Bombay High Court
Olectra Greentec Limited ( Formerly ... vs The Brihanmumbai Electric Supply And ... on 16 October, 2018
Equivalent citations: AIRONLINE 2018 BOM 1214
Author: G.S.Kulkarni
Bench: Naresh H. Patil, G. S. Kulkarni
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION LODGING NO. 3069 OF 2018
Olectra Greentec Limited. .. Petitioner
Versus
1.The Brihanmumbai Electric Supply & Transport
Undertaking
2. Municipal Corporation of Gr.Mumbai.
3. The State of Maharashtra
4. Department of Heavy Industries. .. Respondents
---
Mr.Milind Sathe, Senior Advocate and Mr.P.K.Dhakephalkar, Senior
Advocate with Mr.Kazan Bhosale, Ms.Neha Bhosale & Ms.Aditi Bhargava
I/b. NBD Law for the Petitioner.
Mr.G.S.Godbole with Mr.Aseem Naphade and Mr.Arsh Misra I/b.
M.V.Kini & Co., for Respondent No.1.
Ms.Deepali Patankar, AGP for the State.
Mr.Rajendra K.Singh with Mr.Atul Singh for Respondent No.4-Union of
India.
---
CORAM: NARESH H. PATIL, ACTING CJ. &
G. S. KULKARNI, J.
RESERVED ON: October 11, 2018
PRONOUNCED ON: October 16, 2018.
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Judgment :(Per G.S.Kulkarni,J.)
1. Rule returnable forthwith. By consent of the parties and at their request taken up for final hearing.
2. The petitioner was formerly known as 'Goldstone Infratech Limited'. The petitioner was a successful bidder in a tender issued by respondent no.1-Brihanmumbai Electric Supply & Transport Undertaking & Ors. (for short "BEST") on 10 January 2018, invited for the work of "Appointment of Service Provider/Fleet Operator for Operating 20 Nos. of Midi Non-AC & 20 Nos. of MIDI AC Electric Buses In the City of Mumbai & Its Extended Suburbs On Gross Cost Contract (GCC) Model". By a communication dated 26 February 2018, the BEST informed the petitioner of acceptance of the petitioner's proposal for hiring of 40 electric buses consisting 20 Nos. Midi Non-AC Buses and 20 Nos. Midi AC Electric Buses, for a period of seven years. One of the delivery terms was that the petitioner agreed to provide 25% buses within three months and balance 75% by six months after release of Contract Work Order by BEST. It would be appropriate to note some of the contents of the acceptance letter which read thus:-
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"TERMS & CONDITIONS:
... ... ...
f) DELIVERY TERMS You have agreed to provide 25% buses within
3 months and balance 75% by 6 month after
th
requirement is given by the Undertaking after
release of Contract Work order.
g) PENALTIES/FINES You have accepted Clause no.1.33 of
Annexure-C.
h) SECURITY DEPOSIT You are requested to furnish Rs.20,00,000.00
in Cash or Demand Draft or Bank Guarantee
in the prescribed format as shown in the
Annexure-1 in favour of the BEST
Undertaking. Bank Guarantee should be valid
for a period of 96 months from the date of
release of Contract Work Order. In case of
Bank Guarantee, you will have to pay
Rs.2,000/- towards the Administration
Charges
i) CONTRACT VALIDITY 96 months from the technical bid opening
PERIOD date. (i.e. 06-02-2026)
j) OTHER IMPORTANT As shown in the attached Annexure-C
TERMS & CONDITIONS
This Letter for all purposes should be treated as Contract Work Order. The
system generated Contract Work Order will be issued after your furnishing Security Deposit. Further, this contract work order is also subject to other terms and conditions of the tender." (emphasis supplied)
3. In Annexure-C as referred in clause (j) (supra), there is a note below clause 4.2 which reads thus:-
"Note: This acceptance letter is subject to approval of incentive from Department of Heavy Industries (DHI)."
4. The petitioner was issued a formal 'contract work Order' by ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 4 wpl3069-18=15-10-18.doc the BEST on 28 February 2018. It is not in dispute that the petitioner complied with all the requirements of the letter of acceptance interalia of furnishing the bank guarantee etc.
5. The case of the petitioner is that in view of the clear stipulation to deliver 25% of the buses in three months, the petitioner immediately, on award of the contract acted upon the same by mobilizing resources and spend substantial amounts, for manufacturing of the e- buses. The petitioner in fact by June 2018 manufactured 24 electric buses.
6. As the BEST had issued the said tender in question under the incentive scheme of the Government of India -Department of Heavy Industries, whereby subsidy would be received from the Central Government by the BEST, there was correspondence entered by the BEST with the Central Government, in the context of present contract. We refer to this long correspondence at a later stage. However, the sequel to this, though ostensibly was the BEST issuing the impugned communication dated 30 August 2018 whereby the petitioner was informed, that the contract work order stands, withdrawn with immediate effect. The ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 5 wpl3069-18=15-10-18.doc petitioner being aggrieved by this communication dated 30 August 2018 has invoked the jurisdiction of this court under Article 226 of the Constitution by filing the present petition, interalia praying for the following reliefs:-
"(a) That Rule be issued and record and proceedings be called for from Respondent No.1 being The Brihanmumbai Electric Supply & Transport Undertaking.
(b) that this Hon'ble Court be pleased to issue an appropriate writ, order or direction to quash and set aside the Termination Notice dated 30 th August 2018 issued by Respondent no.1 being the Brihanmumbai Electric Supply & Transport Undertaking;
(c) that this Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order and/or direction to Respondent no.1 to act in accordance with the Acceptance Letter dated 26th February 2018;
(d) that this Hon'ble Court be pleased to issue an appropriate writ, order and/or direction to set aside the Fresh Tender Notice dated 31 st August 2018 issued by BEST;"
Background of the tender/contract
7. The Central Government with an intention to encourage the use and operation of electric buses, floated a scheme to provide subsidies to the Corporations and Local Authorities, in the event, of such bodies engaging in electric buses. Since the BEST is providing public transport utility at Mumbai, the BEST submitted its proposal to the Government of India for obtaining electric buses on lease basis from the subsidy to be availed/granted by the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 6 wpl3069-18=15-10-18.doc Central Government. By a communication dated 27 December 2017 addressed by the Under Secretary of the Ministry of Heavy Industries and Public Enterprises of the Government of India (for short 'the DHI') to the General Manager of the BEST, a letter of intent was issued for a pilot project proposal for multi model public transport. This was in response to the expression of interest (31 October 2017) of the Department of Heavy Industries (DHI). The BEST was informed that the Ministry had decided to support the said project under the "Faster Adoption Manufacturing of Hydro Electric Vehicles in India (FAME India Scheme)," as a pilot project for 40 electric buses, although the proposal of the BEST was for 100 buses.
8. Accordingly, the BEST floated the tender in question inviting bids for delivery of 40 buses (20 number of MIDI Non-AC and 20 No. of MIDI-AC electric buses), by issuing a tender notice dated 10 January 2018. As per the tender program, the technical bid was to be opened on 7 February 2018 and the price bid was to be opened on 8 February 2018. Some conditions in the tender document are required to be noted. Schedule III of the tender document pertains to the Mandatory Techno-Commercial Eligibility Criteria. Conditions 7 and 8 are relevant in the context of the present proceeding which read thus:-
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" 7)
The tenderer (tenderer in case of single bidder or the lead member in case of consortium) should share the ownership of the Electric buses during contractual period on pro-rata basis as per the % contribution from both the parties viz. the Service Provider/Operator and the BEST Undertaking. The % of ownership of Electric buses by the firm will reduce to the extent of the % of subsidy transferred to the Service Provider/Operator. The bidder shall agree to submit the Bank Guarantees of amount equal to the FAME incentives (subsidy from DHI) transferred to the Service Provider/Operator.
The 60% subsidy as and when received from DHI by the Undertaking shall be transferred to the successful tenderer in the following manner:
i) 20% will be transferred prior to the placement of Purchase Order.
ii) 20% will be transferred at the end of first year of operation.
iii) Balance 20% will be transferred at the end of second year of operation.
The ownership of Electric buses initially procured by the successful tenderer shall be transferred to the BEST Undertaking on pro-rata basis as and when the subsidy received from DHI is transferred to him.
