Delhi High Court
Ramunia Fabricators Sdn Bhd And Ors. vs Oil And Natural Gas Corpn. Ltd. And Ors. on 11 April, 2008
Author: T.S. Thakur
Bench: T.S. Thakur, Aruna Suresh
JUDGMENT T.S. Thakur, J.
1. In terms of a tender notice dated 15th May, 2007, respondent No. 1 Oil and Natural Gas Corporation Limited invited bids for what was described as B-22 Field Development Project requiring among other works Surveys, Design, Engineering, Procurement, Fabrication, Transportation, Installation of submarine pipeline and modifications on existing facilities, as described in the bidding documents. The notice inviting the bids stipulated certain broad conditions regulating the submission of the bid documents and inter alia provided that the bidding documents could be purchased on payment of US$1000 for foreign bidders and Rs. 45,000/- for Indian bidders and that the bids could be submitted to the authority nominated for the purpose by 24th July, 2007. The notice further provided that the bidding documents would consist of four separate parts in which Part-I would deal with instructions to bidders, Part-II with general conditions of contract, Part-III with appendices and Part-IV with the scope of work, specifications and drawings etc. What is significant is that the tender documents were available for review and download from the website of the respondent corporation and that the prospective bidder had the option of purchasing the tender documents either from the selling center detailed in the Invitation for Bids (IFB) or by downloading the same from the website. In case the tender documents were downloaded from the website, the tenderer had to ensure that the tender fee along with confirmation of meeting the major qualification criteria reaches the office of the respondent Corporation before the date specified for the sale of bid documents. It is also significant to note that the tender documents envisaged a two bid system, viz; (a) the Technical Bid and (b) Commercial Bid. The price bid of only such of the bidders had to be evaluated as were found eligible for evaluation of their technical bids.
2. The case of the petitioners is that while petitioner No. 1 is a company incorporated under the Law of Malaysia specializing in fabrication, load out and sea fastening installation, petitioner No. 2 is a company incorporated under the laws of Hong Kong specialized in engineering, procurement and management of sub- contractors. Petitioner No. 3 is also a company incorporated under the laws of Malaysia and is the holding company of petitioners No. 1 and 2. The petitioners claim that all of them constitute one single economic entity. According to the petitioners, since they were desirous of submitting a bid in response to the IFB mentioned earlier, petitioner No. 1 instructed its bank, the RHP Bank, Berhard, Malaysia on 24th May, 2007 to issue a bank draft in a sum of US$ 1000 in the name of the respondent corporation. A bank draft was accordingly prepared by the said bank for the said amount in favor of the respondent corporation. Petitioner No. 1 at the same time instructed a representative of petitioner No. 2 in India to purchase the tender documents which was done to enable the petitioners to prepare and submit the same after completion. A copy of the remittance application dated 24th May, 2007 submitted by petitioner No. 1 to its bank along with the bank statement has been annexed with the writ petition to support the assertion made by the petitioners that the amount of US$1000 for the purchase of the tender documents was paid by petitioner No. 1 company.
3. The petitioners' further case is that the bid documents were completed by them in all respects and submitted to the respondent corporation on or about 5th September, 2007. The petitioners assert that a full disclosure of the relationship between the petitioners was made by them to the respondent corporation and that the bid documents inter alia included a Corporate Guarantee issued by the parent company petitioner No. 3 and an agreement between petitioner No. 1 and petitioner No. 3 that the parent company would undertake to provide financial and technical support and expertise, expert manpower and procurement assistance etc. The tender documents, according to the petitioners, also included a letter dated 30th August, 2007 from petitioner No. 3 to the respondent advising the latter that petitioners No. 1 and 2 were its wholly owned subsidiaries and that petitioner No. 2 had purchased the bid documents but the bid was being submitted by petitioner No. 1. It was further stated that a joint and several undertaking was also being provided. Since one of the issues that arises for consideration in this petition is whether the bid offered by the petitioners was valid keeping in view the terms and conditions of the tender notice, we may extract in extenso letter dated 30th August, 2007 addressed to the respondent corporation disclosing the facts relating to the purchase of the documents and the inter se relationship between the petitioners as also their involvement and association with the proposed project as a single economic entity:
Our ref. : RISL (PROP)/R1016/07/L/013 Date: 30th Aug 2007 To Oil and Natural Gas Corporation Limited 4th Floor, 11 High Bldg., Badra Sion Link Road, Sion(W), Mumbai-400 017 Attn: Head of MM ES(Offshore) Dear Sir, PROJECT : B-22, Field Development Project Tender No.: MR/OW/MW/B-22/04/2007 Subject: Statement Letter Please be advised that Ramunia International Services Ltd. ("RISL") and Ramunia Fabricators Sdn Bhd ("RFSB") are both wholly owned subsidiaries of Ramunia Holdings Berhad.
