Union of India & Others Vs Bharat Forge Ltd. (Supreme Court)
It is contended by the appellants that as far as the tenders relied upon by the writ petitioner produced in the counter affidavit as having been brought out wherein the HSN code is indicated, they are tenders issued by the other units of the Indian Railways. Since the first appellant is the Union of India, we would expect that if it is otherwise permissible to sustain the impugned judgment, it may not be fair to not have a uniform policy in the matter of award of largesse by the various units under it. However, the appellants do point out that even in the tenders which have been brought out, the HSN Code mentioned in the tender is shown as indicative only. It has been provided in the tenders relied upon by the writ petitioner that it will be the responsibility of the bidder to quote the correct HSN Code and the corresponding GST rate while submitting the offer. We may notice the relevant clause:
“A. 1. HSN number mentioned in tender 8504 is indicative only. It will be responsibility of the bidders to quote correct HSN number and corresponding GST rate while submitting offer.
2. Even if bidders quote different GST rates in offers, the offers shall be evaluated by IREP3 system based on the GST rate as quoted by each bidder and same will be used for determining the inter se ranking. Bidders may note that I. It shall be the responsibility of the bidder to ensure that they quote correct GST code and HSN number. II. Purchaser shall not be responsible for any misclassification of HSN number or incorrect GST rate if quoted by the bidder. III. Wherever the successful bidder invoices the goods GST rate of HSN number which is different from that incorporated in the purchase order, payment shall be made as per GST rate which is lower of the GST rate incorporated in the purchase order or billed. IV. Any amendment to GST rate or HSN number in the contract shall be as per the contractual conditions and statutory amendments in the quoted GST rate and HSN number, under SVC. B. Are you eligible for availing benefits and preferential treatment extended to Micro and Small Enterprises (MSEs). If so, the necessary documents as per special conditions for MSEs for claiming benefits and preferential treatment extended to MSEs to be attached. C. In case the successful tenderer is not liable to be registered under CGST/ IGST/ UTGST/ SGST Act, the railway shall deduct the applicable GST from his/their bills under Reverse Charge Mechanism (RCM) and deposit the same to the concerned tax authority. D. Performance statement of orders received and supplies made for last three years for subject item is must for all tenderers including approved sources.”
Having regard to the terms, we cannot cull out a public duty to provide for the correct HSN code. Therefore, we cannot support the impugned judgment based on the issuance of tenders as contended.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave granted.
2. By the impugned Judgment, High Court has disposed of the Writ Petition filed by the first respondent (hereinafter referred to as the “Writ Petitioner”) with the following directions:
“We, therefore, find it expedient to Issue a direction to respondent no.2 namely, the General Manager, Diesel Locomotive Works, Varanasi that if the GST value is to be added in the base price to arrive at the total price of offer for the procurement of products in a tender and is used to determine Interest ranking in the selection process, he would be required to clarify the Issue, If any, with the GST authorities relating to the applicability of correct HSN Code of the procurement product and mention the same in the NIT (Notice inviting tender) tender/ bid document, so as ‘to ensure uniform bidding from all participants and to provide all tenderers/bidders a ‘Level Playing Field’.”
3. The appellants take exception to both the reasoning employed by the High Court and the final direction, as aforesaid.
4. A global tender was published on 11.04.2019 by the third appellant (Diesel Locomotive Work through its Manager, Varanasi). E-tenders were invited for procurement of turbo wheel impeller balance assembly 2BLW Part No. 16080385 (hereinafter referred as, ‘the product’). The writ petitioner was one of the tenderers. So were among others Respondents 6 to 8 in the Writ Petition. Respondent No. 6 in the Writ Petition is arrayed as respondent No. 2 in this appeal. Respondent No.7 and 8 in the Writ Petition were initially arrayed as Respondents 3 and 4 in the Special Leave Petition but later deleted on the request of the appellants.