8. The subsidy made available by DHI will be passed on to Service Provider/Operator as and when received by the BEST Undertaking. However, at the end of the contractual period, the ownership of the Electric buses will stand transferred in the name of Service Provider/Operator. Please convey your acceptance for the same." (emphasis supplied)
9. Schedule V to the tender document pertains to 'conditions of supply'. Paragraph 10 thereunder provided for termination of contract in the event of the contractor committing any breach of any of the terms and conditions of the contract. Paragraph 10 reads thus:-
"10. TERMINATION OF CONTRACT: In the event the Contractor commits any breach of any of the terms and conditions of contract, the General Manager or his ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 8 wpl3069-18=15-10-18.doc Authorized Representative shall have the right to forfeit the Security Deposit-cum- Performance Guarantee referred to in Clause 6 and/or to claim from the Contractor any amount due and payable by him towards this contract. If during the period when contract remains in force, General Manager or his Authorized Representative has reasons to believe that the Contractor is not performing the contract in accordance with the terms of the contract, General Manager or his Authorized Representative may by a notice in writing, call upon the Contractor to perform the contract in the way as indicated in the notice, within a specified period of 15 days and if the Contractor fails to perform the same within such specified period, then notwithstanding anything contained in the contract, General Manager or his Authorized Representative shall be at liberty at any time thereafter to terminate the contract by giving the Contractor 15 days notice in writing and the contract shall stand terminated on expiry of such notice period. The Security Deposit-cum-Performance Guarantee amount referred to the Clause 6 and amount due and payable by the Contractor towards this contract shall be forthwith due and be recoverable from them."
10. The tender document in Schedule VI provided for 'Special Conditions of Contract'. The relevant clauses which pertain to the subsidy being received by BEST from the Central Government is contained in clause-1 which provides for the Scope of the Contract. Paragraphs 1(b), 1(c), 3 and 3.1 read thus:-
"1. SCOPE OF CONTRACT
(a) ... ....
(b) The BEST had submitted a proposal to Department of Heavy Industries (DHI) for procurement of Midi Electric Buses by way of wet leasing under FAME SCHEME.
DHI had approved 40 Nos. of Electric buses to BEST. Under FAME scheme procurement of Electric Buses are eligible for subsidy upto 60% of the Electric bus cost.
Percentage of Level-1 Level-2
Localization (Minimum 15% Localization) (Minimum 35% Localization)
Subsidy 60% of purchase cost or 60% of purchase cost or 1.00 Cr.
available Rs.85.00 Lacs (whichever is (whichever is lower)
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lower)
Some of important Notifications and guidelines of FAME scheme are placed in Circulars incorporated in the Tender document. Based on the percentage of localization, the amount of subsidy varying from Rs.85.0 lacs to Rs.1.00 Cr. Is available. BEST/DHI intends to transfer this subsidy for procurement of buses by tenderer as and when the subsidy is received by the BEST. The tenderer has to bear the entire initial cost of the Electric bus and the subsidy will be subsequently transferred to the tenderer. Percentage of ownership of the BEST in the Electric bus shall be to the extent of subsidy transferred. This Tender Notice is invited for Appointment of Service Provider/Fleet Operator for operating 20 Nos. of Midi Non- AC & 20 Nos. of Midi AC Electric Buses in the city of Mumbai & its extended Suburbs on Gross Cost Contract (GCC) model jointly owned by the BEST and Private Contractors (hereinafter referred to as the "Contractor") by the BEST Undertaking referred to as the "BEST") on 'per km.' basis for monthly guaranteed 4000 kms for following various operating range.
Operating range Charging time Rates (In Rs/Kms)
in Single charge
170 to 200 kms. 3 hours Please refer Schedule of Prices (i.e.
Annexure-M)
80 kms 2 hours
50 kms With battery swapping within 5
minutes or fast charging within 20
minutes
c. Period of Contract:
The contract for hiring of both types of Electric Buses will be operative for a period of 7 years. Date of commencement of contract will be taken not later than one year from the date of issue of Acceptance Letter. However, the tenderer shall agree to provide 25% buses within 3 months, 75% Buses in 6th month after the requirement is given by the Undertaking.
... .... ... ....
3. Responsibilities of the contractor:
3.1 The BEST Undertaking had submitted a proposal to Department of Heavy Industries (DHI) for procurement of Midi Electric Buses by way of wet leasing under FAME scheme DHI had approved 40 Nos of Electric buses to BEST. Under FAME scheme procurement of Electric Buses are eligible for subsidy from DHI up to 60% of the Bus cost as per the guide lines of FAME & on percentage of localization.::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 :::
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Percentage of Level-1 Level-2
Localization (Minimum 15% Localization) (Minimum 35% Localization)
Subsidy 60% of purchase cost or Rs.85.00 60% of purchase cost or Rs.1.00
available Lacs (whichever is lower) Cr. (whichever is lower)
Various Notifications and guidelines of FAME scheme are placed separately as Circular incorporated in the Tender document. Based on the percentage of localization amount of subsidy varying from Rs.85.00 lacs to Rs.1.00 Cr. Is available.
BEST/DHI intends to transfer this subsidy for procurement of buses by tenderer as and when received by the BEST. The tenderer has to bear the entire cost of the bus, but as & when subsidy received from DHI is transferred to contractor, percentage of ownership of BEST will be increased to the extent of subsidy transferred accordingly. After transferring the subsidy, ownership of the bus will be in the ratio of 60:40 of the BEST and the Contractor, respectively. The proportion of the ownership will remain in force till the 7th year of the contract. At the end of the contractual period, total ownership of the Electric bus shall stand transferred in the name of the contractor.
11. The petitioners, prior to the pre-bid conference, by their letter dated 13 January 2017 addressed to the concerned official of the BEST, sought clarification on certain clauses of the tender document. The clarifications as sought were categorized under three annexures. This letter alongwith these annexures is annexed at Exhibit C to the petition. It can be seen that none of the clarifications sought by the petitioner pertains to the ownership of the buses to be supplied under the tender, meaning thereby that the Petitioners accepted the ownership criteria as contained in the tender document.
12. A pre-bid meeting was held by the BEST on 16 January 2018 wherein the representatives of the proposed bidders participated. From the Minutes of the pre-bid meeting, we note some relevant clauses, which pertain ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 11 wpl3069-18=15-10-18.doc to the bidders query on ownership of the buses and the issue on the exact timing for the supply of first lot of 25% buses and the clarification of the BEST. These queries and the clarifications are read thus:-
8 Schedule III ... ....
Clause no.7 Page no.19 Bidders queries The bidders requested regarding ownership of the buses as well as time schedule of transfer of subsidy from Govt. of India Clarifications given by the The ownership of the buses will remain with the BEST Undertaking contractor throughout the contractual period.
However, Bank Guarantee as mentioned in the Tender document shall be submitted of amount equal to the subsidy as and when it is transferred. The clause is revised as below.
The tenderer (tenderer in case of Single bidder or the lead member in case of consortium) shall have the sole ownership of the Electric buses. The bidder shall agree to submit the Bank Guarantees of amount equal to the FAME incentives (subsidy from DHI) transferred to the Service Provider/Operator.
.... ... ... ...
11 Schedule-III Mandatory Techno-Commercial Eligibility Criteria:
Clause No.20 The tenderer (tenderer in case of single bidder or the Page no.21 lead member in case of consortium) shall agree to provide 25% buses within 3 months and balance 75% by 6th month after requirement is given by the Undertaking Bidder's queries The bidders requested to elaborate the exact timing for the first lot of 25% buses Clarifications given by BEST It is clarified that the time of 3 months will commence Undertaking from release of Contract Work Order (CWO).
However, the proto bus can be shown for approval much in advance any time and even during the tendering process.
Thus, in the pre-bid meeting the BEST altered the tender criteria on the ownership of the buses, by modifying the same, to the effect that the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 12 wpl3069-18=15-10-18.doc ownership of the buses will remain with the contractor, throughout the contractual period, replacing clause no.7 in Schedule III (supra), which provided for joint ownership.
13. In the tender process the petitioner being the lowest bidder (L1), the BEST issued an acceptance letter dated 26 February 2018, informing the petitioner that the BEST has accepted the petitioner's proposal for hiring of the electric buses. In the acceptance letter, as noted above in clause (f) under the heading 'Delivery terms" it was stipulated that the petitioner shall provide 25% of the delivery within three months and balance 75% by six months after requirement is given by the BEST after release of the contract work order. The letter of acceptance also provided that the said letter for all purposes shall be treated as contract work order. Thereafter, a formal contract work order was issued to the petitioner. The formal contract work order incorporated a clause under paragraph 4.2 that the acceptance letter is subject to approval of the incentive from the Department of Heavy Industries.
