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REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  9151-9152 OF 2015 (Arising out of S.L.P. (Civil) Nos. 34129-34130 of 2014)

Elektron Lighting Systems                               …..Appellants Pvt. Ltd. and Anr.

Versus

Shah Investments Financial Developments  and Consultants Pvt. Ltd and Ors. Etc.       .….Respondents

J U D G M E N T

Prafulla C. Pant, J.

These  appeals  are  directed  against  judgment  and  order

dated  14.10.2014  passed  by  High  Court  of  Judicature  at

Bombay, whereby Writ Petition Nos. 7843 of 2014 and 8211 of

2014, are allowed, and the work order dated 03.09.2014, and

consequential agreement between the appellants and respondent

No. 3, are quashed.

2.  Succinctly stated the facts of the case are that on 01.08.2014

respondent no. 3 - Aurangabad Municipal Corporation (for short

“municipal  corporation”)  invited  tenders  for  replacement  of

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existing street lights by Light Emitting Diodes (LED) fittings with

refurbishment of street light infrastructure on Build, Operate and

Transfer (BOT) basis.  The contractor was required to complete

the project within one year and recover the payment from the

municipal  corporation  through  Ninety  six  Equated  Monthly

Installments  (EMIs)  over  a  period  of  eight  years.  Response  to

E-tender notice was required to be made in two separate parts,

namely, technical bid and price bid. As per the tender notice, the

tender  forms  were  made  available  from  01.08.2014  to

20.08.2014. The period of submission of bids was extended up to

28.08.2014.

3. The Tender Notice contained inter alia following conditions :

-

“(i) Manufactures of LED Lights OR registered Clause A  Electrical  Contractors  and  are  eligible  to participate in the Tender.

(ii) The Class A Electrical Contractors (Lead Partner) may only participate by having a Joint Venture agreement  with  the  Manufacturer  of  LED Light Fittings.

(iii) The  Manufacturer  of  LED  Light  fittings  (Lead Partner) may form a Joint Venture with Class A Electrical Contractor.

(iv) The Manufacturer of  LED Lights (Lead Partner) may  form  a  Joint  Venture  with  another Manufacturer  of  Electrical  items,  provided  that the Lead Partner has entered into a MOU with a Class A Electrical Contractor towards execution

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of the tendered BOT project. (v) The  Bidder  should  have  achieved  a  minimum

turnover  of  Rs.  25  crores  in  each of  the  three preceding financial years, total 75 crores in three years.

(vi) Attested true copies of Sale Tax/VAT registration, Manufacturing  certificate  & DD for  EMD to  be submitted along with tender papers.

      xxx xxx xxx

(xiv) Bidder  may be  Joint  Venture  of  maximum two companies/firms to jointly meet the commercial and technical conditions.”

      xxx xxx xxx

4. The  present  appellants  and  respondent  No.1/writ

petitioners submitted their bids but technical bids of the latter

were rejected as they did not fulfill the terms as per the tender

notice.  The  price  bid  of  appellants  was  negotiated  by  the

respondent - municipal corporation, and proposal was sent to the

standing committee of  the  corporation.  Whereafter,  as  per  the

resolution, the work order was issued in favour of the appellants.

5. The two disqualified bidders filed the Writ  Petitions (W.P.

Nos. 7843 of 2014 and 8211 of 2014) before the High Court of

Judicature  of  Bombay,  Aurangabad  Bench,  challenging  their

disqualification, and acceptance of the appellants’ bid. The High

Court vide impugned order held that though disqualification of

writ petitioners was correct but extraordinary favour was shown

to appellants who were awarded work order, as such, the same

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was quashed. Hence these appeals.

6. It is relevant to mention here that the writ petitioners have

not  challenged  the  order  of  the  High  Court,  whereby  their

disqualification by the municipal corporation has been upheld.

The  disqualification  and  rejection  of  technical  bid  of  the  writ

petitioners was mainly based on following three reasons:-

(i)  Neither the writ petitioner nor its joint venture partner was a registered Class-A contractor, nor any one of them was stated to be manufacturer of LED lights.

(ii)     None of the writ petitioners had achieved a minimum turnover of Rs. 25 crores in the three preceding financial years.

(iii) The  writ  petitioners  failed  to  submit  minimum thirty pieces of different types of samples for the purposes of testing.

