Rajasthan High Court - Jaipur
M/S Lamifab Industries vs Union Of India And Ors on 12 October, 2017
Author: M.N. Bhandari
Bench: M.N. Bhandari
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT
JAIPUR
S.B. Civil Writ Petition No. 2718 / 2017
M/s Lamifab Industries, 101, Mohan Palace, TPS-III, 57th Road,
Near Bhatiawandi, Borivali (W) Mumbai Through Its Power of
Attorney Holder Shri Mahendra Singh Rathore, S/o Shri Ram
Pratap Singh Rathore, G-1, Shri Shyam Excellency, 1216-1217,
Rani Sati Nagar, Kings Road, Jaipur.
----Petitioner
Versus
1. Union of India Through the Joint Secretary, Department of
Economic Affairs, Ministry of Finance, North Block, Cabinet
Secretariat, Raisina Hill, New Delhi.
2. State of Rajasthan Through Principal Secretary, Agriculture,
Government of Rajasthan, Secretariat, Jaipur, Rajasthan.
3. The Project Director, Project Management Unit, Rajasthan
Agricultural Competiveness Project (RACP), II Floor, Academic
Block, SIAM, Durgapura, Jaipur-302018, Rajasthan.
4. Texel Industries Limited, Through Its Director(s), Block No.
2106. Santej- Khatraj Road, Near Shah Alloys Ltd. Village Santej-
382721, Tal.: Kalol, (N.G.) Dist- Gandhinagar- Gujarat.
----Respondents
_____________________________________________________ For Petitioner(s) : Mr. Pancham Surana Mr. Sarvesh Jain For Respondent(s) : Mrs. Manju Joshi, Addl. Govt. Counsel - for respondent Nos.2 & 3 Mr. Mahendra Singh with Mr. Raunak Bafna -
for respondent No.4 _____________________________________________________ HON'BLE MR. JUSTICE M.N. BHANDARI DATE OF JUDGMENT : 12th October, 2017 The Rajasthan Agricultural Competitiveness Project Management and Implementation Society invited sealed Proposals for supply and installation of Geo-Membrane sheets in the farmers' field.
(2 of 19) [CW-2718/2017] The petitioner-company apart from others submitted their proposals before the last date for its submission. The proposals were opened on 7th October, 2015 where the petitioner-company remained lowest. The petitioner-company received letters on 24 th November, 2016 & 19th December, 2016 to return their proposal security with intimation of assignment of work to other company. The reason for rejection of proposal was not given in the letter dated 24th November, 2016 but it was conveyed vide letter dated 19th December, 2016. The rejection of proposal was for want of proposal security for a period of 135 days. The petitioner-company had given proposal security for a period of 45 days. As per terms of proposal document, the bid was liable to be rejected if proposal security is not given for the required period.
The proposal was to be submitted with validity of 90 days and proposal security of a period of bid validity plus 45 days totalling 135 days. The petitioner-company has submitted proposal security for a period of 45 days only thus their proposal was rejected.
The official respondents awarded work to the respondent No.4. The allegations have been made regarding violation of the terms of proposal document for awarding work to the respondent No.4, that too, on a higher rate. As per terms and conditions of the proposal document settled under the guidelines of the World Bank, no deviation in the document was permissible yet amendment in the performance guarantee was made apart from its receipt beyond the period of 21 days. As per condition of proposal document, performance security was required to be (3 of 19) [CW-2718/2017] submitted within 21 days of the acceptance of the bid and intimation thereupon. The framework agreement was executed after violation of the conditions.
The case of the petitioner-company is even for extension of bid validity beyond the period permissible under the proposal document. As per the condition, bid validity was of 90 days with its extension by the official respondents for maximum period of four weeks. Beyond that, it could have been extended only with the approval of the World Bank. The validity of the proposal was extended without approval of the World Bank and it was even beyond the period by which supply and installation of Geo- membrane sheets was to be made.