14. The BEST has taken a categorical stand that the tenderers were all along made aware that the contract was for wet leasing of 40 Electric Buses and the tender was expressly under the FAME India Scheme, being a scheme sponsored by the Central Government in its Department of Heavy Industries.::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 :::
Pvr. 13 wpl3069-18=15-10-18.doc The averments to that effect can be seen also in the reply affidavit, that the entire basis of the tender was the subsidy to be received by the BEST from the Central Government and the prior correspondence with the Government of India stands incorporated in the tender document.
Post Award
15. The petitioner complied with the terms and conditions of the work order by submitting performance security/bank guarantee. By letter dated 5 March 2018 addressed to BEST, the petitioner informed the BEST that the petitioners have already started process of procurement of raw material, production and its planning. The Executive Engineer, Transport Department of the BEST by e-mail dated 22 March 2018 informed the petitioner that Traffic Operation wing of the BEST has decided to operate these buses from the Dharavi, Majas and the Backbay Bus Depots, in the proportion of 18, 18 and 4 buses respectively. The petitioner was called upon for early joint inspection of the site to finalise the further course of action. A joint inspection was thereafter undertaken. The petitioner being bound by the express stipulation as contained in the tender document and the confirmation of the same in the pre-bid meeting, as also in the acceptance letter, in regard to supply 25% of buses within three months of the issuance of the contractual work order, ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 14 wpl3069-18=15-10-18.doc started mobilizing resources and manufactured not only 25% of the buses but manufactured about 24 buses.
16. By its e-mail dated 2 April 2018 the BEST informed the petitioner under the subject 'FWD: Agreement for Contract Work Order dated 28.2.2018"
that that in a recent development, DHI has revised some issues regarding OPEX Model of Electric buses. The petitioner was therefore, requested to send documents on 4 April 2018. The petitioner by its E-mail dated 2 April 2018 informed the BEST that the petitioner is ready with the agreement and requested to advise the petitioner on the said matter.
17. The petitioner after compliance of the necessary requirements in the work order and after prior discussion finalized the operator agreement with the BEST and forwarded the same to the BEST by its communication dated 23 June 2018.
Post Award Correspondence Between the BEST And the DHI -Govt.Of India
18. By a letter dated 8 March 2018 the General Manager of the BEST informed the Joint Secretary- DHI the gratitude of the BEST for extending the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 15 wpl3069-18=15-10-18.doc incentive for procurement of 40 electric buses by the BEST. The documents as requested by the DHI in regard to the award of the contract were forwarded to the DHI. It was informed that the total incentive was worked out at Rs.35,42,40,000/- and that the BEST is eligible for the first installment of the incentive, which worked out to Rs.11,80,80,000/-. The DHI was requested to release the first installment of the demand incentives and credit of the same to the bank account of the BEST, the details of which were furnished.
19. The DHI by its letter dated 26 April 2018 ('Exhibit I' at page 104 of the paper-book) informed the BEST that in regard to the contract in question and another contract of 80 electric buses, awarded by the BEST, and the demand as made by the BEST for release of the grants for the said contracts, it was stated that huge variation was found in the prices and specification of models of E-buses selected through tendering process by the Cities selected in response to the said expression of interest dated 31 October 2018 ( Sic 2017). It was informed that the Ministry has decided to constitute a committee to go into the relevant details and submit its recommendations as regards the benchmark prices for various E-model buses offered by these Cities. Based on the recommendations of the committee, the Department decided the benchmark price as under:-
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2. Based on the recommendations of the said Committee, the Department has decided the benchmark price as shown below:
Specification No. of Benchmark price Eligible Incentive (in Lakhs) Total Buses (in Lakhs) (60% of Benchmark price or incentive Rs.1 Crore (whichever is (in Lakhs) lower)] 9m AC, 40 74.9 44.9 1798 80km Range 9m AC, 20 122.97 73.8 1476 170km Range 9m Non-AC, 20 122.97 73.8 1476 170km Range In paragraph 3 of the said letter the DHI informed the BEST that the respective organizations/State Transport Undertaking (STU) should jointly own the buses in the same proportion of sharing cost of the bus and a letter of acceptance for the abovementioned benchmark prices and a proportional ownership by the BEST, be submitted by 15 May 2018. Paragraphs 3 and 4 of the said letter read thus:-
"3. The undersigned is further directed to inform that respective organization/STU should jointly own the Buses in the same proportion of sharing of cost of bus.
4. In view of the above, you are requested to submit the letter of acceptance for the above mentioned benchmarked prices (as per column 3 of the Table) and the proportional ownership by the BEST Undertaking for the buses by 15th May 2018."
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20. The General Manager of BEST by its letter dated 2 May 2018 informed the petitioner of the above letter dated 26 April 2018 of the DHI, recording that the incentive available will be restricted to the amounts which are stated in the said letter and that the BEST and the service provider would jointly own the buses in the same proportion of showing of cost of buses. The petitioner was called upon to give its concurrence to the said conditions on or before 7 May 2018, after which the service level agreement will be modified accordingly. The petitioner responded to the BEST by its letter dated 3 May 2018, seeking time upto 15 May 2018 to confirm on the issues as raised and sought an appointment of the General Manager on the issue. The Assistant General Manager of the BEST by his letter dated 8 May 2018 informed the petitioner that there is a reduction in subsidy amount as mentioned in the letter of the DHI and that the BEST will have to follow the latest norms of DHI regarding subsidy disbursement. It was informed that the amount of disbursement as mentioned in the RFT document and the total amount will be reduced in the exact proportion of the earlier subsidy and the revised subsidy. It was further informed that the decision regarding ownership of the vehicle will be informed to the petitioner in due course. The petitioner was called upon to submit the confirmation by 12 May 2018. The petitioner thereafter ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 18 wpl3069-18=15-10-18.doc had discussions with the officers of the BEST on 10 May 2018. By their further letter dated 11 May 2018 the petitioner requested for another extension of time to convey its confirmation as sought in the letter of the BEST dated 8 May 2018, on the issue of reduced subsidy amount and joint ownership of buses.
21. The General Manager of the BEST responded to the said letter dated 26 April 2018 of the DHI by his letter dated 28 May 2018 addressed to the Joint Secretary DHI interalia recording the entire background of the participation of the BEST in the incentive scheme and informed the DHI of completion of the bidding process and after obtaining approval of the competent authority (BEST Committee), the contract being awarded to the petitioner for 40 electric buses and to another contractor M/s.MP Enterprise for 40 electric buses. The BEST recorded that in the second tender the BEST had received aggressive quotes from M/s.MP Enterprises which indicated that though they had quoted a high bus cost, however, they have considered the overall project cost, subsidy receivable and ensured that the benefit would be passed to BEST by quoting a very low "rate per kilometer" making the project viable for the BEST to operate, but also serve a boost for the initiative for Government of India for promoting cleaner buses. Some paragraphs of this ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 19 wpl3069-18=15-10-18.doc letter are required to be noted which reads thus:-
" After completing the bidding process and on obtaining approval of the Competent Authority ie. BES&T Committee, the Contracts were awarded to the Goldstone Infra and M.P.Enterprise for 40 Electric Buses each.
.........................
We therefore, wish to re-interate that both the issues raised by you i.e. benchmark incentive and shared ownership are in contravention to our pre-declared tender conditions, which we may not be able to modify at this stage. It compels us to conduct Post-tender negotiations with the vendors which we are not comfortable.
You are therefore requested to approve "AS IS" the declared incentives as agreed earlier and not the bench-mark incentives. We also request you to allow ownership to be with the Operator against a Bank Guarantee."
(emphasis supplied)
22. The petitioner by its letter dated 31 May 2018, confirmed the acceptance on jointly owning the electric buses and in the proportion to the incentive release and balance price of the bus, subject to the conditions interalia incorporated in the said letter.