RISL has purchased the bid document for above reference project. We are submitting our bid proposal thru RFSB.
RISL/RFSB shall, supported by the parental guarantee of Ramunia Holdings Berhad, undertake to be jointly and severally liable to ONGC for all rights and obligations subsequently entered into for B-22 Field Development Project.
Yours Faithfully For and on Behalf of Ramunia Holdings Bhd Sd-
Dr. Daniel C.S. Ahn Managing Director
4. The technical and commercial bids received by the respondent corporation from the petitioner and other bidders were opened by it on 5th September, 2007. The petitioners' case is that the technical bids were forwarded by the Corporation to Engineers India Limited (EIL), the consultants of the respondent, for purposes of evaluation who are believed to have completed the evaluation process by 24th September, 2007 and submitted their report to the Corporation. The petitioners' further case is that EIL, the consultants appointed for the purpose, had found only the bids of petitioner No. 1 and respondent No. 2 Larsen and Toubro Limited to be technically compliant. This implied that only the petitioners and respondent No. 2 qualified for the second stage of bidding, viz; the opening of the price bids.
5. Before the price bid could be opened and evaluated, petitioner No. 1 appears to have received a letter dated 17th October, 2007 from the Mumbai office of the corporation requiring it to confirm compliance and submit necessary documents as detailed in the said letter. Petitioner No. 1 complied with the requirements of the said communication and furnished, among others, a Memorandum of Understanding executed by the three petitioners whereby they agreed to be jointly and severally responsible to the respondent corporation for successful execution of the project as per its tender requirements. According to the petitioners, while the recommendations made by EIL, consultants of the respondent corporation, were accepted by the corporation and while they were waiting for a call from the corporation for opening of the price bid, petitioner No. 1 received a letter from the General Manager (MM), ES Group of the respondent inviting it to a meeting with the Independent External Monitors (IEM) of the respondent at New Delhi on 30th November, 2007. It was in that letter pointed out for the first time by the Corporation that a question regarding the admissibility of the offer made by the petitioner had arisen in the context of Clause 10.1 of the ITB and Clause A-4 of the Bid Evaluation Criteria (BEC). The letter pointed out that the issue regarding the admissibility of the offer made by the petitioners was under examination of the IEMs and that the IEMs intended to discuss the matter with the petitioners.
6. The representative of the petitioners accordingly attended the meeting of the IEM on 30th November, 2007 and submitted a letter dated 29th November, 2007 addressed to the respondent Corporation clarifying that both petitioners No. 1 and 2 were under the same group, viz; Ramunia Holdings, Barhad. In addition, the petitioners clarified that while the bid documents were signed by petitioner No. 1 it had been clarified in the technical proposal and the main execution plan that petitioners No. 1 and 2 would jointly execute the project. It was also clarified that petitioners No. 1 and 2 were 100% subsidiaries of petitioner No. 3 who was providing the guarantee for the project. The representatives of the petitioners also explained under the cover of a letter dated 14th December, 2007 that the money for the purchase of the bank draft had been provided by petitioner No. 1. A request was also made in writing by petitioner No. 3 to the Chairman of the Corporation clarifying the issues and reiterating the relationship between the petitioners and requesting that their price bid documents should be opened as they had qualified to go to the next stage of the process of evaluation after qualifying in the evaluation process of the technical bid.
7. The petitioners' grievance in the above background is that the respondent corporation had decided to proceed to the second stage of the bid system without reference to the petitioners and without any reply to its letter clarifying its stand particularly in regard to compliance with Clause 10.1 of the ITB despite the letters addressed by it to the Corporation. The petitioners allege that the price bid of Respondent No. 2, Larsen and Tourbo Limited was around US$59,70,00,000 whereas the bid offered by the petitioners was lower by nearly 100 million US dollars. The rejection of the petitioners' bid on the ground of alleged violation of Clause 10.1 of the ITB is, according to the petitioners, totally unfair and unreasonable leaving no alternative for the petitioners except to approach the Court especially because the respondent is understood to have invited the representatives of respondent No. 2 for discussions on the price bid submitted by it. The petitioners have, therefore, prayed for a mandamus directing the respondent corporation not to award the contract in question without first opening the price bid documents of the petitioners and in case the same has already been awarded, to quash the award of the contract.