It is also alleged that to accommodate respondent No.4, amendment in the performance guarantee was made. The words "framework agreement" were substituted by "letter of acceptance". The change in the proposal document was not permissible but it was allowed to favour respondent No.4. though its proposal was on a higher rate. The petitioner-company had given rate of 122.15 unit price including all taxes, whereas, the rate quoted by the respondent No.4 was 157.22 unit including all taxes but excluding excise duty of 12.5% plus CST of 5%. The difference of rates between two bidders is quite huge, however, to bestow favour to the respondent No.4, the petitioner-company's proposal was treated to be non-responsive while accepting the bid of respondent No.4.
(4 of 19) [CW-2718/2017] Learned counsel for petitioner-company further made reference of various terms of proposal document to show its non- compliance. As per the condition, if a proposal is taken to be non- responsive then proposal security was required to be returned within 28 days of proposal validity period and thereby rejection of the performance security should have been within 118 days. In the instant case, official respondents did not comply the direction aforesaid, rather, proposal security was returned after lapse of several months. The official respondents have made strict compliance to the terms and conditions of the proposal for the petitioner-company and not for them and for respondent No. 4. It is moreso when the proposal security submitted by the petitioner- company was having validity of 135 days, if it is read in words, instead the numerical figures. There was difference in the period written in the words than in numerical figure. The benefit should have been given to the petitioner-company to get lowest price. Instead of taking a positive view, proposal submitted by the petitioner-company was treated to be non-responsive ignoring that it is on the competitive rates. In view of the issues raised above, the letter under challenge be set aside with a direction to award the work to the petition company.
Learned counsel for respondents have contested the writ petition. It is submitted that petitioner-company's proposal was treated to be non-responsive as per terms and conditions of the proposal. The petitioner-company failed to submit proposal security of a period of 135 days as it was submitted with validity of 45 days only. The validity period of the bid was of 90 days and (5 of 19) [CW-2718/2017] 45 days in addition to it. In view of the above, the petitioner- company was rightly treated to be non-responsive and accordingly, financial bid was assessed and bid submitted by the respondent No.4 was accepted.
The official respondents have doubts on the price quoted by the petitioner-company. It is not only lower than other competitors but even to the market price. The supply and installation of Geo-Membrane sheets is for a period of three years but petitioner-company has given it for one year. The annual turnover is Rs.7.50 crore for last three years. Thus for those reasons also, the petitioner-company was not entitled to get contract. It cannot be only for the reason that it stood lowest.
The petitioner-company has raised many other issues pertaining to award of work to respondent No. 4. It needs to be clarified. The letter of acceptance was signed by the Project Director on 21st September, 2016 and was sent to the Successful bidder on the same day. The successful bidder requested to redraft the performance security deed vide his communication dated 13th October, 2016 as their was an error in it. The request aforesaid was accepted on 17 th October 2016 with the approval of the World Bank. The performance security then submitted on 21 st October, 2016. It was submitted beyond the period of 21 days but under the circumstances explained above.
The contract was signed on 9th November, 2016. It is alleged that acceptance of the bid was beyond its validity period as proposals were opened on 7th October, 2015. The bid validity (6 of 19) [CW-2718/2017] period was of 90 days. It could have been extended by the official respondents for a period of four weeks. The petitioner-company has ignored that validity period of the bid was subsequently extended by the World Bank and based on the aforesaid only, proposal was accepted. The extension of the validity period was within the domain of the World Bank beyond the period of four weeks after initial validity period of 90 days. Thus there is no illegality in accepting the proposal with the extension of the validity period.
It is further explained that on the receipt of communication about acceptance of the bid, the successful bidder was required to submit performance security within 21 days. It has been complied by them but due to error in the performance security document, the Bank did not issued it. The respondent No.4 immediately sent a message to the official respondents to correct the mistake in the performance security document as it made a reference of execution of framework agreement, whereas, it is to be signed after submission of performance security. Accordingly, the words "framework agreement" were substituted by "letter of acceptance"
and thereupon within four days, the performance security was submitted by the respondent No.4. Looking to the aforesaid, the period beyond 21 days is condonable. An apparent mistake in the document cannot be to the disadvantage of a party who had under taken all the actions without default and delay.