23. By a communication dated 7 June 2018 of the DHI to the General ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 20 wpl3069-18=15-10-18.doc Manager of the BEST as also to the Municipal Commissioner of the Mumbai Municipal Corporation, it was informed that the Hon'ble Minister for Heavy Industries and Public Enterprises desired to review the progress of the proposal received from the BEST for demand incentives for procuring 80 electric buses and in that connection a meeting was scheduled at 3 p.m. on 12 June 2018. The concerned officers of the BEST and the Municipal Corporation were requested to attend the said meeting.
24. On the backdrop of the meeting held on 12 June 2018 with the Hon'ble Minister for Heavy Industries, the General Manager BEST, by his letter dated 18 June 2018 informed the Joint Secretary - DHI, of the steps which would be taken regarding inviting bids for OPEX model that the selection criteria would be the quoted rate per kilometer for both types of buses namely 'the 9 meters AC bus with 80 kilometer single charge' and the '9 meters AC and NON AC bus with 170 kilometers single charge'.
25. The above letter of the BEST dated 18 June 2018 was responded by the Under Secretary of DHI by his letter dated 21 June 2018 recording that the matter was examined by the department and it was decided to advise BEST to call tender in such a way so that rate of bus and per kilometer ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 21 wpl3069-18=15-10-18.doc running charge both are discovered. There is nothing in the above two letters which would touch the contract already awarded.
26. The petitioner by its letter dated 18 June 2018 informed the General Manager-BEST that as per the work order, the petitioner had started manufacturing the buses and from time to time and that the petitioner were verbally updating the same with the concerned officer and its status, during various discussions, so as to adhere to the delivery schedule and time frame. The petitioner informed that the petitioner has manufactured 20 AC buses and 4 non-AC buses totaling to 24 buses out of 40 buses which were ready for dispatch. The petitioner requested BEST to advise the petitioner of the details of the Depot where the buses should be delivered for starting of the operations. It was informed that once the details of depots were available the petitioner would be ready with the equipments for charging the buses. The petitioner also requested to routes and schedule for operation thereafter.
27. The petitioner by its further letter dated 20 June 2018 also informed the Joint Secretary, DHI of the assurance of the delivery of the E- buses to the various State Transport Undertakings where the petitioner was awarded the contract.
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28. The petitioner thereafter by the letter dated 22 June 2018 informed the General Manager of the BEST that the additional conditions imposed by the BEST by the letter dated 2 May 2018 are already accepted by the petitioner qua the FAME incentives and joint ownership and the petitioner was once again confirming the same. The petitioner also recorded that the petitioner had completed the survey of allocated depots jointly along with the officers of the BEST and requested to advise the concerned depot manager to formally hand over the space allocated in the depots so that the battery charging infrastructure installation process can be started and completed. The BEST was also requested to inform the allocation of AC and NON-AC buses to the respective depots so that the buses can accordingly be delivered. Petitioner also requested to inform of the amounts of incentive, that would be released.
29. By a further letter dated 13 July 2018 the Director (Auto) of the DHI informed the General Manger of the BEST, that the joint ownership in proportion of Govt. of India funds in the cost of the bus is necessary, for release of grant as per the expression of interest in case of OPEX model.
30. The Under Secretary, DHI by his letter dated 10/13 August 2018 informed the General Manager-BEST, of the method that can be adopted for ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 23 wpl3069-18=15-10-18.doc calculation of NVP and demand incentive in the OPEX Model by the BEST. In paragraph 2 and 3 the letter recorded thus:-
"2. In addition, a price quote for the price of the bus will be obtained. The incentive (60% of cost of bus or Rs.1 Crore, whichever is lower, in case localization of minimum 35% is achieved) will be determined on the value of the bus arrived at as per Para 1 above or the price quote for the bus, whichever is lower.
3. I am further directed to inform the BEST Mumbai must satisfy the condition of Joint Ownership for being eligible to line demand incentive through the said Eol.
4. This issues with approval of the competent authority"
31. The General Manager -BEST by his letter dated 14 August 2018 replied to the said letter dated 13 August 2018 of the DHI. This letter is crucial showing the real intention of the BEST in regard to the award of the contract to the petitioner. We thus note the contents of this letter which reads thus:-
"Surendrakumar Bagde Phd.I.A.S. BRIHAN-MUMBAI ELECTRIC SUPPLY General Manager & TRANSPORT UNDERTAKING BEST Bhavan, BEST Marg, Colaba, Mumbai : 400 001 Tel. : 022-22873961, 022-
22873962
Fax : 022-2285 1244.
E-mail : [email protected]
Ref.No.DO/GM/AGM(TE)/34281/2018 14th August 2018
Sub: EOI issued by BEST, Mumbai for public and shared electric mobility. Ref: 1. DO/GM/CMTr./26590/2018 dated 18.6.2018
2. F.No. 1(07)/2017-NAB.II(Auto) dated 21.6.2018.::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 :::
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3. F.No. 1(07)/2017-NAB.II(Auto) dated 13.7.2018.
4. DO/GM/AGM(TE)./30920/2018 dated 20.7.2018
5. F.No. 1(07)/2017-NAB.II(Auto) dated 13.8.2018.
------------------------------------------------------------------------------------
Dear Sir, This is in continuation to our earlier communications through above letters in respect of procurement of electric buses for Mumbai City, under public and shared electric mobility. We have sought your consent for tender evaluation based on NPV (Not Present Value) and vide letter dtd.13.8.2018 referred at 5, DHI consented the same.
As regards, joint ownership of buses, Chapter IV -Registration of Motor Vehicles, Clause No. 41 of Motor Vehicle Act 1988 states that "where a motor vehicle is jointly owned by more persons than one, the application shall be made by one of them on behalf of all other owners and such applicant shall be deemed to be the owner of the motor vehicle for the purpose of this act"
Besides this, initially operator will have to bear the entire cost of the buses and incentive will be transferred as and when received from DHI. Due to this, the buses will be invoiced and registered in the name of operator and in the Vehicle Registration Book (i.e. R.C. book), only operator's name will appear. The joint ownership of the buses by BEST will be by virtue of agreement only.
As regards transfer of incentive, the issue was discussed with the Joint Secretary, Dept. of Heavy Industries on 13.8.2018 and it was informed that 20% of the subsidy will be transferred after placing the purchase order and remaining 40% will be transferred within 6 months of placing the purchase order.
Considering these points, your consent is requested for joint ownership of the buses by BEST by virtue of agreement and for the schedule of transfer of incentives.
With regards, Yours Sincerely Sd/-
( Surendrakumar Bagde ) Shri Vishvajit Sahay Joint Secretary Department of Heavy Industries Govt. of India Udyog Bhavan, New Delhi 110011"
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32. The Under Secretary of the DHI responded to the above letter of the General Manager, BEST, by his letter dated 27 August 2018 and conveyed that the BEST may follow the methodology adopted by Hyderabad and Bangalore regarding joint ownership of the e-buses purchased under the EOI issued by the DHI. It was further informed that 20% of the incentive will be released at the time of signing the agreement and the balance would be released in a staggered manner or in one go, once the buses are supplied and brought on road.
33. According to the petitioner this letter dated 27 August 2018 of the DHI indicates that the DHI expected forwarding by the BEST a signed agreement for release of the first installment of the incentive to the petitioner, as the petitioner had already accepted the modified terms, as categorically informed in its letter dated 22 June 2018 to the BEST.
34. The Dy. Chief Materials Manager, BEST however instead of finalizing the issues and releasing payments, issued the impugned communication dated 30 August 2018 intimating withdrawal of the contract order with immediate effect. As serious contentions are raised on the nature of this letter it would be relevant to note the contents of the impugned letter ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 26 wpl3069-18=15-10-18.doc which reads thus:-
" Date: 30.08.2018 To, M/s.GoldStone Infratech Limited Center Point Bldg, 4th floor, Plot No.359-363/401, U S Consulate Lane, Begumpet, Secunderabad, Hyderabad, Telangana-500016.
Sub: Notice of Withdrawal of Contract Work Order No.H/18421/288 dtd.28.02.2018.
Sir, A Contract Work Order No.H/18421/288 dtd.28.02.2018 was awarded to you with regard to tender No.DMM(T-II)/08/TUC/43537/2017-18/Advt., dated 14.02.2018 for hiring of 20 Nos. Midi AC Electric buses & 20 Nos. Midi Non AC Electric buses of the brand BYD K7D for a contractual period of 7 years from the date of commencement of the Contract, defining the obligations you were required to perform subject to the terms and conditions mentioned therein.