5. On the basis of the tabulation carried out by the third appellant, respondent no.2 in the appeal emerged as L1 whereas respondent nos. 7 and 8 to the writ petition emerged as L2 and L3, respectively. The writ petitioner emerged only as L4. It is thereupon that the first respondent filed the writ petition praying for the following reliefs:
“
i. a writ order or direction in the nature of mandamus commanding and directing the Respondent No.1, i.e., the Tendering Authority to clarify that the Procurement Product must be taxed @ 18% under the Relevant HSN Code, i.e., 84148030, to ensure a Uniform Bidding from the parties, and also to ensure a level playing field for all Bidders/ Suppliers;
ii. a writ order or direction in the nature of mandamus commanding and directing the respondents stay the effect of the opening of the Subject Tender No. 10191001 by the Respondent No.1 and subsequent awarding of the category/rank from L1-L6 to the various parties to the Tender;
iii. a writ order or direction in the nature of mandamus commanding and directing the respondents in light of the incorrect GST Rate /HSN Codes, as ought to have been correctly specified by the Bidders/ Suppliers to the Subject Tender, this Hon’ble Court may also be pleased to declare the opening of the Tender a nullity, and issued a Writ of Mandamus, directing the Tendering Authority, i.e., Respondent No.1, to invite fresh bids with the HSN Code duly specified;
iv. writ order or direction in the nature of mandamus commanding and directing the respondents disqualify those Suppliers/Bidders who are not entering the correct HSN Code/GST Rate specification and are, thus, paying a GST of only 5%, as against the applicable rate of 18%.”
THE CASE OF THE WRIT PETITIONER
6. The complaint of the Writ Petitioner can be noticed at this stage as follows:
A reading of the Notice Inviting Tender (hereinafter referred to as, the ‘NIT’), would reveal that the bidders were directed to specify the percentage of local content of the material being offered, in accordance with the ‘Make in India’ Policy. In terms of the said Policy, preference would be given to those projects, which have at least 50 per cent local content ordinarily, such purchase preference being limited to a margin of 20 per cent. The sixth respondent in the writ petition (2nd Respondent in this appeal) (L1) is a trader, importing the product from Walbar Corporation, Mexico. It was contended that the tabulated statement of all the financial bids, would show that the entities, which emerged as L1 to L3, had quoted their payment of GST at a rate of 5 per cent on the base rate. The writ petitioner had quoted its GST rate as 18 per cent. The writ petitioner, in fact, had quoted its base price as rupees seven lakh and three thousand. L1 had quoted its rate as rupees six lakhs. There is a difference of just about 17.1 per cent in the base price of L1 and the writ petitioner. But only on account of the fact that L1 has shown the rate of GST at five per cent whereas the writ petitioner has shown with GST liability at 18 per cent, the total price of the writ petitioner became Rs. 8,29,540/- whereas the total price of the L1 became Rs.6,30,000/-. On account of this, a unilateral act of L1 in showing the GST rate at 5 per cent, generated a difference of about 31.6 per cent in the total price quoted by L1 and the writ petitioner. It is the further case of the writ petitioner that the GST rates of each product and service have been duly clarified by the GST Council (for short, ‘the Council’), using the Harmonised System of Nomenclature (for short, ‘the HSN Code), in accordance with Chapter 84. It is the case of the writ petitioner that the Council has declared in the Code that as far as the product is concerned, the rate has been shown as 18 per cent. The further case of the writ petitioner is that, neither the NIT nor the bid documents, mention the relevant HSN Code applicable to the product. It has sabotaged the preservation of the level playing field. This is for the reason that while the writ petitioner honestly revealed the correct GST rate, L1 to L3 showed the GST rate at a far lower rate, viz., 5 per cent. This has distorted the tendering process. Though the writ petitioner had given, on earlier occasion, representation to the appellants about earlier instances of such unfair practices, in the subject NIT, no corrective steps were taken, thus, culminating in the writ petitioner being relegated to the position of L4. It also had the propensity to completely frustrate the ‘Make in India’ Policy and deprive local manufacturers of the legitimate preference, it was otherwise entitled.