8. In response to a notice issued by this Court, the respondents have appeared and filed their counter affidavits to the writ petition. The counter affidavits support the rejection of the bid offered by the petitioners on the ground that the same was in violation of Clause 10.1 of the ITB, which according to the respondents, is an essential condition violation whereof would render the bid invalid. The counter affidavit filed on behalf of the Corporation has also placed on record the order by which the EPC (Executive Purchase Committee) had, relying upon the report submitted by the IEM, rejected the bid submitted by the petitioners. The respondent Corporation has also tendered the record of proceedings of the IEM in which reasons for rejection of the bid offered by the petitioners have been set out and submitted for consideration of the EPC.
9. We have heard learned Counsel for the parties at considerable length and perused the record. The following questions arise for determination:
i) Was the bid submitted by the petitioners in accordance with the terms regulating the tender process.
ii) If the answer to question No. 1 is in the negative was the condition stipulated in Clause 10.1 an essential condition sufficient to justify the rejection of the bid of the petitioners even when the same was technically compliant.Re: Question No. 1
10. The invitation for bids issued by the respondent corporation required the bids to be submitted in the prescribed bid forms and performa inter alia stipulated that any offer sent without having the prescribed bidding document of ONGC and without complying with the terms and conditions of the bidding documents will be ignored. The bidding documents in turn consisted of four separate parts. Part I consisted of instructions to the bidders. Part II related to general conditions of the contract. Part III contained Appendices while part IV set out the scope of work, specifications and drawings. Part I containing instructions to the bidders dealt with a variety of subjects like Joint Venture/Consortium bids, site visits, local conditions, bidding system, experience and capability of the bidders etc. Clause III of Part I permitted the formation of consortium and/or joint ventures for undertaking the tendered work. Keeping in view its complexity and nature, it enumerated the steps which the joint venture or the consortium had to take in regard to various matters including signing of contract etc. in the event of contract being allotted in their favor. In Clause 10.1 of the instructions to bidders, the corporation stipulated the bidding system. It inter alia stipulated that bid shall be stipulated only in the name of the bidders or consortium/joint venture lead by the bidder in whose name the bidding documents were issued by the company. Since considerable time was spent on the interpretation of the provisions of Clause 10.1 and the violation if any of the provisions thereof it would be necessary to extract the said provision:
10.1 General 10.1.1 Two bid system shall be followed as described in this Clause. The bids shall be submitted only in the name of the Bidder or a consortium led by the bidder in whose name the Bidding Documents were issued by the COMPANY. The Bid shall be submitted complete in all respects together with requisite information and Appendices and shall be unconditional, complete and free from ambiguity, change or interlineations.
10.1.2 The original Bidding Documents as received by the bidder along-with bidder's tender as prepared by the bidder in original and all other required appendices as given in Clause 11.0, such as power of attorney of the signatory to the tender, descriptive literature and any other information required to be furnished by the bidder shall be construed to constitute the Bid. The un-priced bid (termed as "Un-priced Techno-Contractual Bid") shall be submitted in one sealed box marked Envelope No. 1 with the Bid number and closing date and the words "Un-priced Techno-Contractual Bid" duly super scribed on it. Copy of "Priced Commercial Bid" with price column/figures duly blanked out shall also be submitted in Envelope No. 1.
10.1.3 The Proforma proposal and Proforma schedule of price, given as Appendix "A3 duly filled in, shall be submitted in separately bound booklet in a separate sealed envelope marked Envelope No. 2. This envelope shall also be marked with tender number and the closing date. The words "Priced Commercial Bid" shall be clearly superscripted as Envelope No. 2.
10.1.4 The above said Envelopes No. 1 and 2 shall, after sealing, be marked "Confidential" and be placed inside another Box No. 1 which again should be duly sealed and super scribed "Tobe Opened by tyhe Addressee Only- Original Set". This Box should be addressed to Lead Contracts Administrator, 'Lakshmi Chambers', 192, St. Mary's Road, R.A. Puram, Chennai 600 018, India by courier service/registered air mail. Tender reference and closing date shall also be shown on this envelope.
10.1.5 Bidders desiring to effect hand delivery may arrange to submit completed sealed Bids as described above, at the Company's office in due time during officer hours not later than bid closing date and time. Bidders desiring to obtain a receipt may deposit their bid with the addressee or his authorized representative at the above address of the COMPANY before the closing date and time of the tender.
10.1.6 The second and third copies of "Un-priced Techno-Contractual Bids" Un-priced version of Priced Commercial Bids with price column/figures duly marked as "Quoted" should be submitted separately on the same lines as described above and marked in Box Nos. 2 and 3 (Copies of Un-priced Techno-Contractual Bids) respectively.
10.1.7 In addition to above, bidders are also requested to submit two soft copies on CD of "Un-priced Techno-Contractual Bids" in Box Nos. 2 and 3.