The relevant clauses of the Contract Work Order read as under:
1.43. The contractor whose tender has been accepted shall, within the one month from the date of acceptance letter, enter into a contract agreement. The contractor shall also get the contract agreement duly adjudicated upon from the Stamp Office at Mumbai.
In the event of a tender of a partnership firm/company being accepted, the contract agreement shall be signed by all the Partner/Directors of the firm/company or by competent person on behalf of the firm/company, subject to production of the necessary resolution or any other documents in support thereof. ..................................
"Note: This acceptance letter is subject to approval of Incentive from Department of Heavy Industries (DHI)"
However, the contract agreement has not been executed between us on account of various changes in the guidelines stipulated by Government of India (GOI). Further, the said contract work order is subject to approval of incentive from Department of Heavy Industries (DHI) as evident in the note in the Contract Work Order.
The GOI/Department of Heavy Industries, vide its circular/notification No.1(07)/2017-NAB.II dated 26/04/2018 interalia has stipulated that, the Centre has agreed to provide a subsidy of Rs.14.76 Cr. For 20 Nos. of 9 m. Air Conditioned buses and Rs.14,76 Cr. For 20 Nos. 9 m. Non-AC buses, subject to the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 27 wpl3069-18=15-10-18.doc same being jointly owned by B.E.S.T and the bus owner.
Thus the basic nature of the tender has now changed in the light of the aforesaid notification wherein B.E.S.T. is required to have a joint ownership with the Successful Bidder and not act only as a mere lessee, in terms of the said Tender.
You may further note that the Contract Work Order, being in the nature of a Letter of Intent, merely is an expression of an intention to enter into a contract.
Thus in light of the same, and the notification of Department of Heavy Industries, we hereby withdraw the aforesaid Contract Work Order, with immediate effect.
For B.E.S.T (R.A.Prabhu) Dy.Chief Materials Manager."
35. The petitioner immediately by its letter dated 31 August 2018 addressed to the Deputy Chief Materials Manager, BEST interalia informed that the petitioner was awarded the said contract by an acceptance letter dated 26 February 2018 and a contract work order dated 28 February 2018, as also the bank guarantees were submitted and it was a binding contract between the parties. It was also recorded that the acceptance of the bench mark prices as required by the BEST by its letter dated 2 May 2018 was confirmed by the petitioner on joint ownership of buses. The petitioner also recorded that the petitioner having agreed to additional conditions of joint ownership, the BEST should withdraw the letter dated 30 August 2018. Another representation was made on 31 August 2018 to the General Manager of BEST. However, as there was no response, the petitioner has filed the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 28 wpl3069-18=15-10-18.doc present petition.
Reply Affidavits of the BEST
36. The BEST has filed a reply affidavit justifying its decision to withdraw the contract, interalia, contending that the contract work order is withdrawn on account of non compliance by the petitioner of the requirement as contained in the letter dated 26 April 2018 of the DHI addressed to the BEST. There are various pleas taken in the reply affidavit. It is contended that it is a contractual dispute which ought not to be interfered in the writ jurisdiction. Secondly it is contended that the work order dated 28 February 2018 was conditional in nature, subject to approval of the DHI and the petitioner having not complied with the requirement of the DHI as contained in the letter dated 26 April 2018, the petitioner cannot complain of the withdrawal / termination of the contract. It is contended that the petitioner was never under a mandate to manufacture the 24 buses, but the mandate was only, that the petitioner supply 25% of the buses within a period of three months. It is next contended that there is no challenge to the communication of the DHI dated 26 April 2018. In paragraph 7 of the reply affidavit the BEST contends that it is the direction of the DHI to issue a fresh tender as contended in DHI's letter dated 21 June 2018. The averments as made in paragraph 7 are ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 29 wpl3069-18=15-10-18.doc required to be noted which read thus:-
"DIRECTION OF DEPARTMENT OF HEAVY INDUSTRIES: ISSUE FRESH TENDER I say that the Department of Heavy Industries vide its letter dated 21 st June,2018 (Exhibit K hereto) directed Respondent no.1 Undertaking to call fresh tender in respect of hiring of Electric Buses. The relevant extract of the letter is reproduced below:
"I am directed to refer to your letter no.DO/GM/CMT/26590/2018 dated 18 th June,2018 on the subject and to say that the matter has been examined in the Department as per EoI issued by this Department for public & shared electric mobility. It has been decided to advise BEST to call tender in such a way so that rate of bus and per km running cost, both are discovered."
I therefore, say that in view of the binding directions issued by the Government of India in the letter dated 21st June,2018, therefore, the Respondent Undertaking in compliance with the aforesaid directions has called fresh tender for hiring 80 electric buses. Therefore the said order being binding upon the Respondent undertaking clearly prevents the Petitioner from challenging the fresh tender notice issued pursuant to binding direction issued by the Department of Heavy Industries. Therefore, the present petition should be dismissed on this ground alone."
37. There is an additional affidavit filed on behalf of the BEST to place on record some events, which have taken place during the pendency of this petition namely that the BEST workers union and the Mumbai Electric Workers Union had filed proceedings before the Industrial Court alleging unfair labour practices. One of the relief sought was to restrain the BEST, from hiring of buses alongwith bus drivers and other supporting staff,. The Industrial court passed an interim order dated 5 May 2018 permitting the BEST to hire electrical buses from the petitioner and M.P. Enterprises and Associates Ltd. This order restrained the BEST from hiring non-electric buses ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 30 wpl3069-18=15-10-18.doc on Wet lease basis, meaning thereby that the BEST was permitted to take buses on hire. It is stated that this order is challenged by the BEST workers Union in Writ Petition no.8384 and 8385 and 8386 of 2018. The BEST also filed Writ Petitions challenging the said order in so far as the BEST was restrained to take non electric buses on wet lease by filing petition lodg no.2229, 2287, 2288 and 2289 of 2018. It is stated that in all there are seven petitions and the learned Single Judge has passed an order dated 25 September 2018 in these petitions, whereby order dated 5 May 2018 passed by Industrial Court has been stayed and restrains the BEST from issuing fresh work order for hiring buses and where work order for hiring buses are already issued, it is directed that the same be not acted upon. The contention of the BEST is that as a result of the said orders even otherwise the BEST is not in a position to issue work order, unless the aforesaid order of learned Single Judge dated 25 September 2018 is vacated. In paragraphs 5 to 9 of the additional affidavit the BEST has contended that in fact, the proposal of the BEST to the Govt. of India was for approval of hiring buses on Wet lease basis and by letter dated 27 December 2017 the DHI approved the said proposal of the BEST for hiring buses on wet lease basis and not on joint ownership basis. It is thus contended that the conditions which are imposed by the Govt. Of India by its letter dated 26 April 2018 materially and substantially alter the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:00 ::: Pvr. 31 wpl3069-18=15-10-18.doc tender condition. In para 5 of the additional affidavit the BEST states as under:
Para 5......... In particular, the earlier scheme of things envisage that the bidder shall be sole owner of the electric buses, whereas, now the bidder is only 40% owner of the electric buses, and 60% ownership right vest in BEST."
The additional affidavit further records the relevant dates and events to justify the impugned decision. It is also stated on 31 August 2018 a fresh tender has been issued by the BEST and the BEST be permitted to proceed with the said tender.
Stand of the DHI/UOI
38. The Union of India through the DHI initially was not impleaded as party to the petition and by an amendment to the petition came to be impleaded. On behalf of Union of India a letter dated 1 October 2018 is placed on record enclosing the remarks of the Director of the DHI which reads thus:-
"Remarks of Department of Heavy Industry (DHI)
1. DHI issued a letter to BEST vide F.No.1/(07)2017/NAB.II dated 26.4.2018 (annexed at Pg 299 - Exh P). As long as petitioner & BEST ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 32 wpl3069-18=15-10-18.doc (Respondent) abide by the conditions imposed by this letter, DHI will extend the incentive support to BEST, Mumbai in accordance with EOI conditions.
2. DHI issued a letter to BEST with F.No.1(07)/2017/NAB.II(Auto) dated 21.06.2018 (Pg.412 - Reply of Best- Exb-M), only as a response to clarification sought by BEST vide letter No.DO/GM/CMT/26590/2018 dated 18th June,2018 (Pg.410 - Reply of Best- Exb-L). In view of this fact, this is to state that DHI has (SIC was) not asked BEST to cancel the contract and invite fresh tender. It is reiterated that the contract is in between BEST and successful bidder & DHI has no role in the matter."