7. The appellants joined issue and filed their pleadings opposing the reliefs sought by the writ petitioner. Rejoinder and further affidavits were filed. The High Court, in the impugned Judgment, found, inter alia, as follows:
It refers to Clauses 2.7.6, 2.8.6.2, besides Clause 2.9.2 of the Tender Document, which we shall advert to in detail. It was found that there is no dispute that the writ petitioner is a local manufacturer included in the list of Approved Vendors. It was further found that the opening of the subject tender may not be possible as the offer period had expired due to the interim order passed by the High Court. Moreover, a subsequent tender in regard to the product was granted to the writ petitioner. Prayer nos. 2 and 3 have become infructuous. However, thereafter the Court posed the question as to whether there was any flaw in the procedure adopted by the appellants. The dimension about the ‘Make in India’ Policy engaged the attention of the Court. The case of the appellants that they are not concerned with the GST rates and it was the responsibility of the bidders to quote the HSN number and GST rate was found not sound as the GST rate is integral to the tendering process. Noting that a contract is a commercial transaction, it was found that the Court cannot examine the detail of the terms of the contract. The High Court articulated the limitations on the Court exercising power of judicial review. Thereafter, the Court has found that the Court can certainly examine as to whether the decision-making process was reasonable, rational and not arbitrary. Support was drawn from Judgment of this Court in Reliance Energy Ltd. and another v. Maharashtra State Road Development Corpn. Ltd. and others1. Thereafter, it was found that the bid documents contemplated that the applicable GST has to be deducted from the bid of the successful tenderer under the reverse charge mechanism and the deposit of the same is to be made with the concerned Tax Authority. There will be disparity in the total price offered on account of the difference in the GST rate, thus, denying fair competition or level playing field. The mentioning of the concerned HSN Code is necessary to determine the GST rate, which is to be added to the base price to arrive at the final price. Applying the said process, it was found that the rate quoted by the writ petitioner was more than 20 per cent of the rate quoted by L1 and also L2 and L3, on account of writ petitioner quoting much higher rate, which was the correct rate, whereas L1 to L3 did not quote the correct rate. It was further found that, if the GST value is to be added in the base price, to arrive at the total price, and it is used to determine the inter se ranking in the selection process, it was the duty of the appellants 1 and 2 to clarify the HSN Code. It is further found that, mentioning of the HSN Code in the tender document itself, will resolve ‘all disputes’ relating to fairness and transparency, by providing a level playing field in the true spirit of Article 19(1)(g) of the Constitution of India. It is on this reasoning that the relief, as already noted, was granted.
8. We heard Shri N. Venkataraman, the learned Additional Solicitor General (ASG), appearing on behalf of the appellant, Shri Amar Dave, learned Counsel appearing on behalf of the writ petitioner and Shri Girdhar Govind, learned Counsel, appearing on behalf of the second respondent.
9. Shri N. Venkataraman, learned ASG, would point out that the High Court has issued a Mandamus. A Writ of Mandamus can be issued, if there is a statutory duty. There is no statutory duty with the appellants to do the things, which have been directed in the impugned Judgment. He would further point out that a proper appreciation of the Clauses in the bid document, would reveal the following:
The bidders, on the one hand, undoubtedly, are called upon to declare the tax rate, as applicable (Clause 2.7.6). However, a perusal of Clause 2.9.2 would reveal that, in case, the information about the tax liability is not forthcoming in the bid, the bid will be considered as inclusive, and any liability on account of such tax, would be payable by the concerned bidder. It is further pointed out that Clause 2.8.6.2 declared that the appellants will not be responsible for payment of taxes and duties paid by the bidder on a misclassification or misapprehension of law. In other words, the contention of the appellants is that the terms of the bid contemplated that it is expected of the bidders to bid the correct rate of tax. If the rate of tax was expressed in the bid, then, the bid would be evaluated on the consideration of the base price, after adding the tax component. Should the bid of such a tenderer be selected, the appellants would, necessarily, have to pay the price to the bidder and absorb the tax also. On the other hand, in the case of a bidder, who does not reveal the rate of tax separately and merely quotes the base price, then, if he is selected, he would be entitled only to the payment of the amount quoted. In other words, the duty to pay