10.1.8 All bidders shall note that if any price quotation is indicated in the envelope No. 1 and Box Nos. 2 and 3 submitted by them, the bid is liable to be rejected.
10.1.9 Bidders are requested to use the formats given as Appendices in Part-11 of Volume 1.
10.1.10 The proposal form incorporating the schedule of prices and instructions is enclosed as Appendix A3.
10.1.11 Company will not be responsible for the loss of any Bid form or for the delay in postal transit.
11. A careful reading of the above would show that the bidding system clearly envisaged the bid to be submitted in the name of the bidder or the consortium/joint venture in whose name the bidding documents were issued by the Corporation. What was contended on behalf of the respondent/corporation was that the bid received from the petitioner was not submitted in the name of the bidder in whose name the bidding documents were issued by the Corporation. There was, therefore, a violation of the terms stipulated in the tender document. We shall presently examine the said contention but before we do so we need to point out that in terms of Clause 10.1 (Supra) a bid could be in the name of (a) bidder; or (b) consortium/joint venture. It was common ground that the petitioner was neither a consortium nor a joint venture. A bid could still be submitted by it, for it was not necessary to be a member of a consortium or of a joint venture to do so. The question, however, is whether a bid submitted by a subsidiary on the basis of documents purchased by another subsidiary of a single parent company was legally permissible in terms of the tender conditions stipulated in the tender documents. The answer to that question is provided by Appendix A-6 which contains Bid Evaluation Criteria (BEC). Clause A-4 of the said appendix envisages offers of such bidders as did not themselves meet the experience in financial capability criteria stipulated in the BEC being considered provided the bidder is a 100% subsidiary company of the parent company which itself meets the experience and financial capability criteria as stipulated in the BEC. Clause A-4 of Appendix A-6 reads as under:
A-4) Offers of those bidders who them selves do not meet the experience and financial capability criteria as stipulated in the BEC can also be considered provided the bidder is a 100% subsidiary company of the parent company which itself meets the experience and financial capability criteria as stipulated in the BEC. In that case as the subsidiary company is dependent upon the experience and financial capability of the parent company with a view to ensure commitment and involvement of the parent company for successful execution of the contract, the participating bidder should enclose and Agreement (as per format enclosed as Appendix B-10) between the parent and the subsidiary company and Corporate Guarantee ( as per format enclosed as Appendix B-11) from the parent company to ONGC for fulfillling the obligation under the Agreement. The bids of Parent/Subsidiary company (ies) can also be considered based on the experience capabilities of any of them, provided all the related companies referred to in the bid are contracted by a single parent company and they agree for joint and several responsibility and furnish in the Unpriced bid, the corporate guarantee for successful execution of the contract.
12. A plain reading of the above would show that offers could be made even by such of the bidders as did not themselves meet the experience and financial capability criteria provided the bidder happened to be a 100% subsidiary company of the parent company which meets the experience and financial capability criteria as stipulated in the BEC. In any such case since the subsidiary company is dependent upon the experience and the financial capability of the parent company, the bidder was required to enclose an agreement in the prescribed format executed between the parent and the subsidiary company and a corporate guarantee also to be submitted in the prescribed format from the parent company to ONGC for finalizing the obligations under the agreement. It is further evident from a reading of the Clause that bids of parent/subsidiary companies could also be considered based on the experience/capability of any of them, provided all the related companies referred to in the bid are controlled by a single parent company for joint and several responsibility and furnish in the price bid a corporate guarantee for a successful execution of the contract.
13. It is not in dispute that the petitioners had in the present case submitted their bid on 4th September, 2007 together with all the requisite documents stipulated in Clause A-4 (Supra) except a Memorandum of Understanding signed by authorized signatory of all the three parties confirming joint and several responsibility for the execution of the work. The ONGC had, therefore, by a letter dated 17th October, 2007 called upon petitioner No. 1 to submit the said document latest by 24th October, 2007. This is evident from the following two passages of the said communication:
To M/S Ramunia Fabricators Limited.
Kuala Lumpur Fax No. 603 4043 1058 Sub: Tender No: MR/OW/MM/B-22/04/2007 B-22 Field Development Project Sir(s), With reference to the subject tender and your techno contractual bid opened on 05.09.2007, you are required to confirm compliance and submit necessary documents as below, laterst by 16:00 hrs. of 24th October, 2007. The supporting documents submitted by you must be of a date not later than the closing date of submission of bids and should not contradict the details already given in the original bid.