Submissions on behalf of the Parties
39. On the above conspectus, we have heard Dr.Sathe, learned Senior Counsel along with Mr. Karan Bhosale for the petitioner, Mr.Godbole with Mr.Aseem Naphade, learned Counsel for the BEST and Mr.R.K.Singh, learned Counsel appearing for Union of India/DHI.
40. Dr.Sathe, learned Senior Counsel for the petitioner would submit that the impugned decision dated 30 August 2018 of the BEST withdrawing the work order and/or terminating the contract is patently illegal and violative of the petitioner's fundamental rights guaranteed ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 33 wpl3069-18=15-10-18.doc under Article 14 and 19(1)(g) of the Constitution. It is submitted that being the lowest bidder the petitioner was awarded the contract by issuance of letter of acceptance dated 26 February 2018 and the contractual work order dated 28 February 2018. It is submitted that in view of the express stipulation as contained in the tender conditions and the acceptance letter, the petitioner mobilized resources to comply with the requirement of 25% of the delivery of the e-buses within three months of the issuance of the letter of acceptance and in fact the petitioner has manufactured about 24 buses, not anticipating that the awarded contract will be withdrawn/terminated. It is submitted that the BEST is bound by the terms and conditions of the tender and that although there was no direct privity between the petitioner and the DHI the petitioner is ready and willing to comply all the requirements as sought by the DHI in its letter dated 26 April 2018 addressed to the BEST. It is submitted that in fact the petitioner has unconditionally accepted the terms and conditions as sought to be imposed by DHI by its letter dated 26 April 2018, even if the said amounted to alteration of certain terms and conditions of the contract. It is submitted that the petitioners letter dated 31 May 2018 cannot be termed by the BEST as a ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 34 wpl3069-18=15-10-18.doc conditional acceptance as there is no reply of the BEST to the petitioner's said letter, rejecting the contention therein. It is submitted that the unconditional acceptance of the petitioner of the conditions of the DHI as contained in letter dated 26 April 2018 is clear from the petitioner's subsequent letter dated 22 June 2018 (page 312 of the petition). It is further submitted that the statement as placed on record on behalf of DHI makes is abundantly clear that the DHI is willing to extend the incentive support to the BEST, if the petitioner abide by the condition imposed by Govt. of India by letter dated 26 April 2018 which the petitioner has confirmed unconditionally to comply, and thus, the apprehension of the BEST that it may not receive incentive from DHI itself erroneous, rendering the action of termination of contract as illegal. It is submitted that, in fact para 2 of the statement as made on behalf DHI, completely falsifies the plea of the BEST that the BEST was required to terminate the contract on the insistence of the DHI. It is submitted that the stand of the BEST is thus wholly arbitrary and the impugned decision of the BEST to terminate the contract, does not fulfill any of the requirement of fairness, non- arbitrariness and non- discrimination as expected from a public body as enshrined under Article ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 35 wpl3069-18=15-10-18.doc 14 of the Constitution. It is submitted that the decision making process leading to impugned communication is clearly on some extraneous consideration which cannot be supported in law.
41. On the other hand, Mr.Godbole, learned Counsel for the BEST has justified the termination. It is submitted that the petitioner was called upon to comply with the requirement by letter dated 26 April 2018 of the DHI which the petitioner did not accept and in fact by the petitioner's letter dated 31 May 2018 conditionally accepted the said conditions imposed by DHI. It is therefore submitted that the conditional acceptance is no acceptance in the eyes of law and therefore, respondent BEST was justified in withdrawing the contract work order. It is further submitted that the Govt. of India by issuing a letter dated 26 April 2018 has substantially altered the conditions of the original tender and therefore, the work order stood frustrated. It is then submitted, that in fact the Govt. of India/DHI by its letter dated 21 June 2018 directed the BEST to call fresh tenders, for hiring of electric buses and on this count the action of the BEST, to cancel the work order was justified. It is submitted that the BEST has accordingly issued a fresh tender on 31 ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 36 wpl3069-18=15-10-18.doc August 2018 which should be permitted to be completed by upholding the decision to terminate the petitioner's contract. It is further submitted that in any case in view of the order passed by the learned Single Judge in the writ petitions filed by the workers union as also by the BEST the work awarded under the present work order has been stayed and thus in any event the petitioner cannot go ahead with the contract. It is contended that the petitioner has not assailed imposing of conditions by letter dated 26 April 2018 of the DHI, and thus the petition on this count should fail. It is submitted that the action of the BEST to terminate the contract of the petition is in accordance with law. The petitioner is not entitled to any relief in the present petition. The learned Counsel for BEST in supporting the contention that the conditional acceptance of letter of DHI dated 26 April 2018 by the petition vide its letter dated 31 May 2018 has no sanctity in law, has relied on the decisions in Haridwar Singh Vs. Bagun Sumbrui & Ors. (1973)3 SCC 889, Abdul Rahim Khan. Vs. Union of India & Ors. (AIR 1968 Pat 433), Raghunadha Reddy Vs. The State of Hyderabad (AIR 1963 AP 110), M/s.Swadesh Rubber Industries Vs. Sardar Singh & Ors. (1995(1) ILR Punjab & Haryana page 218) ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 37 wpl3069-18=15-10-18.doc
42. Mr.Rajendra Singh, learned Counsel for the DHI/Union of India at the outset submits that it is not correct for the BEST to contend that the DHI had asked the BEST to cancel the contract and invite fresh tender. Referring to the letter of the DHI along with the note as placed on record on 4 October 2018, it is submitted that the contract is between the BEST and the petitioner who is a successful bidder and the DHI has no role in the matter. It is further submitted that it is the clear stand of the DHI, that as long as the petitioner and the BEST abide by the conditions imposed by the DHI, under letter dated 26 April 2018, the DHI will extend the incentive support to the BEST in accordance with the expression of interest conditions. It is therefore, submitted that the contention of the BEST which are contrary to the stand of DHI as placed on record cannot be accepted.
Discussion and Conclusion
43. Having heard the learned Counsel for the parties and having perused the record, it is indubitably clear that the BEST invited the tender in question to take benefit and participate in the policy of ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 38 wpl3069-18=15-10-18.doc Government of India namely the FAME (supra). The intention of the policy is to provide financial incentives in promoting pollution free electric buses. The BEST made a proposal dated 30 November 2017 to the Government of India under the FAME India Scheme for 100 buses. The Govt. of India / DHI issued a letter of intent dated 27 December 2017 to the BEST to extend incentives for purchase of 40 buses as per the terms and conditions of the expression of interest dated 31 October 2017. Accordingly, the BEST issued the tender in question by notice dated 10 January 2018. A pre-bid meeting was also held. The petitioner had submitted its issues for clarification in the pre-bid meeting. In the said issues the petitioner never commented/ objected on the original ownership criteria which was a criteria not of the exclusive ownership of the bidder but a criteria of proportionate ownership as set out in Paragraph 7 of the Schedule III of the tender document. The BEST however altered the ownership criteria so as to maintain the ownership of the buses solely of the supplier and not of the joint ownership. No previous approval for this change appears to have been taken from the DHI, when the tender was issued to utilise the grants from the Government of India. On 1 February 2018 the General Manager of the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 39 wpl3069-18=15-10-18.doc BEST informed the Joint Secretary of DHI of the issuance of the tender in question and informing of the nature of the tender and that the incentive which would be received from DHI will be transferred to operator on receipt of the same and the maximum incentive available under the scheme is 60% and balance 40% shall be borne by the operator on behalf of BEST. A meeting was held on 19 February 2018 wherein the General Manager of BEST participated and informed the DHI that the BEST has opened the bid and will be issuing supply order shortly. It was informed that the BEST has committed to its involvement in the project as an operator and shall invest 40% cost of buses. It was also informed that the BEST will be taking bank guarantee from the operator for seven years for the 70% for the incentive amount to be received from DHI. The petitioner being the lowest bidder was awarded the contract by issuance of letter of acceptance dated 26 February 2018 and formal contract work order dated 28 February 2018. It is pertinent that the acceptance letter and the contract work order is issued to the petitioner in consonance to the Note below clause 4.2 in Annexure-C which provides for the following:-
"Note: This acceptance letter is subject to approval of incentive from ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 40 wpl3069-18=15-10-18.doc Department of Heavy Industries (DHI)."