the GST, being an indirect tax, is on the seller or supplier. He would have to file the return and assess the tax on self-assessment basis and pay the tax. This would equally be the position of the tenderer, who may quote the rate, which may not be the correct rate but a lesser rate. In both the cases last mentioned, viz., where the tenderer does not include the tax component separately, or includes it, but shows tax rate at a lower rate, the tax element would have to be absorbed by the bidder. That is not the look out of the appellants. The appellants are concerned only with selecting the lowest of the bidders, who is, no doubt, otherwise compliant with the norms. The view taken by the High Court creates considerable impediments, is unworkable and would lead to greater problems. It also involves the appellants being obliged to seek clarification regarding the HSN Code under the GST Act. There are Authorities under the concerned taxing Statute, viz., the GST Act, who are charged with the duty of assessing and collecting the tax under the Act. The impugned Judgment casts the burden to discharge duties, which are essentially to be shouldered by the Taxing Authorities under the Taxing laws. While enviable advance has been made by the Courts in entertaining application seeking judicial review, even in contractual matters, the impugned Judgment represents a case, where the High Court has erred and overstepped its limits. He would submit that the judgments of this Court do not support the impugned Judgment of the High Court. The impugned judgment, in fact, runs counter to the law declared by this Court. He would contend that an indirect tax is ordinarily capable of being passed on. The liability, in the case of the indirect tax in question, is on the seller (the bidders). This is a liability, which it can, undoubtedly, pass on to the buyer under a contract but it may instead absorb it. On a conspectus of the terms, it is, however, clear that no liability is undertaken by the appellant to pay the tax except as provided in the terms. The liability remains the responsibility of the successful tenderer.
10. Shri Girdhar Govind, learned Counsel for the second respondent, adopts the contentions of the learned ASG and he would contend that, on facts, there is no occasion to pass the impugned Judgment. A short counter affidavit is also filed in this Court.
11. Shri Amar Dave, learned Counsel appearing on behalf of the Writ Petitioner, would address the following submissions:
He would support the impugned Judgment and he contends that all that the High Court has directed, is that, there must be a level playing field, in the matter of award of largesse by the State, an inevitable result of applying Article 14. He would contend that the crucial aspect is that when the appellants specifically contemplated the addition of the tax liability to the base price for determining the question as to who is to be the successful tenderer, then, it is imperative that there should be clarity and certainty about the tax rate and the HSN Code. This would produce actual equality of treatment as between the tenderers. The facts of the case exemplify a situation where tendering process becomes a mockery, having regard to the wide disparity between the rate of tax quoted by the writ petitioner and L1 to L3. A huge difference of 13 per cent has completely impaired and derailed the fair bid of the writ petitioner and, what is more, defeated the sublime object sought to be achieved in the ‘Make in India’ Policy. He would emphasise that what has been going on, before the High Court stepped in with the impugned Judgment, was clearly an unfair trade practice. The stand of the writ petitioner promotes the fundamental value of honesty. A bidder, who does not disclose the correct rate of tax, despite the injunction contained in Clause 2.7.6, will walk away with a contract, having indulged in a completely unfair practice. The implementation of the impugned Judgement would result in the extinguishment of this wholly undesirable practice. He would further contend that the appellants had, in fact, brought out tender notices, implementing the direction of the High Court. It is not something, which is incapable of being achieved. He next drew our attention to the circumstance, that even the appellant has purchased the product, showing the tax rate at 18 percent, as is evident from the document dated 21.03.2017. He would further contend that the Government of India, in the Ministry of Defence, has been showing the correct HSN Code, thus, facilitating the uniform disclosure of correct rate of tax for all the bidders. He next relied on Circular dated 31.12.2018 issued by the Government of India in the Ministry of Finance, Department of Revenue (Tax Research Unit). Therein, he points out the following:
“12.3 Turbo charger is specifically classified under chapter HS code 8414 80 30. It continues to remain classified under this code irrespective of its use by Railways. Therefore, it is clarified that the turbo charger is classified under heading 8414 and attracts 18% GST.”