7. As such, so far as the disqualification of the writ petitioners

(present respondent no. 1) is concerned, it  requires no further

examination. The only point to be considered by us is whether

the High Court, even after finding that the technical bids of the

writ petitioners were rightly rejected, was justified in quashing

the work order given to the appellants whose technical bid was

accepted by the municipal corporation.

8. On  behalf  of  the  appellants  following  submissions  were

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made assailing the impugned order passed by the High Court:-

(1). RE. ABSENCE OF MOU:  

a) That  the  appellants  duly  entered  into  MOU  on

14.08.2014  with  M/s.  Matoshree  Electricals  &

Winding  Works,  a  Class  A  Electrical  Contractor  as

required in Clause 1.1(4) of tender.

b) That the Technical Evaluation Report by AMC states

that MOU had been duly filed by Petitioners.

c) That  the  Writ  Petitioners  never  raised  this  point  in

their  Writ  Petitions  and  even  in  the  amended  Writ

Petitions. That is also the reason why the MOU was

not filed before High Court.

d) That this being an online tender, all documents filed

by  all  the  parties  were  accessable  to  all.  Since  the

MOU had been uploaded, the issue was not raised in

Writ Petition.

(2). RE.  NON-SUBMISSION  OF  ATTESTED  COPIES  OF  VAT RETURNS:  

a) That the appellants had duly filed attested copies of

VAT Returns  in  terms of  Clause  1.2(1)(C)  of  tender.

The Technical Evaluation Report by AMC states VAT

Returns had been duly filed by them.

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b) That  the  Writ  Petitioners  never  raised  this  point  in

their  Writ  Petitions  and  even  in  the  amended  Writ

Petitions. That is why copies of VAT Returns were not

filed before the High Court.

c) That this being an online Tender, all documents filed

by all  parties  were accessable  to  all.  Since  the  VAT

Returns had been uploaded, the issue was not raised

in Writ Petition.  

d) That the High Court erred in assuming that even joint

venture  partner  which  had  zero  turnover  in  a

particular financial year had to file VAT Returns. It is

submitted  that  VAT  return  was  required  only  to

establish  the  turnover  requirement.  Thus  a  joint

venture  partner  had  to  file  VAT  returns  only  if  its

turnover exceeded zero.

(3). Re. TURNOVER REQUIRMENT:

a) That  the  Clause  1.1(5)  requires  that  bidder  should

have achieved minimum turnover of Rs. 25 crores in

each of the 3 preceding financial years, total 75 crores

in 3 years. Clause 1.1(14) specifies bidder may be a

joint  venture  of  maximum  two  companies/firms  to

‘jointly meet’ the commercial & technical conditions.

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b) That  the  joint  turnover  of  the  two  joint  venture

partners is in excess of Rs. 25 crores p.a. and Rs. 75

crores in 3 years. The fact that turnover of P-1 was nil,

is  inconsequential  since  requirement  is  joint

compliance.  

c) That the High Court at para 28 noted that jointly the

turnover  requirement  is  met  but  erroneously  held

against the appellants on the ground that turnover of

appellant No.1 is nil.

(4). RE. TREATING LETTER DATED 19.08.2014 AS FINANCIAL OFFER:

a) That the subject matter of letter dated 19.08.2014 was

offer of a separate product and different period, which

was not covered by the present tender. Hence question

of the letter being a financial offer did not arise.

b) That  the  letter  dated  19.08.2014  had  the  subject

“Additional  Suggestions  towards  tender-

UNCONDITIONAL”  and  specifically  stated  that

“…..These suggestions are unconditional and are being

made  in  favour  of  the  improvement  for  the  City  of

Aurangabad.  It  shall  be  completely  at  your  kind

discretion to accept or reject these suggestions…..”