This for the reason that the Government of India/DHI by letter dated 27 December 2017 issued to BEST had agreed to provide for incentives for purchase of 40 buses as noted above. The BEST therefore, cannot have a quarrel with issuance of contract work order to the petitioner.
44. There can be no manner of doubt that the issuance of work order amounts to acceptance of the proposal of the petitioner and thus forms formation of a contract between the parties. That the contract is awarded to the petitioner is specifically recorded by the BEST in its letter dated 28 May 2018 addressed to the DHI when the BEST recorded that "
After completing the bidding process and on obtaining approval of the Competent Authority ie. BES&T Committee, the Contracts were awarded to the Goldstone Infra and M.P.Enterprise for 40 Electric Buses each". This clearly falsifies the BEST's stand in the impugned letter that the contract work order was is in the nature of a letter of intent and an expression of an intention to enter into a contract.
45. It is also not in dispute that the letter of acceptance dated 26 February 2018 in clause F provides that 25% of the buses should be provided by the petitioner within three months and balance 75% by six ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 41 wpl3069-18=15-10-18.doc months after requirement is given by the Undertaking after release of the contract work order. The petitioner acted upon the work order by mobilizing the finance and other resources and in fact manufactured the required quantity of 25% buses to be made available to BEST. In fact the petitioner manufactured more number of buses than the stipulated requirement of 25% to be delivered within three months of the issuance of the work order. This perhaps on the anticipation that once a contract is awarded there can never be a turn around by a statutory authority like the BEST. There was also a joint survey between the parties to visit the depots from where the buses would be made operational.
46. It appears from the record that when the BEST approached the DHI by its letter dated 8 March 2018 requesting for release of the first installment of the incentive, submitting all the relevant documents and correspondence as ensued between the parties, there arose some dissimilitude between parties, leading to the letter dated 26 April 2018 of the DHI setting out the benchmarks interalia that the respective organization/STU shall jointly own the buses in the same proportion of sharing of cost of bus and calling upon the BEST to submit the letter of acceptance for above mentioned benchmark prices and the proposed ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 42 wpl3069-18=15-10-18.doc joint ownership of the buses by 15 May 2018. The BEST acted upon this letter and by its letter dated 2 May 2018, called upon the petitioner to confirm its acceptance of the condition as contained in the letter of DHI dated 26 April 2018. Initially the petitioner requested for some time to ponder on the issue. It also had discussion with the officials of the BEST and finally by letter dated 31 May 2018, conveyed the acceptance of the said conditions to the BEST, however, recording that the joint ownership of BEST alongwith petitioner shall be in proportion to the incentive amount to be funded by the petitioner and after the contract period, the bus ownership would be automatically deemed to be transferred to the petitioner at no costs. There were certain other conditions which were set out. The BEST never rejected this letter of the petitioner nor sought a clarification on it, if it was of the opinion that the contents of the said letter of the petitioner, were not acceptable for some reason or were required to be modified by the petitioner. This was the least what could be expected of a public body if it is to be forthright, clear and transparent.
47. The petitioner in the intervening period, informed the BEST of ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 43 wpl3069-18=15-10-18.doc completion of manufacturing of buses and that they were ready for delivery as per the work order. Further the petitioner by its letter dated 22 June 2018 informed the BEST that they have accepted the terms and conditions as imposed by the Government of India and once again confirmed the same. Again no clarification on this letter was sought by the BEST. A convenient stand however is taken in the reply affidavit to say that the acceptance of the petitioner was a conditional acceptance and also tried to be justified in the arguments. The BEST straight away proceeded to issue the impugned communication dated 30 August 2018 terminating the contract observing that as the Govt. of India / DHI by its letter dated 26 April 2018 had stipulated that the subsidy would be granted for the buses to be supplied by the petitioner subject to the same being jointly owned by the BEST and the bus owner, by virtue of this condition the basic nature of the tender had changed, in the light of the said directives of the Govt. of India wherein the BEST was required to have joint ownership with the successful bidder and not act as a mere lessee. Further astonishingly, the BEST took a position that the contract work order was merely in the nature of letter of intent which was an expression to enter into a contract and thus in the light of the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 44 wpl3069-18=15-10-18.doc directives of the Department of Heavy Industries, the contract work order was required to be withdrawn with immediate effect.
48. Can it be so simple for a statutory authority to float a tender at public cost, complete the tender process, award the contract with conditions that the contract would be immediately acted upon and then for reasons which are not attributable to the contractor terminate the contract? What is the sanctity of the commercial dealing with public bodies? What happens to the invaluable constitutional mandate guaranteed under Article 14 and 19(1)(g) of the Constitution and a legitimate expectation of the participating bidders that a public body would act with fairness, bonafide and with transparency,are issues which ponder us in this case.
49. We may observe that learned Senior Counsel for the petitioner at the outset submitted that the petitioner unconditionally is accepting the terms and conditions of letter dated 26 April 2018 of DHI albeit the confirmation of the same in the petitioner's letter dated 22 June 2018. The matter in our opinion should have rested at this. ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 :::
Pvr. 45 wpl3069-18=15-10-18.doc However to our dismay the BEST thought it appropriate to contest the proceedings. We may also observe that the contention of the BEST relying on the decisions that the petitioner conditionally accepted the offer cannot be accepted as the facts stand. There can be no quarrel on the propositions of law as laid down in the said decisions however in the facts of the case these decisions are certainly, not applicable. This argument of the BEST of a conditional acceptance is clearly an afterthought unsupported by any material and is without any factual basis, as we have already observed that the BEST never objected or raised any issue on the contents of the petitioners letter dated 31 May 2018 and the subsequent letter dated 22 June 2018.
50. We find that the decision of the BEST to issue the impugned communication terminating the contract which is stated to be withdrawal of the contract work order, is ex facie arbitrary and illegal. Considering the impugned communication firstly it is an erroneous or deliberate on the part of the BEST to record in the impugned letter that the work order was in the nature of a letter of intent and merely an expression of intention to enter into a contract. The record indicates and ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 46 wpl3069-18=15-10-18.doc that there cannot be a semblance of doubt that the petitioner responded to the tender. The petitioner's tender/bid was accepted by issuance of, not only a letter of acceptance, but a formal contract work order. Above all there is a candid acceptance of the award of the contract to the petitioner, in the BEST's letter dated 28 May 2018 addressed to the DHI, as referred by us above. If this be the case, then for the BEST to say that there is no contract between the parties, goes against the fundamental tenets of law on contracts and the basic principles of commercial jurisprudence. Secondly, as clearly seen from the impugned communication, the entire basis for the BEST to terminate the contract was on the foundation that the Govt. of India/DHI has imposed a condition of joint ownership of the vehicles by its letter dated 26 April 2018 and thus as the nature of the tender has changed the contract was required to be terminated. We find this reason astonishing and certainly not appealing to our judicial conscience. Perusal of the record do not inspire any confidence for the BEST to take such a stand. We feel that there may be some extraneous reasons which have compelled the BEST to deviate itself from its normal and lawful course expected of the statutory authority. We say so for two basic reasons, firstly the BEST ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 47 wpl3069-18=15-10-18.doc maintained a deep silence to react in any manner on the petitioner's acceptance on the conditions imposed by DHI by its letter dated 26 April 2018 and as called upon to be complied by the petitioner by the BEST's letter dated 2 May 2018. Secondly, if the BEST had any fundamental dispute or reservation on imposing of these conditions, the BEST could have never called upon the petitioner to forward its compliance on or before 15 May 2018. In fact the BEST took up the matter with the DHI, and never informed the DHI when acting under the incentive scheme of the DHI that it would take such a draconian step to terminate the contract which was also put into execution, as awarded to the petitioner. Moreover, the entire correspondence we have referred above from 20 May 2018 till 27 August 2018 gives a clear impression that the BEST agreed to the DHI's requirement of joint ownership of the buses as crystal clear from the BEST's very own letter dated 14 August 2018. In fact this correspondence shows that a clear impression was created at the doors of the Government of India that the compliance of its requirements is being met so as to seek disbursement of the first installment of the subsidy. It appears that the BEST for reasons best known to it was playing a dual role one with the Government of India/DHI and another ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 48 wpl3069-18=15-10-18.doc with the petitioner. The question is as to what went wrong between 14 th August 2018 and 30th August 2018? Considering the entire correspondence it is writ large that there is a fundamental flaw and arbitrariness in the decision of the BEST to terminate the petitioner's contract.