He would, therefore, contend that there is no impediment, in law or on facts, for the appellants to comply with the impugned Judgment. He next drew our attention to the Public Procurement (Preference to ‘Make in India’) Order, 2017 dated 15.06.2017. He emphasised the definition of the word ‘local content’:
“’Local content’ means the amount of value added in India which shall, unless otherwise prescribed by the Nodal Ministry, be the total value of the item procured (excluding net domestic indirect taxes) minus the value of Imported content in the item (including all customs duties) as a proportion of the total value, in percent.”
12. The learned Counsel for the writ petitioner would also seek to support the direction of the High Court with reference to Section 168 of the Goods and Services Act, 2017. This is apart from pointing out that there is a provision for advance tax ruling contained in Section 96 of the GST Tax. Therefore, it is not a case where the appellants can object to the impugned direction, on the basis that there is no provision to ‘seek clarification’.
13. In the Rejoinder submission, the learned ASG would submit as follows:
He would contend that it is the Assessing Officer, relevant to the supplier of goods and not the Assessing Officer relevant to the purchaser, who would have authority in the matter and this adds to the woes of the appellants if they are compelled to comply with the impugned directions. As far as the Order dated 15.06.2017 is concerned, he would contest the version of the writ petitioner based on the definition of the word ‘local content’ and would point out that the maker of the Order, viz, the Government of India had, in fact, contemplated excluding the net domestic taxes. As far as the subsequent tenders issued is concerned, it is sought to be justified with reference to the action of the appellants seeking to comply with the impugned directions. He would contend that the impugned directions are wholly impracticable and far from putting an end to the disputes, it will only engender unending disputes.
14. Learned ASG would contend that the no reliance can be placed on the publication in the Business Standard about tax invasion in the Railways and the purport of the complaint can only be that if there is evasion, the Tax Authorities must be awake to their duty and vigorously pursue the evaders as per law.
ANALYSIS
SCOPE OF WRIT OF MANDAMUS
15. The learned ASG contended that the High Court erred in issuing the direction, which is in the nature of the Writ of Mandamus. It is his case that a Writ of Mandamus would lie only when a Statute imposes a duty and there is failure in discharge of duty. We would think that this is not a matter which is res integra. As early as in Comptroller and Auditor General of India, Gian Prakash, New Delhi and another v. K.S. Jagannathan and another2 , a Bench of three learned Judges of this Court had this to say:
“18. The first contention urged by learned counsel for the appellants was that the Division Bench of the High Court could not issue a writ of mandamus to direct a public authority to exercise its discretion in a particular manner. There is a basic fallacy underlying this submission—both with respect to the order of the Division Bench and the purpose and scope of the writ of mandam us. The High Court had not issued a writ of mandamus. A writ of mandamus was the relief prayed for by the respondents in their writ petition. What the Division Bench did was to issue directions to the appellants in th e exercise of its jurisdiction under Article 226 of the Constitution. Under Article 22 6 of the Constitution, every High Court has the power to issue to any person or authori ty, including in appropriate cases, any gov ernment, throughout the territories in rela tion to which it exercises jurisdiction, directions, orders, or writs including writ s in the nature of habeas corpus, mandamus, quo warranto and certiorari or any of them, for the enforcement of the Fundamental Righ ts conferred by Part III of the Constitutio n or for any other purpose. In Dwarkanath v . ITO [AIR 1966 SC 81: (1965) 3 SCR 536, 54 0] this Court pointed out that Article 226 is designedly couched in a wide language in order not to confine the power conferred by it only to the power to issue prerogative writs as understood in England, such wide language being used to enable the High Courts “to reach injustice wherever it is found” and “to mould the reliefs to meet the peculiar and complicated requirements of this country.” In Hochtief Gammon v. Sta te of Orissa [(1975) 2 SCC 649 : 1975 SCC (L&S) 362 : AIR 1975 SC 2226 : (1976) 1 SCR 667, 676] this Court held that the powers of the courts in England as regards the control which the Judiciary has over the Executive indicate the minimum limit to which the courts in this country would be prepared to go in considering the validity of orders passed by the government or its officers.