A. Commercial:
1. In your bid you have submitted a letter from your parent company M/s Ramunia Holding Bhd. (RHB) which states that Ramunia International Services Ltd. (RISL) and Ramunia Fabricators Sdn Bhd (RFSB) shall, supported by the parent guarantee of RHB, undertake to be jointly and severally liable to ONGC for all rights and obligations subsequently entered into for B-22 Field Development Project. It is to inform that ONGC shall not be able to accept any document from the bidder in this regard subsequently. However, you are required to furnish at this stage an MOU signed by authorized signatories of all the three parties (RHB, RISL and RFSB) confirming joint and several responsibility for execution of the work with clearly defined role of each of the three parties involved.
14. It is also not in dispute that the petitioner had not only submitted the requisite Memorandum of Understanding mentioned in the above communication but also answered other queries and clarifications sought by the ONGC in the said communication within the time granted to it for that purpose. The bid submitted by the petitioners was, in that view of the matter, perfectly consistent with the provisions of Clause A-4 (Supra) appearing in Appendix A-6 of the tender documents. A harmonious construction of the above Clause with Clause 10.1 of the instructions to bidders appearing in Part-I of the tender documents would leave no manner of doubt that while submission of bids by the bidders who have purchased the bid document was one of the requirements of the bidding system prescribed by the respondent/corporation, the system also permitted submission of a bid by a parent company or by its subsidiaries relying upon the experience and financial capability of the other. It is also evident that while Clauses 3.0, 3.10 read with Clause 10.1 dealt with bids submitted by consortia and joint ventures, other bidders who did not answer that description would include those that fell in the specific relationship of parent subsidiary companies envisaged under Clause A-4 of Appendix A-6. In other words, the expression "Bidder Company" in Clause 10.1 would be a genus while Clause A-4 in Appendix A-6 may be a specie. What is significant is that so long as the petitioners' inter se relationship fell within the four corners of Clause A-4 viz; relationship of 100 % subsidiary companies drawing support from the experience and financial capability of the parent company in the bids submitted by them, the bid would be in order and perfectly in tune with the provisions of Clause A-4. The parent subsidiary companies making a bid in terms of Clause A-4 would then constitute one single economic entity subject to their mutual relationship being given legal sanction in terms of the documents stipulated by the clause. So viewed the requirement of the bidder being also the purchaser of the tender documents stipulated in Clause 10.1 must be deemed to have been satisfied if the said document was purchased by anyone of the parent or subsidiary companies who make the bid and legally bind themselves to undertake the project by executing the requisite documents as stipulated in Clause A-4. Stated differently, the purchase of the bid document by the subsidiary companies must, in such a situation, be deemed to be a purchase of the document by the single entity which emerges out of the parent and the subsidiaries joining hands to undertake the work jointly and severally. Any other interpretation would, in our opinion, result in anomalies and give rise to oddities that need to be ironed out by adopting the rule of harmonious construction. Support for that view is available from Clause D-3 to appendix A-6 which stipulates that any contradiction between the Bid Evaluation Criteria (BEC) stipulated in Appendix A-6 and a Clause appearing elsewhere in the bidding document would be resolved in favor of the provisions of Clause D-3 which gives overriding effect to the provisions of the Bid Evaluation Criteria and supersedes all other Clauses to the contrary. The Clause reads as under:
D-3. In case of any contradiction between BEC and a Clause appearing elsewhere in the Bidding Documents, provisions of BEC shall supersede all such clauses.
15. Assuming, therefore, that there is any conflict between Clause A-4 in Appendix A-6 and Clause 10.1 of the instructions to the bidders, although we see no such contradiction in the case at hand, the provisions of Clause A-4 would have to be given overriding effect implying thereby that so long as a bid is in terms of Clause A-4 of Appendix A-6, the fact that the bidding documents were purchased in the name of one while the bid has been submitted in the name of another 100% subsidiary or the parent company would make little difference. We have, in the light of the above discussion, no hesitation in holding that the bid submitted by the petitioners was perfectly in tune with the provisions of Clause A-4 and could not, therefore, be said to have been non-compliant of either the said Clause or Clause 10.1 of the instructions to the bidders.
16. Before we part with this aspect of the controversy before us, we may gainfully refer to the decision which the ONGC had taken in regard to the validity of the bid received from the petitioners. From the record note of discussions of the Executive Purchase Committee a copy whereof was produced by Mr. Datta, learned ASG for the ONGC, it is evident that 13 bidders had purchased the bid documents in response to the ICP tender out of whom only 8 bidders attended the pre-bid conference. Offers were eventually received only from the following 4 bidders.:
1) Raumania Fabricators Sdn Bhd, Jalan Kampar, Off Jalan Tun Razak, Kuala Lumpur, Malaysia.