51. We are also certain that the conspicuous silence of the BEST in reverting to the petitioner either way on the petitioner's acceptance of the conditions required by the DHI was not superficial. It appears and quite possibly hectic activities were going on, for issuance of a new tender for award of the same contract. This is clear from the fact that no sooner on 30 August 2018 the impugned communication was issued to the petitioner terminating the contract, immediately on the next day on 31 August 2018 a fresh tender was issued and the BEST started with the tender process. This shows that the petitioner on one hand was kept in dark on the fate of its contract and on the other hand the BEST was engaged in preparing for issuance of a new tender.This was not expected of a public body. This Court in its different orders has recorded that the date to receive the bids is extended by the BEST and as recorded in the ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 49 wpl3069-18=15-10-18.doc order dated 1 October 2018, it was extended till 15 October 2018 and further by our order dated 4 October 2018, we directed that the respondent may accept the tender, but shall not open the tender without permission of the Court.
52. We also cannot be oblivious as to what is clearly reflected by the record namely as to how a statutory body like the BEST can adopt an approach so casual in exercising its statutory powers to award contracts, as conferred by the Mumbai Municipal Corporation Act 1888 (for short 'MMC Act'). to terminate an awarded contract when the contract is already put into execution and that too on glaringly ostensible reasons as set out in the termination letter. As per the tender document, the tender issuing authority is the BEST undertaking (page 28 of the paperbook). It is not in dispute that when such tenders are issued by the BEST the provisions of the MMC Act are attracted. The powers which are exercised by the BEST are statutory powers as conferred under Chapter XVI-A of the MMC Act. Section 460A provides for management of the undertaking by the General Manager. It provides that subject to the superintendence of the Brihanmumbai Electric Supply Transport ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 50 wpl3069-18=15-10-18.doc committee and of the Corporation (The Mumbai Municipal Corporation) the General Manager shall manage the BEST. Section 460-K provides for making of contracts for the purposes of the BEST undertaking. Section 460-L provides for mode of executing contracts. Section 460-M provides that tenders to be invited by the BEST for contract involving expenditure exceeding Rs.50,000/-. The scheme of the chapter XVI-A postulates that the BEST being a statutory body and a "State" within the meaning of Article 12 is required to function within the framework of law and the well established Constitutional principles in the matter of award of contracts and in dealing with public utilities involving public money. The basic requirement expected of a statutory body, when it acts in a contractual sphere is that the statutory body should adhere to the principles of fairness, transparency, non- arbitrariness, non- discrimination being the basic tenets of the Article 14 of the Constitution. These principles cannot be given a go-by. It is a settled principle of law that a Constitutional Court in exercising powers of judicial review can examine the decision making process in contractual matters, even post award of a contract and concerning termination of contract. In any case there are no disputed questions of fact in the present case. The limited ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 51 wpl3069-18=15-10-18.doc scrutiny which is called for is to test the impugned decision making process on the touchstone of article 14 of the Constitution.
53. In M/s.Dwarkadas Marfatia & Sons Vs. Board of Trustees of the Port of Bombay 1989(3) SCC 293, the Supreme Court was concerned with the action of the public authority terminating the tenancy and taking proceedings for eviction. The court referring to many celebrated decisions held that judicial review is not concerned with the decision but the decision making process. The court accepted the contention of the petitioner that every action / activity of the Bombay Port Trust /respondent therein which constituted "State" within Article 12 of the Constitution, in respect to any right conferred or privilege granted under a statute is subject to Article 14 and must be reasonable and taken only upon lawful and relevant ground in public interest. It was observed that where there is arbitrariness in State action, Article 14 springs in and judicial review brings such an action down. Every action of the authority must be subject to rule of law and must be informed by reason. The Court observed that whatever be the activity of the public authority, it should meet the test of Article 14. It was held that any ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 52 wpl3069-18=15-10-18.doc governmental policy and action even in contractual matters, if it fails to satisfy the test of reasonableness, it would be unconstitutional.
54. Mahavir Auto Stores and Ors. Vs. Indian Oil Corporation and Ors. (1999(3) SCC 752) was a case of the respondent-Indian Oil Corporation suddenly discontinuing the supply of the petroleum products without any intimation or notice or hearing, the parties stood in a contractual position. In para 12 of the decision the Supreme Court observed that the rule of reason and rule against arbitrariness and discrimination, rule of fair play and natural justice are part of rule of law applicable where a State instrumentality is dealing with citizens. It was held that even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevant and reasonableness, fair play, natural justice, equality and non discrimination in the types of the transactions and the nature of the dealings.
55. In Verigamto Navin Vs. Govt. of A.P. (2001(8) SCC 344) ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 53 wpl3069-18=15-10-18.doc which was a case pertaining to illegal termination of a sub-lease under the Mines and Minerals Development Regulation Act,1957, the Supreme Court taking a review of the law on interference in contractual matters held that where the breach of contract involves breach of statutory obligation, when the order complained of was made in exercise of statutory power by a statutory authority, though the cause of action had arisen out of or pertained to a contract, brings it within the sphere of public law because the power exercised is apart from the contract. The freedom of the government to enter into business with anybody it likes is subject to condition of reasonableness and fair play as well as public interest. It was observed that after entering into a contract, in cancelling the contract which is subject to the terms of statutory provision, it cannot be said that the matter falls purely in a contractual field. The contention that no interference under Article 226 of the Constitution could have been made by the High Court, was thus rejected.
56. In Food Corporation of India and Anr. Vs. SEIL Ltd. & Ors. 2008(3) SCC 440, the Supreme Court referring to the decision in ABL International Ltd. held that Article 14 of the constitution has received a ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 54 wpl3069-18=15-10-18.doc liberal interpretation over the year. Its scope has been expanded by creative interpretation of the Court. The law has developed in this field to a great extent and when no disputed question of fact involved, the High Court in appropriate cases grant relief to which the writ petitioner is entitled to law as well as in equity.
57. Adverting to the above settled principles of law and applying the test of the manner, the method and the motive of a decision expected from a statutory body and when tested on the touchstone of Article 14, we have no manner of doubt there is a breach of the statutory obligation as conferred on the BEST to act in a fair, transparent and reasonable manner and in public interest, in taking the impugned decision, to terminate the petitioner's contract and/or withdraw the work order. It was surprising that despite the clear stand of DHI that it never insisted the BEST to terminate the petitioner's contract had in fact resulted into the entire basis of the termination letter having vanished, the BEST nonetheless contested the proceeding. Further what would disturb our judicial conscience is that when the learned Single Judge passed the order dated 25 September 2008 on the writ petitions filed by BEST ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 55 wpl3069-18=15-10-18.doc challenging the orders passed by the Industrial Court, the pendency of this proceeding was not brought to the notice of the learned Single Judge, as informed to us categorically by the learned counsel for the BEST, and more particularly when the issue of contract/work order on e- buses was raised before learned Single Judge as clear from the following observations in the order passed by the learned Single Judge:-
"In the eventuality the work order are already issued with the directions of the Industrial Court, the same shall not acted upon only until further orders."
58. We may observe that incidentally this petition was also listed before us on the very same day (25 September 2018) when we heard the parties at length and passed an order recording the questions which fell for consideration in this petition.
59. For all these reasons, to our mind the actions, conduct and the approach of the BEST leaves no manner of doubt that the BEST not only acted high handedly and arbitrarily in taking the impugned decision, but also attempted to abuse the process of law least expected ::: Uploaded on - 16/10/2018 ::: Downloaded on - 17/10/2018 02:29:01 ::: Pvr. 56 wpl3069-18=15-10-18.doc from a public body.
60. As a sequel to the above discussion, the impugned decision as contained in the communication of the BEST dated 30 August 2018 cannot be sustained and is quashed and set aside as illegal and unconstitutional.
61. We clarify that this judgment is confined only to the tender in question, as awarded to the petitioner in regard to forty e-buses.
62. Rule is made absolute in the above terms. Now as to cost. We were inclined to impose cost on the BEST, we however refrain from doing so.
(G. S. KULKARNI, J.) (ACTING CHIEF JUSTICE)
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