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c) That the letter was considered separately by AMC. This

is  apparent  from  the  Work  Order.  This  is  also

corroborated by AMC’s Additional affidavit before the

High Court.

d) That the letter was uploaded alongwith the Technical

Bid.  The High Court erroneously held that the letter

had  been  disclosed  even  before  opening  of  the

technical bid, which is contrary to its own recording

that letter was submitted simultaneously with tender

offer. In fact Shah Investments’ amended Writ Petition

itself  records  that  letter  dated  19.08.2014  was

submitted with technical bid.

e) That the relevant figure for evaluation of tender was

under  the  heading  “TOTAL  COST  TO  AMC  for

Evaluating the Lowest  Bidder  = (VI)+(VII)+(VII)”.  This

figure was nowhere disclosed either in technical bid or

in the letter dated 19.08.2014. Price bid comprised of

27 pages and none of the pages was attached as part

of Technical Bid.

f) That  without  prejudice  to  the  aforesaid,  the  part  of

work  order  relating  to  letter  dated  19.08.2014  is

severable  and  even  if  that  part  is  set  aside,  the

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remaining contract stands.

(5). RE.  TREATING  GRANT  OF  ADVERTISING  RIGHTS  ON POLES AS BEYOND THE TERMS OF THE TENDER:  

That the work order is in two parts-one pertaining to

award  of  the  main  contract  and  the  other  to  additional

suggestions of the appellants.  It is submitted that the part

pertaining  to  additional  suggestions  can be  severed  from

main contract and directed to be removed from the work

order. Thus, work order may be confined to award of main

contract only.

(6). RE. THE DECISION MAKING BY AMC BEING HASTY: a) That  the  Notice  Inviting  Tender  was  issued  on

01.08.2014 and the whole process was completed on

03.09.2014. There was thus no undue haste.

b) That  the  time  period  for  submission  of  bids  was

extended  twice  which  negates  the  factum of  alleged

haste.

c) That the Commissioner of AMC being under orders of

transfer had no bearing on the matter as the ultimate

decision  was  taken  by  the  Standing  Committee  of

AMC.

d) That  the  decision  making  process  shows  due

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application of mind.

(7). OTHER SUBMISSIONS: a) That the High Court did not correctly appreciate the

judgment of this Court in Sanjay Kumar Shukla Vs.

Bharat  Petroleum Corporation  Limited  [(2014)  3

SCC 493] where this Court reiterated need for caution

in entertaining writ  petitions in contractual  matters,

unless  justified  by  public  interest,  since  serious

consequences could ensue.

b) That  the  High  Court  failed  to  appreciate  that  the

petitions before it were not public interest petitions but

were petitions of unsuccessful bidders.

c) That the motives of the writ petitioners, who made bids

despite knowing that they did not fulfill the essential

requirements,  were  not  considered.  In  fact,  Shah

Investments was a finance company. It  is submitted

that the Writ Petitioners were front men for others.

d) That  writ  petitioner  Shah  Investment’s  W.P.  No.

7843/2014 did not even contain any prayer to quash

the petitioners’ bid despite amendment. appellant No.

2 in present appeals  was not  even made a party in

Polycab’s W.P. No. 8211/2014.

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e) That  impugned  order  imputes  mala  fides  although

there  were  no  allegations  of  mala  fide  against  any

particular person in the writ petitions.  

9. On the other hand, on behalf of the respondent No.1, it is

argued that the work order in question was rightly quashed by

the High Court for the following reasons:-

(i) That the bidding for the present tender was to be conducted

by a two-step e-tendering process. As per Clause 3 of the

bid document, at the first stage the bidders were required to

submit  their  technical  bids,  and  the  acceptable  bids

amongst  these  would  be  sent  for  field  trials.  Only  the

financial bids of  those bidders whose samples qualify the

technical stage were thereafter to be opened.

(ii) That  Clause  1.2(h)  stipulated  that  in  the  event  a  bidder

submits  the  price  offer  along  with  the  technical  bid,  the

tender bid shall be treated as withdrawn and EMD forfeited.

(iii) That  it  was an essential  and mandatory condition of  the

tender as can be construed from the use of the word “shall”

and the consequences attached to a breach of this clause,

i.e., the bid treated to be as withdrawn and the consequent

forfeiture of the EMD deposit.

(iv) That  it  is  settled  law  that  where  there  are  essential

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conditions,  the same must be adhered to.  In the present

case, the Respondent No. 3 - Corporation has no power to

relax any of  the  terms of  the  bid  document,  and in any

event no such power can be inferred in this context, as no

relaxation can be granted from complying with a mandatory

condition of the bid document.