2) M/s Larsen and Toubro Ltd. Larsen and Toubro House, Bellard Estate, Mumbai.
3) M/s Punj Llyod Ltd. Nehru Place, New Delhi; and
4) M/s Naftgaz India, Noida, Uttar Pradesh.
17. While evaluating the said bids, Engineering Services( for short 'ES') had in its deliberation recommended for the consideration and approval of the Executive Purchase Committee (EPC) the bid submitted by petitioner No. 1, no matter the bid document had been purchased by petitioner No. 2. This recommendation proceeded on the basis that both RFSB and RISL, petitioners No. 1 and 2 were 100% subsidiary of the parent company, petitioner No. 3 (RHB) and both the subsidiaries were relying on the parent company for financial and technical capability. The Engineering Services (ES) had also noticed that all the three parties had submitted a memorandum of understanding confirming joint and several responsibility for successful completion of the project as per ONGC tender requirement. It was further submitted that as per Clause A-4 of the Bid Evaluation Criteria, the bids of parent/subsidiary companies could also be considered based on the experience/capabilities of any of them provided the related companies referred to in the bid are controlled by a single parent company and the requisite documents furnished for successful execution of the contract. All these documents were found to have been submitted by the Engineering Services who observed that although 13 bidders had purchased the bid documents only 4 had made offers out of which only 2 bidders viz; petitioners and respondent No. 2 had been found to be technically compliant. In that view, therefore, the Engineering Services recommended consideration of the bid submitted by the petitioners and sought approval for the same from the executive purchase committee of the ONGC. The decision of the Executive Purchase Committee has referred to the observations and recommendations of the Engineering Services in the following words:
2.2 Subsequent to Brief submitted for consideration of EPC, another representation from M/s LandT dated 16.11.07 and M/s Naftogz dated 16.11.07 were received on 19.11.2007 and supplementary brief-1 with following recommendation was circulated in the EPC meeting held on 21.11.2007:
Quote In view of the foregoing, ES reiterates its earlier recommendation for consideration and approval of EPC for acceptance of bid of M/s Ramunia Fabricators Sdn. Bhd before short listing of the bidders for price bid opening as brought out in main EPC brief already submitted.
18. Since, however, respondent No. 2, the only other technically qualified bidder had made a report to Independent External Monitor (IEM) appointed in terms of an integrity pact against the consideration of the bids submitted by the petitioners, the EPC resolved to make the consideration of the bid submitted by the petitioners subject to the report which the IEMs would submit on the complaint made by respondent No. 2. What is noteworthy from the above is that even the Engineering Services of the ONGC and the Executive Purchase Committee which happens to be the apex body for taking a final decision in such matters had taken a pragmatic view of the terms incorporated in the tender documents and declared the tender submitted by the petitioner to be valid for being processed further by opening the financial bid offered by it. In fairness to Mr.Datta, learned ASG appearing for the ONGC, we must say that he has strongly supported the view taken by the Engineering Services and the EPC but stopped short of agreeing to consider the bid submitted by the petitioners in view of the opinion which the Independent External Monitors have given on the subject. Mr. Datta submitted that although the opinion of the Independent External Monitors was not binding upon ONGC yet the spirit of the Integrity Pact left no option for the ONGC except to abide by the same, no matter the said decision is in conflict with the views which the ONGC might hold on a given subject. Suffice it to say that the IEMs have, by a process of interpretation of the provisions of Clause 10 of the Instructions to the Bidders, overruled the view taken by the ONGC and thus brought about a change in its course of action. The report given by the IEMs on the complaint made by respondent No. 2 has also been placed on record by the ONGC. The IEMs have opined as under:
Quote
16. We have given careful consideration to the entire matter. It is undoubtedly true that while submitting the bid, RFSB and the 2 companies of the Group were entirely transparent and communicative about the relationship that existed between them and about the matter in which the contract, if awarded, would be executed by them. In this manner, the Ramunia Group put all its card on the table and acted in a forthright fashion. In considering the matter, we have looked very closely at the provisions of Clause 10.1 of the ITB. This Clause makes not just clear-cut and categorical stipulation about the party purchasing the tender document and submitting the bid being necessarily the same, it emphasizes the exclusion of any other party by the use of the word "only" therein. The clear implication and consequence of this provision is indisputably that the party purchasing the bid document and the party submitting the bid must be one and the same. To our mind, there is neither any ambiguity nor any leeway in applying or interpreting this provision. In so far as the relevance and applicability of the second part of Clause A-4 of BEC is concerned, that provision does have the effect of enlarging the scope of stipulation in the first part of Clause A-4 but does not impart any opportunity for considering a bid from a party that had not purchased the bid document. Only a party that successfully passes through the funnel of Clause 10.1 of ITB would seem to be eligible for consideration under Clause A-4 of BEC.