It is further submitted that the delay in return of proposal security given by the petitioner-company cannot result in treating extension of the period of proposal security. It had otherwise no (7 of 19) [CW-2718/2017] adverse consequence because with the expiry of period of 118 days, proposal security lapsed automatically. Hence, even if it was not returned within 28 days after expiry of the bid validity period of 90 days, no right is created in favour of the petitioner-company on that count.
It is also submitted that no amendment was made in the document or condition of proposal as performance security was not part of proposal document as per Clause 23.1. Ignoring the aforesaid, amendment in the performance security is taken to be changed in the proposal despite a bar under Clause 23.1 of ITP. The petitioner-company has failed to refer "documents constituting proposal" where performance security has not been included thus any amendment therein cannot constitute change in the proposal after its submission.
It is lastly contended that contract for a period of three years has been executed. No deviation exist in it as the period aforesaid has been given in the proposal. The petitioner-company has wrongly referred period to be of two years with the extension. Hence, dispute about period of agreement is also of no substance.
Learned counsel for respondent No.4 has submitted that the fact pertaining to acceptance of proposal and subsequent events were not part of writ petition, rather, they have been added by way of rejoinder. The petitioner-company cannot make out a new case in the rejoinder thus whatever has been stated in the rejoinder, needs to be ignored and accordingly, writ petition may be dismissed.
(8 of 19) [CW-2718/2017] I have considered the rival submissions made by learned counsel for the parties and perused the record.
It is a case where the Invitation for Proposals (IFP) were invited for procurement and installation of Geo-Membrane sheets. As per the invitation, the framework agreement is to be of one year from the date of signing agreement. It can, however, be extended for further period (maximum two years) in accordance with the terms of the framework agreement. The petitioner- company and others submitted their proposals and were opened on 7th October, 2015. The technical as well as financial bids were opened on the same day as per direction of the World Bank. The official respondents failed to finalise the proposal immediately thereupon. It took 11 months' time after opening of the proposal as the intimation about the successful bidder was given on 21 st September, 2016. The validity period of the bid proposal was of 90 days with liberty to the official respondents to extend it by a period of four weeks but further extension could have been made with approval of the World Bank. The fact in reference to the aforesaid would be discussed later on. The first issue is to be discussed and to be decided in reference to the bid of the petitioner-company itself.
As per Clause 17 of the condition of proposal, the proposer was required to submit proposal security with validity period of 45 days beyond the validity period of the proposal. The validity of proposal is of 90 days thus after adding 45 days, total period comes to 135 days. As per Clause 17.4, if any proposal is not accompanied by an acceptable proposal security then it shall be (9 of 19) [CW-2718/2017] rejected by the purchaser treating it to be non-responsive. Clause 17 of the proposal document is quoted hereunder for ready reference:
"17. performance security 17.1 The Proposer shall furnish, as part of its Proposal, a proposal security in the amount stipulated in the Annexure A of Section IV in Indian Rupees.
17.2 The performance security shall remain valid for a period of 45 days beyond the validity period for the Proposal.
17.3 The performance security shall be denominated in Indian Rupees, and shall be, at the Proposer's option, in one of the following forms:
(a) a demand draft drawn in favour of the
purchaser;
(b) a (bank) guarantee issued by a
nationalized/scheduled bank in India selected by the Proposer or any reputable bank located in any eligible country. The format of the (bank) guarantee shall be in accordance with the form of performance security included in Section VII or any other form acceptable to the Purchaser.
17.4 Any Proposal not accompanied by an acceptable proposal security shall be rejected by the Purchaser as non-responsive. The performance security of a joint venture must be in the name of the joint venture submitting the Proposal.
17.5 The proposal securities of unsuccessful Proposers will be returned as Promptly as possible, (10 of 19) [CW-2718/2017] but not later than 28 days after the expiration of the period of proposal validity.