(v) That  the  contention  of  the  appellants  that  the  offer

contained  in  the  letter  dated  19th August,  2014  was  an

unconditional  offer  made  only  for  the  consideration  and

benefit of the Respondent no. 3 - Corporation cannot save

the  appellants from the  consequences of  a  breach of  the

terms of the bid document.

(vi) That  the  said  letter  dated  19th August,  2014  admittedly

contained the following offers and suggestions which have a

direct bearing on the price offer made by the appellants:

a. The  letter  divulged that  the  appellants  would     be

offering its services for the minimum guarantee period

under the tender at the rate of Rs.95/- per fixture per

month.

b. The letter also stated that by implementing the online

monitoring system, the number of control panels to be

utilized  would  be  reduced  to  600  from  1200  as

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required  by  the  bid  document.  Interestingly,  no

corresponding reduction in  the  price  was  offered by

the  appellants.  However,  if  the  number  of  control

panels  required  were  to  increase  over  600,  the

appellants  would  install  the  same  at  the  additional

cost of the Respondent No.3 - Corporation. This is a

kind  of  offer  which  clearly  exposes  the  mischievous

intention  of  the  appellants  in  negotiating  a  bargain

which would be purely beneficial to itself at the cost of

the public exchequer.

c. The letter also made an offer to implement these new

technologies  in  consideration  for  being  granted

exclusive advertising rights on the street lights for the

entire BOT period.

(vii) That the offers and suggestions made in the said letter, be it

conditional or unconditional,  were unquestionably a price

offer, as is evident from the work order dated 3rd September,

2014 issued by the Respondent No. 3 - Corporation.

(viii) That the submission of such letter ipso facto renders the bid

of the appellants unresponsive, to be treated as withdrawn

and EMD forfeited. The terms of the bid document do not

give  the  Respondent  No.3  -  Corporation  the  authority  to

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relax its terms unilaterally for any individual bidder, in a

manner  which  would  allow  such  bidder  to  circumvent  a

mandatory and essential terms of the bid document.

(ix) That  having  submitted  such a  price  offer  along with  the

technical  bid,  the  appellants  stood  disqualified  at  the

technical  stage  and,  therefore,  no  question  arises  as  to

whether the Respondent No.3 - Corporation could choose to

accept or reject these additional offers and suggestions of

the appellants.

(x) That the practice of  indulging in post tender negotiations

has been deprecated and labeled as a source of corruption

and  in  pursuance  of  the  same,  the  Central  Vigilance

Commission  has  issued  Circular  No.4/3/07  dated  3rd

March,  2007  and  has  mandated  that  no  post  tender

negotiations be held with L-1 except in certain exceptional

situations as are mentioned therein.  Admittedly,  no such

situation exists in the present case.

(xi) That  the  acceptance  of  these  additional  offers  and

suggestions as contained in the Work Order dated        3 rd

September, 2014 has resulted in enlarging the scope of the

tender. The period of the tender has been increased from

eight years with a two years extended guarantee period to

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eight  years with a  four  years extended guarantee  period.

The  answering  respondent/writ  petitioner  seeks

compensation  in  return  for  providing  the  additional  two

years of guarantee. The scope of the tendered work has also

been increased to include the grant of exclusive advertising

rights  for  the  entire  contract  period  which  now  stands

revised  to  twelve  years,  for  no  consideration  whatsoever.

These are major deviations from the essential terms of the

tender which cannot be permitted.

(xii) The  appellants  during  the  course  of  arguments  have

tendered certain additional  documents  across the bar,  to

establish that  the acceptance of  the additional  offers has

been done after due consideration. However, a mere perusal

of said documents such as the appellants’ letter dated 2nd

September,  2104,  the  minutes  of  the  meeting  of  the

Aurangabad  Municipal  Commission  chaired  by  the

Commissioner  also  dated  2nd September,  2014  and  the

minutes of the meeting of  the Standing Committee of the

Aurangabad  Municipal  Corporation  dated  3rd September,

2014 would indicate the hurried manner in which the entire

process of the tender has been finalized.

10. Learned  counsel  for  the  municipal  corporation  has  in

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substance  supported  the  grounds  taken  by  the  appellants

assailing the impugned orders passed by the High Court.

11. We have considered submissions of learned counsel for the

parties, and perused the papers on record.