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20. There is thus no doubt that the High Courts in India exercising their jurisdiction under Article 226 have the power to issue a writ of mandamus or a writ in the nature of mandamus or to pass orders and give necessary directions where the government or a public authority has failed to exercise or has wrongly exercised the discretion conferred upon it by a statute or a rule or a policy decision of the government or has exercised such discretion mala fide or on irrelevant considerations or by ignoring the relevant considerations and materials or in such a manner as to frustrate the object of conferring such discretion or the policy for implementing which such discretion has been conferred. In all such cases and in any other fit and proper case a High Court can, in the exercise of its jurisdiction under Article 226, issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give directions to compel the performance in a proper and lawful manner of the discretion conferred upon the government or a public authority, and in a proper case, in order to prevent injustice resulting to the concerned parties, the court may itself pass an order or give directions which the government or the public authority should have passed or given had it properly and lawfully exercised its discretion.”
16. Three years thereafter, in the decision reported in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust and others v. V.R. Rudani and others3, while dealing with the word ‘authority’, used in Article 226 and also dealing with the issue as to whether Mandamus will lie even if the duty is not imposed under a Statute, this court held as follows:
“20. The term “authority” used in Article 226, in the context, must receive a liberal meaning unlike the term in Article 12. Article 12 is relevant only for the purpose of enforcement of fundamental rights under Article 32. Article 226 confers power on the High Courts to issue writs for enforcement of the fundamental rights as well as non-fundamental rights. The words “any person or authority” used in Article 226 are, therefore, not to be confined only to statutory authorities and instrumentalities of the Stat e. They may cover any other person or body performing public duty. The form of the bod y concerned is not very much relevant. What is relevant is the nature of the duty imposed on the body. The duty must be judged in the light of positive obligation owed by the person or authority to the affected par ty. No matter by what means the duty is imposed, if a positive obligation exists mandamus cannot be denied.
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22. Here again we may point out that mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Professor de Smith states: “To be enforceable by mandamus a public duty does not necessarily have to be one imposed by statute. It may be sufficient for the duty to have been imposed by charter, common law, custom or even contract.” [ Judicial Review of Administrative Action, 4th Edn., p. 5 40] We share this view. The judicial control over the fast expanding maze of bodies affecting the rights of the people should not be put into watertight compartment. It should remain flexible to meet the requirements of variable circumstances. Mandamus is a very wide remedy which must be easily available “to reach injustice wherever it is found”. Technicalities should not come in the way of granting that relief under Article 226. We, therefore, reject the contention urged for the appellants on the maintainability of the writ petition.”
17. It is necessary to notice, what a Bench of two learned Judges spoke about the Writ of Mandamus in the judgment in Mansukhlal Vithaldas Chauhan v. State of Gujarat4. Therein, this Court held as follows:
“22. Mandamus which is a discretionary remedy under Article 226 of the Constitution is requested to be issued, inter alia, to compel performance of public duties which may be administrative, ministerial or statutory in nature. Statutory duty may be either directory or mandatory. Statutory du ties, if they are intended to be mandatory in character, are indicated by the use of the words “shall” or “must”. But this is no t conclusive as “shall” and “must” have, sometimes, been interpreted as “may”. What is determinative of the nature of duty, whether it is obligatory, mandatory or directory, is the scheme of the statute in which the “duty” has been set out. Even if the “duty” is not set out clearly and specifically in the statute, it may be implied as correlative to a “right”.
23. In the performance of this duty, if the authority in whom the discretion is vested under the statute, does not act independently and passes an order under the instructions and orders of another authority, the Court would intervene in the matter, quash the order and issue a mandamus to that authority to exercise its own discretion.”