17.6 The performance security of the successful Proposer will be returned when the Proposer has signed the Agreement and furnished the required performance security.
17.7 The performance security may be forfeited
(a) if the Proposer withdraws its Proposal, except as provided in ITP Sub-Clauses 16.2 and 23.3; or
(b) in the case of a successful Proposer, if the Proposer fails within the specified time limit to:
(i) sign the framework agreement, or
(ii) furnish the required performance security."
The petitioner-company has submitted proposal security for a period of 45 days though difference between words and numerical number exist about validity period. The period mentioned in the words is favourable to the petitioner-company but numerical figure given therein shows it only for a period of 45 days and not for 135 days. The subsequent Para 6 of the proposal security makes reference of 45 days only. In view of the above, the petitioner-company could not submit proposal security in terms of Clause 17 of the proposal document. The proposal given by it was liable to be rejected by treating to be non-responsive.
The official respondents should have declared the petitioner- company to be non-responsive within reasonable period after opening of proposals but communication about rejection of the (11 of 19) [CW-2718/2017] proposal was given after more than 11 months. In any case, for the aforesaid reason, proposal security cannot be treated to have been extended for the intervening period. Thus petitioner- company failed to submit proposal security of the required period. If it has been made non-responsive in terms of Clause 17 of the proposal document, action of the respondents cannot be said to be illegal.
The issue now remains about alleged discrimination. It is in reference to extension of the validity period of the proposal. After opening the bid on 7th October, 2015, the period of bid proposal specified in the condition was only of 90 days with liberty for extension, if any, by four weeks. It is as given in the table 3 of the document, however, official respondents extended validity period beyond 90 days and four weeks thereupon. The period for it expired much prior to the acceptance of proposal on 21 st September, 2016. A reference of the approval of the World Bank for extension of validity period has been given by the respondents. They have referred Annexure-R/3. The relevant part of it is quoted hereunder:
"1. As per the table above Lami Fab which is the L1 Bidder with bid validity up to November 18, 2015 is considered non-responsive and L2 bidder i.e. Texel industries is with bid validity up to September 30, 2015 is considered responsive. Please clarity as to what was the requirement specified in the bidding document and how one bid with lesser validity period is considered non-responsive compared to other.
(12 of 19) [CW-2718/2017]
2. Please confirm if any Bid validity extension was sought from Lamifab. It is unclear from the evaluation report.
3. The Bids validity is till February 2, 2016. Borrower may needs to seek further validity extension to ensure that Bids are valid at the award stage.
4. The reason for rejection of Gujarat Craft Industries Ltd. Gandhinagar, Gujarat, Silvassa and Union Quality Plastics Limited, Mumbai is for reason of non- availability of 'historical information'. Since the information is historical in nature the Project is advised to seek the same thru email and incorporate, as appropriate."
The perusal of the letter shows validity of the proposal till 2 nd February, 2016, however, it has also been mentioned that borrower needs to seek further validity upto the stage of award of work, which does not exist.
A reference of Clause 16 of the proposal document is relevant and quoted hereunder:
"16. Period of Validity of Proposals 16.1 Proposals shall remain valid for the period 90 days after the date of proposal submission specified in ITP Clause 21. A Proposal valid for a shorter period shall be rejected by the Purchaser as non- responsive.
16.2.In exceptional circumstances, prior to expiry of the original proposal validity period, the Purchaser may request that the Proposers extend the period of validity for a specified additional period. The request and the responses thereto shall be made in writing. A (13 of 19) [CW-2718/2017] Proposer may refuse the request without forfeiting its performance security. A Proposer agreeing to the request will not be required or permitted to modify its Proposal, but will be required to extend the validity of its performance security for the period of the extension."