17. In this particular case, since the consequence of the factual position is that the bid submitted by RFSB does not successfully meet the requirement stipulated in Clause 10.1 of ITB, hence that bid seems to be incapable of being regarded as admissible under Clause A-4 of BEC.
18. We are conscious of the fact that non-consideration of the bid from RFSB can result in only one tender being available for consideration. Be that as it may, the bid of RSFB does not merit consideration in the light of the forgoing discussion.
19. We regret our inability to agree with the above line of reasoning. The IEMs have found that the petitioner companies have been completely transparent about their inter se relationship and about the manner in which the contract would be executed. They have put all their cards on the table and acted in a forthright fashion. Those findings, in our opinion, give a clean chit to the petitioners insofar as the sincerity of their purpose and bonafides are concerned. There is no murmur, leave alone any assertion, that the petitioners or any one of them were taking any undue advantage out of the situation arising from the purchase of the bid document by one and the submission of the bid by the other. The IEM has, even so, gone by a literal interpretation of Clause 10.1 and stated that no party who has not purchased the bid document can submit the bid even if the parties fully answer and satisfy the requirements of Clause A-4 of the BEC. The question, however, was not whether there was any 'ambiguity' ('leeway') in interpreting the provisions of Clause 10.1. The question was whether a harmonious construction of Clause A-4 with Clause 10.1 could make both the provisions workable without doing undue violence to the language of the said provisions and without defeating the purpose of spirit underlying the same. To say that the bid submitted by a party, eligible under Clause A-4 of the BEC, could not be considered simply because the bid has not passed through the funnel of ITB does not appear to us to be a reasonable and correct understanding of the provisions of the tender document. That interpretation is, in our view, hyper-technical and fraught with the potential of considerable mischief in a situation where one of the two technically qualified bidders is thrown out of competition on a technical ground unrelated to the eligibility of the bidder or its technical and financial capacity to undertake the work in question. If the entire purpose of stipulating a comprehensive procedure and terms and conditions of eligibility is to ensure that the process of finalizing a contract is transparent and that only the very best eventually succeeds in bagging the contract, the authority that interprets the provisions of the tender documents must do so to promote rather than subvert that object. An interpretation that reduces the options of ONGC, the ultimate arbiter of fixing the contract and makes it helpless or renders the entire process of fixing the contract nugatory attracting additional burden for the exchequer without any reasonable justification or basis would have to be eschewed and a more pragmatic interpretation preferred so as to promote the object underlying the tender process. The opinion given by the IEM appears to us to be oblivious of the above overriding consideration apart from being technical and pedantic to the limit of being unworkable if not outrightly unacceptable. In the totality of the above circumstances, therefore, we have no hesitation in answering question No. 1 in the affirmative and holding that the offer made by the petitioners was valid and ought to have been processed further by opening their financial bid. Re Question No. 2
20. In the light of what we have said while dealing with question No. 1 above it is unnecessary to answer this question. But since the matter was argued at considerable length before us, we may as well deal with the same briefly. Clause 10.1 of the "instructions to the bidders" is procedural in character. Inasmuch as it stipulates that the bid must be offered by the bidder in whose name the documents have been purchased, it prescribes a broad guideline for the bidders. It prescribes the procedure by which the process of submission of the bid and its evaluation would be undertaken from the procedural point of view. The clause, it is noteworthy, does not deal with the conditions of eligibility whether technical, financial or administrative which the bidders must satisfy. The conditions of eligibility whether in terms of the technical know how, financial back up, experience or organizational capacity may all be directly related to the capacity of the bidder to undertake the given project. Such conditions may, therefore, be generally termed as essential conditions of the contract, non-fulfillment whereof may result in a bidder being declared ineligible or unqualified. Apart from such essential conditions there may, however, be a large number of ancillary stipulations including those that deal with matters that are procedural in character unrelated to capacity of the bidder or matters relating to the execution of the project by itself. As a matter of fact, bigger the project the greater is the care taken by the authority advertising the same in fixing and stipulating the terms and conditions subject to which the same is offered for allotment. Each one of those conditions cannot obviously be termed as essential to the process of fixing a proper contract or for timely and satisfactory execution of the work in question. Suffice it to say that there can be essential conditions, non- fulfilllment whereof would result in rejection of the bid or disqualification of the bidder, just as there may be unessential conditions which can be waived or time for compliance whereof extended by the competent authority. Whether or not a condition is essential would depend upon the fact situation of each case and the nature of the conditions. The legal position in this regard is fairly well settled by a large number of decisions rendered by the Courts including the Apex Court. In Poddar Steel Corporation v. Ganesh Engineering Works And Ors. , their lordships of the Supreme Court classified the conditions in a tender document in two categories viz; those that lay down the essential conditions of eligibility and others that are merely ancillary or subsidiary to the main object to be achieved by the conditions. The Court held that in the first category of conditions the authority issuing the tender may be required to enforce them rigidly but in the second category of conditions, the authority may deviate from or waive the strict or literal compliance with the conditions in appropriate cases. The Court observed:
6. It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank the Clause No. 6 of the tender notice was not obeyed literally, but the question is as to whether the said non- compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in GJ Fernandez v. State of Karnataka a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view. The High Court has, in the impugned decision, relied upon Ramana Dayaram Shetty v. International Airport Authority of India but has failed to appreciate that the reported case belonged to the first category where the strict compliance of the condition could be insisted upon. The authority in that case, by not insisting upon the requirement in the tender notice which was an essential condition of eligibility, bestowed a favor on one of the bidders, which amounted to illegal discrimination. The judgment indicates that the Court closely examined the nature of the condition which had been relaxed and its impact before answering the question whether it could have validly condoned the shortcoming in the tender in question. This part of the judgment demonstrates the difference between the two categories of the conditions discussed above. However it remains to be seen as to which of the two clauses, the present case belongs.
21. In B.D. Yadav v. Administrator of City of Nagpur AIR 1984 Bombay 351 also the Court made a distinction between essential and non-essential conditions in a contract. The Court noticed in that case that the contractor was not disqualified to undertake or complete the work of the kind advertised by the authority. That being so evaluation of other conditions which were ancillary and subordinate and which did not deal with the essential character of the work could not be made a basis for holding him disqualified. The Court held that there was a clear distinction between the conditions that are essential to the performance of the work involved, undertaken and those which are ancillary, subordinate or subsidiary to it. Reference may also be made to the decision of the High Court of Andhra Pradesh in Jyothi Krishna Engineers v. State Bank of Hyderabad, Rep. By the Chief Manager where the Court observed:
The terms and conditions of tender notice can be classified into two. One is essential conditions of eligibility and the other is ancillary or subsidiary to the man object to be achieved by the condition. So far as conditions of eligibility are concerned, they cannot be waived and must be strictly complied with, while the other conditions which are ancillary or subsidiary need not be literally complied with. The form of making earnest money deposit is not an essential eligible condition. It is only ancillary or subsidiary condition. It is meant for the purpose of making the contractors start the work after giving the contract to him. Any deficiency therein can be waived and the tenderer, if he is the lowest shall not be pin-down for literal compliance of the said condition. Consequently, the rejection of tender only on the ground that the earnest money deposit required to be made pursuant to the conditions of invitation to tender was made not by way of demand draft, but by way of demand draft, but by of "term deposit receipt" was improper.
22. To the same effect is a Division Bench decision of this Court in Kapsch Metro JV v. UOI and Anr. W.P. (C)1309/2007 disposed of on 25th April, 2007 and R.G. Holding Pvt. Ltd. v. MTNL and Anr. 2004 (8) AD Delhi 610.
23. There is in the light of the above decisions no gainsaying that the conditions stipulated in the tender documents may be essential or ancillary but whether or not a condition is essential would depend upon whether the condition is crucial to the technical, financial or other eligibility of the bidder or its capacity to undertake the work or timely completion of the work. Clause 10.1, in the instant case, does not, in our view, constitute an essential condition and while ONGC may in appropriate cases decline to recognize the bid submitted by a person who has not purchased the bid document like for instance in a case where the document has been purchased by one party but a bid based on the same has been submitted by another party who is wholly unrelated to the party purchasing the bid document in any manner whatsoever and who may have simply purchased the bid document for a premium which would not be correct to do. In a case like the present where the bid document has been purchased by one 100% subsidiary and the bid is submitted by another 100% subsidiary of the very same parent company in which all the three companies have joined as a single economic entity to undertake the work the bid cannot be rejected for violation of a procedural requirement especially where a collaboration between the parent and the subsidiary companies is made permissible under the terms of the tender document. Our answer to question No. 2 is given accordingly.
24. In the result, this petition succeeds and is hereby allowed. The decision of the ONGC to reject the bid offered by the petitioners on the ground that the tender document was purchased by one company while the bid was submitted by another, is quashed with a direction to the respondent-ONGC to open and consider the financial bid offered by the petitioner while awarding a contract pursuant to the tender notice issued by it. In the circumstances of the case, however, the parties are left to bear their own costs.