12. In  Tata Cellular Versus Union of India1, this court has

held following limitations relating to scope of judicial review of

administrative  decisions  and  exercise  of  powers  awarding

contracts.  In Para 94 this court has held as under:-

“94. The principles deducible from the above are:

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

(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

1  (1994) 6 SCC 651

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reasonableness (including its  other facts pointed out above) but must be free 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…….”

13. In  Air India Ltd.  Versus Cochin International Airport

Ltd. And Others2,  this court has laid down the principle as to

how  the  discretionary  power  under  Article  226  should  be

cautiously exercised in the matters of awarding contracts keeping

in mind the public  interest.  In Para 7 this  court  has  held as

under:-

“7……..It  can  enter  into  negotiations  before  finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons,  if  the  tender  conditions  permit  such  a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its  corporations,  instrumentalities  and  agencies  are bound  to  adhere  to  the  norms,  standards  and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fides,  unreasonableness and arbitrariness.  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 power 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

2  (2000) 2 SCC 617

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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 intervene.”

14. In  Jagdish  Mandal  Versus  State  of  Orissa  and

Others3, this court has held as under:-  

“22. Judicial  review  of  administrative  action  is intended  to  prevent  arbitrariness,  irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and  not  to  check  whether  choice  or  decision  is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special  features should be borne in  mind.  A contract  is  a  commercial  transaction.  Evaluating tenders  and  awarding  contracts  are  essentially commercial functions. Principles of equity and natural justice stay at a distance. If  the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere  even if  a  procedural  aberration or  error  in assessment or  prejudice to a tenderer,  is  made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest,  or  to  decide  contractual  disputes.  The tenderer  or  contractor  with  a  grievance  can  always seek  damages  in  a  civil  court.  Attempts  by unsuccessful  tenderers  with  imaginary  grievances, wounded  pride  and  business  rivalry,  to  make mountains  out  of  molehills  of  some technical/procedural  violation  or  some  prejudice  to self,  and  persuade  courts  to  interfere  by  exercising power  of  judicial  review,  should  be  resisted.  Such interferences,  either  interim  or  final,  may  hold  up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold.

15. In the light of the law laid down by this Court, as above, we

3  (2007) 14 SCC 517

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examined the facts of the present case. Admittedly, respondent

No.  3  Municipal  Corporation  invited  online  tenders  for

replacement  of  existing  street  lights  by  LED  fittings.   The

e-tender was required to be made of technical bid and price bid.

It is not disputed that the  appellants  and the respondent No. 1

uploaded their  technical  bid and submitted price/financial  bid

separately on the online portal of the municipal corporation. It is

also  admitted  between  the  parties  that  the  last  date  of

submission  of  tenders  was  initially  20.08.2014,  which  was

extended up to 28.08.2014. The technical evaluation of all  the

three bidders was carried out in their presence.  It is relevant to

mention here that the disqualification of other two bidders, who

filed writ  petitions,  was found correct by the High Court,  and

said fact is not challenged before us.  As such, the only issue

required to be examined is as to whether the technical bid of the

appellants was approved in accordance with the settled principle

of law without giving them undue favour, or not.   

16. The High Court has observed in the impugned orders that

the  MOU between the  appellants  and LED manufacturer  M/s

Matoshree Electricals & Winding Works, was not placed on the

record. However, the High court failed to notice that none of writ

petitioners had challenged acceptance of appellants’ bid on that

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ground, and the appellants had no opportunity to place the same

on the record of the court.  The MOU was part of tender bid, and

finds its mention in “Tender Committee Evaluation Report”. The

another  reason  to  take  adverse  view  against  the  appellants,

mentioned  by  the  High  Court  in  the  impugned  order,  is  that

attested  copies  of  VAT  returns  were  not  presented  by  the

appellants. It is pointed out before us that the statement of the

VAT returns for relevant financial years were duly filed by the

appellants with the technical  bid.   From the record,  it  reveals

that filing of VAT returns with technical bids gets corroboration

also from “Tender Committee Evaluation Report”.  In said report

as  to  the  requirement  “VAT  Returns  of  the  Bidder”,  the

Committee  has  mentioned  -  “OK.  “10A,  10B,  10C,  10D”,  and

acquaint the head - “Tender Condition Compliance” word “Yes” is

mentioned.  Regarding the condition of turnover of rupees twenty

five  crores,  the  High  Court  itself  did  not  find  infirmity  and

observed that the appellants did fulfill the condition of return of

rupees twenty five crores in each of the preceding financial years

as the turnover of the joint venture partner was to be taken into

account.