As per Clause 16.2, the period can be extended on a request for the additional period, however, it should be in writing with response thereto prior to expiry of 90 days. There is nothing on record to show a letter by the official respondents and consent of the respondent No.4 for extension of validity period of the proposal prior to expiry of the original period of 90 days if strict compliance of the proposal document is to be made. The extension of validity period can only be in exceptional circumstances which has not been disclosed by the official respondents and otherwise extension of the period, if any, has to be within the validity period of 90 days i.e. till 2 nd February, 2016. In view of the above, acceptance of the bid beyond validity period and letter to seek extension from the World Bank after 2 nd February, 2016 cannot be said to be in strict adherence to the condition of proposal. There is no letter from the World Bank for extension, whereas, strict compliance is mandated and has been emphasised by the respondents themselves. In fact, the validity period of the bid is to be reckoned in reference to Clause 16 which is 90 days after the date of submission of proposal specified in Clause 21. As per Clause 21, last date for submission of proposal was 7th October, 2015 thus period is to be reckoned accordingly (14 of 19) [CW-2718/2017] and in that case, validity of the proposal would expire even prior to 2nd February, 2016, indicated by the respondents in their letter quoted above. A reference of Annexure-R/4 would also be relevant where aforesaid issue has been dealt with specifically and observation-3 of the said document is quoted for ready reference:
"Observation-3:
"The Bids Validity is till February 2, 2016. Borrower may needs to seek further validity extension to ensure that Bids are valid at the award stage."
Clarification:
Correct. Project did request to all bidders except M/s Lami Fab Industries, Mumbai to extend the bid validity up to 29th February. And in response all remaining four (04) 4 bidders accepted the request and have extended their bid validity up to 29 th February."
If it is accepted then validity was extended upto 29 th February though no document exists to show that a written request for extension was made with written response prior to the expiry of period of 90 days of the validity of proposal and in terms of Clause 16 of the proposal document. The extension could have been in exceptional circumstances but it has not been narrated.
The other issue raised by the petitioner-company is to show violation of Clause 33 of the proposal document. The aforesaid clause is quoted hereunder for ready reference:
"33. Performance Security 33.1 Within twenty-one (21) days of the receipt of notification of award from the Purchaser, the successful Proposers shall furnish the performance (15 of 19) [CW-2718/2017] security in accordance with the Conditions of Framework Agreement, using the Performance Security Form provided in Section VII of the document for setting up framework agreement, or in another form acceptable to the Purchaser.
33.2 Failure of the successful Proposer to comply with the requirement of ITP Clause 32 or ITP Sub- Clause 33.1 shall constitute sufficient grounds for the annulment of the award and forfeiture of the performance security."
As per Clause 33.1, successful proposer was required to furnish performance security in accordance with the conditions of framework agreement within 21 days of the receipt of notification of award. According to the official respondents themselves, proposal was accepted on 21st September, 2016 and informed thus performance security was to be given within 21 days of the receipt of notification. The respondent No.4 received the intimation on 21st September, 2016 itself thus the validity period expired on 12 th October, 2016.
According to the official respondents, they received a letter from the successful bidder on 13 th October, 2016 for modification of clause of performance security. The prayer was to substitute words "framework agreement" with that of "acceptance of proposal". It was allowed on 17 th October, 2016 with the approval of the World Bank. The performance security was thereupon given on 21st October, 2016. The dates referred above show that even letter for modification in performance security was received subsequent to the expiry of the period of 21 days. The period of (16 of 19) [CW-2718/2017] 21 days has to be determined from the date of receipt of information through e-mail dated 21 st September, 2016. The date of communication would be inclusive in 21 days and even if excluded then also it expired on 12 th October, 2016. The respondent No.4 prayed for modification though it was not even permissible. If period of 21 days is strictly applied as per Clause 33 then performance security was not submitted within the period given therein.
As per Clause 33.2, the failure of successful proposer was required to constitute sufficient grounds for annulment of the award and forfeiture of performance security. The respondent No.4 has shown it to be a bonafide error of the World Bank but could not explain as to why they waited till 13th October, 2016 to seek correction. As per Clause 33.1, the date of information is also inclusive as words used therein are "within 21 days of receipt of notification". Thus the petitioner-company has rightly shown discrimination in the action of the official respondents while they had taken strict view to treat the petitioner-company's bid to be non-responsive but taken liberal view for compliance of Clause 33 of the proposal document.