18. Therefore, it is clear that a Writ of Mandamus or a direction, in the nature of a Writ of Mandamus, is not to be withheld, in the exercise of powers of Article 226 on any technicalities. This is subject only to the indispensable requirements being fulfilled. There must be a public duty. While the duty may, indeed, arise form a Statute ordinarily, the duty can be imposed by common charter, common law, custom or even contract. The fact that a duty may have to be unravelled and the mist around it cleared before its shape is unfolded may not relieve the Court of its duty to cull out a public duty in a Statute or otherwise, if in substance, it exists. Equally, Mandamus would lie if the Authority, which had a discretion, fails to exercise it and prefers to act under dictation of another Authority. A Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not be bound by technicalities and its chief concern should be to reach justice to the wronged. We are not dilating on or diluting other requirements, which would ordinarily include the need for making a demand unless a demand is found to be futile in circumstances, which have already been catalogued in the earlier decisions of this Court.
19. Having cleared the air with regard to the jurisdiction of the High Court in the matter of a Writ of Mandamus or a direction in the nature thereof, we may proceed next to the law relating to the ambit of the Court’s jurisdiction in judicial review in contractual matters. It is, undoubtedly, too late in the day to countenance the contention that the mandate of fairness in State action does not extend to the realm of contract entered into by the State. We would not burden our judgment chronicling the catena of decisions, which have expounded the law in this regard. We deem it sufficient if we refer to the judgment of this Court in Reliance Telecom Ltd. and another v. Union of India and another5. After an exhaustive survey of case law, this Court, inter alia, held as follows:
“42. In Global Energy Ltd. v. Adani Exports Ltd. [Global Energy Ltd. v. Adani Exports Ltd., (2005) 4 SCC 435], this Court reiterated the principles that: (SCC p. 441, para 10)
“10. … the terms of the invitation to tender are not open to judicial scrutiny and the courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice.”
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44. In Michigan Rubber (India) Ltd. v. State of Karnataka [Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216] , the Court, after referring to Jagdish Mandal v. State of Orissa [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517] and Tejas Constructions & Infrastructure (P) Ltd. v. Municipal Council, Sendhwa [Tejas Constructions & Infrastructure (P) Ltd. v. Municipal Council, Sendhwa, (2012) 6 SCC 464] , expressed the view that (at SCC p. 229, para 23) 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 and actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose and if the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities. It further observed that fixation of a value of the tender is entirely within the purview of the executive and the 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 unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers and greater latitude is required to be conceded to the State authorities in the matter of formulating conditions of a tender document and awarding a contract. The Court also laid emphasis on public interest and the prudence in applying the principle of restraint where the action is fair and reasonable and does not smack of mala fides. It was also emphasised that the courts cannot interfere with the terms of the tender prescribed by the Government simply because it feels that some other terms in the tender would have been fair, wiser or logical.”
20. This Court also laid down paragraph 46 as follows:
“46. In Census Commr. v. R. Krishnamurthy [Census Commr. v. R. Krishnamurthy, (2015) 2 SCC 796 : (2015) 1 SCC (L&S) 589] , a three-Judge Bench of this Court, after noting several decisions, held that (SCC p. 809, para 33) it is not within the domain of the courts to embark upon an enquiry as to whether a particular public policy is wise and acceptable or whether a better policy could be evolved and the courts can only interfere if the policy framed is absolutely capricious or not informed by reasons or totally arbitrary and founded on ipse dixit offending the basic requirement of Article 14 of the Constitution. It further observed that in certain matters, as often said, there can be opinions but the court is not expected to sit as an appellate authority on an opinion.”
21. We must also bear in mind the judgment which is relied upon by the High Court in the impugned Judgment. The High Court has drawn support from the Judgment of this Court in Reliance Energy Ltd. and another v. Maharashtra State Road Development Corpn. Ltd. and others6:
“36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of “non-discrimination”. However, it is not a free-standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to “right to life”. It includes “opportunity”. In our view, as held in the latest judgment of the Constitution Bench of nine Judges in I.R. Coelho v. State of T.N. [(2007) 2 SCC 1] , Articles 21/14 are the heart of the chapter on fundamental rights. They cover various aspects of life. “Level playing field” is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of “level playing field”. We may clarify that this doctrine is, however, subject to public interest. In the world of globalisation, competition is an important factor to be kept in mind. The doctrine of “level playing field” is an important doctrine which is embodied in Article 19(1)(g) of the Constitution. This is because the said doctrine provides space within which equally placed competitors are allowed to bid so as to subserve the larger public interest. “Globalisation”, in essence, is liberalisation of trade. Today India has dismantled licence raj. The economic reforms introduced after 1992 have brought in the concept of “globalisation”.