17. It   is pertinent to mention here that the tender was invited

incorporating the National Lightening Code to ensure the safety

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of pedestrians and motorists.  The tender also specified the Lux

levels to be achieved and to be maintained for eight years.  The

power consumption required to be guaranteed and the contractor

was  made  liable  to  bear  the  difference  between  the  excess  of

actual energy bill over the quoted energy bill.  The contractor was

made responsible for comprehensive maintenance for all installed

equipment over BOT period including any breakage, theft, loss on

any account whatsoever.  It is worthwhile to mention here that in

the  pre-bid meeting,  representatives  of  eight  bidders  stated to

have  participated  and  clarified  various  points  regarding  the

tender notice.

18. In our opinion, there appears to be no hurry on the part of

the municipal  corporation,  in awarding contract  as the tender

had been issued on 01.08.2014 and the same was finalized only

on  03.09.2014,  i.e.  after  a  period  of  more  than  one  month.

Pre-bid meetings were held and the last date for submission of

tender was extended twice from 20.08.2014 to 25.08.2014 and

thereafter to 28.08.2014, which by itself shows that the process

was not carried out in haste.  Exhaustive pre-bid meeting was

held on 12.08.2014, which was stated to have been attended by

eight  prospective  bidders  and  the  minutes  of  the  pre-bid

meetings  running  into  several  pages  changed  many  terms  in

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favour  of  the  respondent  Corporation  to  ensure  even  stricter

contract execution responsibilities and thus became part of the

tender through issuance of two corrigenda.  The pre-bid meeting

was held to understand the requirements of the contract viz. the

opinion of the prospective bidders, to give sufficient time for bid

preparation,  evaluation  of  bids  and  award  of  contract.   One

month was consumed in carrying out the said activities and in

no way can it be termed as a hurried process, as held by the

High Court.

19. Therefore, in our opinion, the High Court has erred in law in

holding that the work order was illegally given to the appellants

in  respect  of  replacement  of  street  lights  by  LED fittings  and

refurbishment of street light infrastructure on BOT basis.  

20. Now, we come to that part of work order and consequential

agreement by which advertising rights were also granted to the

appellants  on the  basis  of  letter  dated 19.8.2014 sent  by  the

appellants to the Municipal  Corporation.   The High Court has

taken serious note of the letter dated 19.08.2014 (a day before

submission of technical bid) in which the appellants has made

“certain suggestions” to the municipal corporation. Copy of said

letter is reproduced below: -

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“The Commissioner, Aurangabad Municipal Corporation Aurangabad, Maharashtra

Sub:  Additional  Suggestions  toward Tender-UNCONDITIONAL

Respected Sir,

We are participating in the tender for the LED Street Lighting  due to  be  opened on 21st August,  2014,  & there  are  some  additional  suggestions  towards  the same for your kind consideration. These suggestions are unconditional & are being made in favour of the improvement for  the City of  Aurangabad. It  shall  be completely at your kind discretion to accept or reject these suggestions.

We can offer to implement the Online Internet based Control  &  Monitoring  of  the  Street  Lights  from  the Switching point. The suitable systems shall use GSM based modems to control the switching ON & OFF of the street lights, to be installed in each control Panel. Though  the  cost  of  such  a  system  is  quite  high, however  we  are  hereby  offering  to  implement  the solution at a reduced price of Rs. 36,000/- per Control Panel  along  with  the  recurring  costs  of  the  GSM communication  &  software  to  Online  monitor  it, provided  the  Exclusive  Advertising  rights  for  all  the Street Lights Poles are extended to us.

The  stipulated  number  of  Control  Panels  is  about 1200,  as  per  the  Tender.  In  case  it  is  decided  to implement the New Technology Online control System, we  may  mutually  plan  to  reduce  the  number  of existing Control Panels to about 600, as the Switching Point system load shall get substantially reduced after implementation of LED Lights. Thus we may offset the cost  of  reduced  Control  Panels  by  using  Online Technology  without  burden  of  AMC.  In  case  due  to logistic issues, the Street Lighting cannot be controlled by the proposed 600 Panels, then whatever additional nos. may be required, cost for the same shall be borne by AMC.

As a reciprocal towards implementation of the Online

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Monitoring  &  Control,  we  seek  the  Exclusive Advertising Rights for all the Street Light Poles.

2. Additional  Extended  Guarantee  Period  of  Two Years:-

We can extend the Additional Guarantee Period from Two Years to Four Years, if required by AMC, on the same terms of Cost as per Part D, i.e. on payment of Rs.95/- per fixture per month. This offer has.

Joint Venture Bidder (Electron Lighting System (P) Ltd. & Paragon Cable India)

Sd/- Authorized Signatory”

21. The  above  letter  discloses  that  the  suggestions  were

unconditional,  leaving it  open for the municipal corporation to

accept  or  not  to  accept  the  same.  Through the  above  quoted

letter the appellants suggested that if exclusive advertising rights

are given to the bidder on the street lights pole, the bidder would

reduce price by Rs. 36,000/- per control panel. The stipulated

number of control panel was 1,200/-, which could be reduced

through mutual plan to 600/-. We are of the view that the above

offer relating to advertising rights was uncalled for and severable,

and not a part of the work for which tender was floated.  Learned

counsel  for  the  appellants  submitted  that  the  appellants  are

ready to execute the work without taking benefit of said letter as

per the work contract relating to replacement of street lights by

LED on BOT basis.

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22. It is submitted on behalf of the respondent No.3 that though

revenue  from  advertising  in  city  of  Aurangabad  from  other

sources,  for  the  financial  years  2011-2012,  2012-2013  and

2013-2014  was  Rs.  81,31,091=00,  81,15,438=00  and

89,03,976=00  respectively,  but  the  same  from  advertising  on

Street Light Poles was nil for each of the three years. As such, the

municipal  Corporation  did  not  commit  any  illegality  in

negotiating the  matter  with the appellants while  awarding the

work order to it.

23. In our opinion, the matter regarding advertising rights was

separate,  and  the  municipal  corporation  which  is  a  statutory

body and instrumentality of the State should have acted fairly by

making it open for all eligible to submit their offers. As such, we

think that the respondent No.3 was not justified in giving the

advertisement rights to the appellants without inviting tender for

it. To that extent, in our opinion, respondent No.3 has not acted

fairly. As such, the manner in which the advertising rights are

given to the appellants with the work order cannot be said to be

fair and contract to that extent was liable to be quashed without

interfering with rest of the work order.

24. Explaining the doctrine of severability contained in Section

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57  of  Indian  Contract  Act,  1872,  in  B.O.I.  Finance  Ltd.,  v.

Custodian and others4, a three Judge Bench of this Court has

held  that  question  of  severance  arises  only  in  the  case  of  a

composite agreement consisting of reciprocal promises.  In Shin

Satellite Public Co. Ltd. V. Jain Studios Ltd.5, this Court has

observed that the proper test for deciding validity or otherwise of

an  order  or  agreement  is  “substqantial  severability”  and  not

“textual divisibility”.  It was further held by this Court that it is

the duty of the Court to sever and separate trivial and technical

parts by retaining the main or substantial  part  and by giving

effect to the latter if it is legal, lawful and otherwise enforceable.  

25. Therefore,  in  the  facts  and  circumstances  and  for  the

reasons  as  discussed  above,  the  appeals  deserve  to  be  partly

allowed.  Accordingly, we set aside the impugned orders passed

by the High Court to the extent it has quashed the work contract

given to the appellants regarding replacement of existing street

lights  by  LED  fittings  and  refurbishment  of  street  light

infrastructure on BOT basis.  The work order dated 03.09.2014,

to that extent given to the appellants shall stand valid.  However,

the  advertisement  rights  given  to  the  appellants,  in  the  work

contract, shall remain quashed.  As to the advertisement rights,

4  (1997) 10 SCC 488 5  (2006) 2 SCC 628

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respondent No.3 may invite tenders before awarding contract in

respect thereof. The appeals stand disposed of.

26. No order as to costs.

……………….....…………J. [Dipak Misra]

     .……………….……………J. New Delhi;       [Prafulla C. Pant] November 20, 2015.