The allegations have been made even for change in the performance security where the words "framework agreement"
are substituted by "letter of acceptance". According to the condition of proposal document, it was not permissible though according to the respondents, the performance security was not part of documents which could not have been changed and otherwise mistake in the performance security is apparent on the (17 of 19) [CW-2718/2017] face of record.
A reference of clause 23(1) of the proposal document has been given. The said clause would not apply as amendment is not in the proposal given by the private respondent but in the draft document submitted by the official respondents. Accordingly, the argument raised by the petitioner in that regard cannot be accepted.
Learned counsel for petitioner further submitted that delay in return of proposal security as it was to be returned within 118 days, whereas, it was sent to the petitioner-company after lapse of more than 11 months. The perusal of the terms and conditions of the proposal document shows that proposal security to be returned within 28 days. It is after completion of the validity period of 90 days. The total of it comes to 118 days but the proposal security was returned after lapse of few months after expiry of 118 days. By the aforesaid, it cannot be inferred to be extension of the proposal security. The proposal security given by the petitioner-company was having validity of only 45 days and with the lapse, it cannot be said to be effective. The delay in return of proposal security may not be in consonance to the terms and conditions of the proposal security but no benefit can be pass on to the petitioner-company.
The only issue now remains as to whether the court can take up the issue in pursuance of the facts narrated in the rejoinder as specific objection has been raised by the counsel for the private respondent. The explanation for submission of the additional facts in the rejoinder has been given. The events narrated therein took (18 of 19) [CW-2718/2017] place subsequent to filing of the writ petition thus incorporated therein. The private respondent had given response to it by way of sur-rejoinder, hence, it is not that without an opportunity, cognizance to the facts narrated in the rejoinder has been taken. The respondent has made contest to the facts narrated in the rejoinder thus now they cannot take objection in reference to the issue already raised and dealt with by them in their pleadings. Hence, I am unable to accept the objection raised by the respondent for consideration of the rejoinder and the issues raised therein.
In the light of the discussion made above, it comes out that while the petitioner-company was rightly held to be non- responsive as they failed to submit proposal security of the required validity period but then act of the official respondents cannot be said to be strictly in consonance to the terms and conditions of the proposal document. They have failed to comply the terms and conditions of the proposal document for execution of framework agreement with respondent No.4. The respondents were expected to take their action in strict adherence and in consonance to the terms of the agreement. The facts regarding submission of performance security after lapse of 21 days has been ignored contrary to the terms of agreement and at the same time even validity period was extended without compliance of the terms and conditions of the proposal document. Thus the way official respondents have acted, it cannot be approved. The discrimination in their action is made out.
(19 of 19) [CW-2718/2017] It is also a fact that period of agreement was kept for one year. With extension, it could be maximum of two years. As against the aforesaid, agreement has been executed for three years. It is again contrary to the terms and conditions of the proposal document thus even the official respondents have committed serious lapses and accordingly, they did not act strictly in consonance to the terms and conditions of the proposal document. If they have not taken action strictly in terms of the proposal document then cannot plead against the petitioner- company and otherwise the bid submitted by the petitioner- company is quite on a lower side as compared to the bid accepted by the official respondents having huge impact on the public exchequer.
In view of the discussion made above, I do not find any illegality in treating petitioner-company to be non-responsive but framework agreement with the non-petitioner No.4 cannot be said to be proper in view of violation of various terms of proposal documents. If it is allowed then would be in discrimination to the action taken against the petitioner-company and accordingly, letter of acceptance dated 21st September, 2016 and framework agreement dated 7th November, 2016 are set aside. The official respondents would be at liberty to proceed further in reference to other bidders or to invite tender afresh.
The writ petition is disposed of with the aforesaid.
(M.N. BHANDARI)J. FRBOHRA