Decisions or acts which result in unequal a nd discriminatory treatment, would violate the doctrine of “level playing field” embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of “equality” should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of “level playing field”. According to Lord Goldsmith, commitment to the “rule of law” is the heart of parliamentary democracy. On e of the important elements of the “rule of law” is legal certainty. Article 14 applies to government policies and if the policy or act of the Government, even in contractual matters, fails to satisfy the test of “reasonableness”, then such an act or decision would be unconstitutional.
xxx xxx xxx
38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This “legal certainty” is an important aspect of the rule of law. If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate doctrine of “level playing field”.”
22. It becomes, however, necessary to notice the context in the said case, which persuaded the Court to make the aforesaid observations. The case involved a global tender floated to award a contract, which was to be done by effecting selection in two stages. The relevant clause in the tender document, inter alia, contemplated the fulfilment of certain financial requirements. We may refer to the following discussion, which gives the factual context:
“50. Taking into account the above principles, it is clear that there are two methods of “cash flow reporting” i.e., direct and indirect. Both give identical results in the matter of the final total. They differ only in presentation of the data. They differ only in presentation of the data contained in the cash flows from operational activities. No reason has been given by the consultants of MSRDC for rejecting the indirect method invoked by KPMG, chartered accountants of REL/HDEC in their letter dated 12-8-2005. The said method is known as “reconciliation method”.”
23. The observations made by the Court, undoubtedly, draw inspiration from factual matrix essentially involved in the culling out of the principle of level playing field, which was found to be impaired on the basis of a lack of legal certainty, as found established by the material available on record. In the course of observations in paragraph-36, this Court held that Article 19(1)(g) confers a Fundamental Right to carry on a business to a company. We would accept it, subject to the caveat that Article 19 confers a right on the citizens, who are natural persons. However, we take it that, what the Court had in mind was, a situation where the company is in the party along with one or more shareholders, who are citizens of India. However, there can be no quarrel with the position at law, having regard to the undeniable and breath-taking advances made by the Courts, drawing inspiration from Article 14 that equals must be treated equally and more importantly, the other facet of Article 14, viz., that all actions of State must be fair, which constitutes the major plank of attack against State action in the arena of contracts. This again is subject to the self-restraint in matters, the scope of which has been dealt with in regard to various aspects of the matter, starting with cases relating to challenge to the very terms of the tender and culminating in the actual award of the contract. Unless such actions are found to be clearly arbitrary, illegal, malafide or contrary to any Statute, the courts would be loathe to fetter even the limited area of freedom of the State has to take decisions which are fair in cases relating to contractual matters.
24. With these observations, the time is ripe to consider the facts.
THE RELEVANT CLAUSES
25. The Clauses in the Tender Document, which engaged the attention of the High Court are as follows. Clause 2.7.6 reads as follows:
“All the bidders/tenderers while quoting the rates should clearly indicate the rate of applicable duties and taxes included in the prices quoted by them. Any variation in tax structure/rate due to introduction of GST, shall be dealt with under Statutory Variation Clause.”
26. The next provision to be borne in mind is Clause 2.8.6.2:
“The purchaser will not be responsible for payment of taxes and duties paid by the supplier under misapprehensions of law or misclassification.”
27. Finally, we must advert to Clause 2.9.2:
“Tenderers must familiarize themselves about all the applicable taxes & duties, and in case the same is not indicated explicitly in their offer the same will be considered as inclusive. Any liability on such account will be payable on firms account.”
28. We may also note the following Clauses, which is put into place on the basis of an amendment, which is described as Amendment No.1 to the Global Tender Bid Document. Clause 2.7.6 reads as follows:
