Calcutta High Court (Appellete Side)
Amitabha Mitra vs The State Of West Bengal & Ors on 18 August, 2011
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose, Soumen Sen
1
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
A.S.T.NO. 167 of 2011
A.S.T.A. 136 of 2011
W.P. 7154(W) of 2011
AMITABHA MITRA
-Versus-
THE STATE OF WEST BENGAL & ORS.
BEFORE:
The Hon'ble Justice PINAKI CHANDRA GHOSE
AND
The Hon'ble Justice SOUMEN SEN
For the Appellants : Mr. Anindya Mitra, Sr. Adv.
Mr. Pratap Chatterjee, Sr. Adv.
Mr. Biswarup Bhattacharya
For the Respdt.No.7 : Mr. Pratik Dhar
Mr. Ritwik Pattanayak
Mr. Sunyasarathi Basu
For the State : Mr. Chameli Majumder
Mr. Swarup Paul
Heard on : 04.05.2011, 18.05.2011,
20.06.2011, 23.06.2011, 05.07.2011
08.07.2011, 14.07.2011, 27.07.2011
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Judgment on : 18.08.2011
Pinaki Chandra Ghose, J. : The present appeal is arising out of an order of
refusal by the learned Single Judge to pass an ad interim order in favour of the
writ petitioner in respect of a public tender issued on 24th November, 2010 for
procurement and related services to be provided by UNOPS to the West Bengal
Medical Services Corporation Ltd. The learned Single Judge refused to pass any
ad interim order to stay the operation and effect of the letter dated 5th of April,
2011 by which United Nations Office for Project Services (hereinafter referred to
"UNOPS") have rejected the bid from Narayan Industries regarding ITB Ref:
UNOPS/IPO/WPMSC/EQUIP/03/2010.
UNOPS by the said communication rejected the said bid on the ground that
M/s. Narayan Industries suffers from "conflict of interest" since it has submitted
more than one bid in the bidding process in relation to equipments covered
under the same Schedules being Schedule 7,14 and 21 and hence became
ineligible in terms of Clause 4.2(ii) of the instructions to bidders.
On 18th May, 2011, the appeal was admitted, however, in view of the fact
that purchase orders have been issued in favour of the Respondent No.9 and the
said medical equipments are urgently required by the Chief Medical Officer, Darjelling District, the Respondent No.9 was permitted to supply initially 1000 Dopplers to the Respondent No.7. Subsequently by an order dated 5th July, 2011 3 we have permitted supply of a further 1000 Dopplers to the authorities concerned in view of the urgent requirement of such equipments.
During the pendency of the appeal two applications were filed on behalf of the appellant to bring on record further materials. We permitted filing of such application and after completion of affidavits, the main writ petition was taken up for consideration along with the applications filed on behalf of the appellant.
At the commencement of hearing, the learned Counsels representing the Respondent No.7 & 9 raised objection as to the maintainability of the writ petition.
The principal ground is that the Respondent No.8, namely, United Nations Office for Project Services (hereinafter referred to "UNOPS") enjoys immunity. It has been argued that the principal relief is against the order passed by the General Counsel, UNOPS being Annexure 11 to the writ petition which cannot be reviewed in this proceeding. It was further argued that the disputes relate to an award of a contract by the Respondent No.8, UNOPS, India Operation Centre and any dispute arising out of the same has to be resolved in accordance with the mechanism as provided in the UNOPS procurement manual, Rev.4,01 September, 2010.
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By referring to Clause 10.04 of the said Procurement Manual it was argued that the said procurement manual contends the elaborate procedure for dispute resolution and in view thereof, the writ petition is not maintainable. It was contended on behalf of the said respondents that UNOPS is an inter governmental organization established by the United Nations (UN) General Assembly by resolution 48/501. UNOPS is a service provider to the United Nations System, international financial institutions and members-States for management of project and procurement which cuts across all sectors and is created by the charter and mandate of the United Nations.
UNOPS is one of the organs set up by the United Nations Organization and as such is not amenable to the writ jurisdiction in view of the United Nations (privileges and Immunities) Act, 1947 and is not State as per definition of Article 12 of the Constitution of India.
As per the special conditions of contract supplementing the general conditions of contract, clause 34 is relevant which is quoted below:-
"34. Privileges and immunities.
Nothing in or relating to this Contract shall be deemed a waiver, expressed or implied, of any of the privileges and immunities of the United Nations, of which UNOPS is an integral part." 5
It is now well-settled that in case of tender process, it is not the decision but the decision making process to be subjected to judicial review under Article 226 of the Constitution of India. Upon bare perusal of the records it would appear that there has not been error in the decision making process while rejecting the bid submitted by JNV. The decision making process so taken by the competent authority cannot be said to be irrational and/or arbitrary. It is clear from the plain reading of the clauses of invitation to tender and procurement manual, Rev.4, 01 September, 2010 that the Respondent No.8 being UNOPS is the authority who was entrusted to advertise, process and finalize the tender.
The respondent No.7 in addition to the aforesaid contended that the West Bengal Medical Services Corporation Limited, (the Respondent No.7) requested UNOPS to undertake procurement of drugs, medical equipment/kit and related services on its behalf in connection with the programmes of the Government of West Bengal. Such request of the Respondent No.7 was accepted by the UNOPS and an agreement was made between the Respondent No.7 and UNOPS. In terms of the said agreement, UNOPS was required to undertake procurement and related services as requested by the Respondent No.7 for the programmes of the Government of West Bengal.
In the agreement between West Bengal Medical Services Corporation Limited and the United Nations Office for Project Services (UNOPS) among other things, following clauses were incorporated:-
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"(a) Whereas UNOPS has been providing loan administration and supervision as well as grant administration and supervision in India to IFAD and GFATM for several years, and is providing procurement services to the Government of India and the State Governments. UNOPS is mandated, among other things, to provide services of procurement for drugs, supplies and equipment (medical and non-medical supplies) and related services such as capacity building in procurement in the health sector, in support of the requests made by member States/UN entities and to enter into arrangements with Governments/Government owned organizations and other UN organizations to undertake activities on their behalf of procurement of supplies, equipment and services as per UNOPS rules and regulations."
"(b) Nothing contained in or relating to this Agreement, including but not limited to any contract entered into in accordance with the terms of this Agreement, shall be deemed to be a waiver, express or implied, of any of the privileges and immunities of the United Nations, and its subsidiary organs including UNOPS, whether under the Convention on the Privileges and Immunities of the United Nations, or otherwise, and no provision of this Agreement or any contrary entered into in accordance with the terms of this Agreement shall be interpreted for applied in a manner or to an extent inconsistent with such privileges and immunities."
In the present case the entire bidding process has been done by UNOPS. 7 Before really going into the question as to whether the decision of the UNOPS was correct in rejecting the bid submitted by the appellant, we propose to decide the maintainability of writ petition against UNOPS.
It appears from record that UNOPS was requested to act in the capacity as the "procurement agent" to and on behalf of the Respondent NO.7. The invitation to bid described the involvement of UNOPS in the following terms:
"Name of Project: procurement and related services to be provided by UNOPS to the West Bengal Medical Services Corporation Limited."
"UNOPS has been requested by the West Bengal Medical Services Corporation Limited to procure on their behalf MEDICAL EQUIPMENTS FOR THE HOSPITALS AND MEDICAL COLLEGES of the Government of West Bengal."
The invitation for international competitive bid for the supply of medical equipments for the hospitals and medical colleges of the Government of West Bengal was issued by UNOPS. The Scope of Bid and the Source of Fund forming part of Section I to the said Instructions to Bidders (hereinafter referred to "ITB") reads as follows:
"1. Scope of Bid 8 The type of Goods and Related services to be purchases is: SUPPLY OF MEDICAL EQUIPMENTS FOR THE HOSPITALS AND MEDICAL COLLEGES of the Govt. of West Bengal as per the Schedule of Requirements."
"2. Source of Funds Funds received from the West Bengal Medical Services Corporation Limited, for the procurement of Medical Equipments on behalf of the West Bengal Medical Services Corporation Limited."
Under the general conditions of contract forming Section 2 of the said ITB, it gives a clear impression that UNOPS is procuring the said goods and then delivering it to the Respondent No.7. Some of the clauses in the general conditions of contract which are relevant for determination of the aforesaid question is reproduced hereinbelow:
"9. Acceptance of Goods:
Under no circumstances shall UNOPS be required to accept any Goods that do not conform to the specifications of or requirements of the Contract. UNOPS may condition acceptance of the Goods upon the successful completion of acceptance tests, as may be specified in the Contract or otherwise agreed in writing by the Parties. In no case shall UNOPS be obligated to accept any Goods unless and until UNOPS has had a reasonable opportunity to inspect the Goods following delivery of the Goods in accordance with the requirements of the Contract. If the Contract 9 provides for UNOPS to issue a written acceptance for the Goods, the Goods shall not be deemed accepted unless and until UNOPS in fact provides such written acceptance. Payment by UNOPS does not imply acceptance of Goods nor of any related work or services under this Contract."
"10. Rejection of Goods:
10.1 Notwithstanding any other rights of, or remedies available to, UNOPS under the Contract, in case any of the Goods are defective or otherwise do not conform to the specifications or other requirements of the Contract, UNOPS may, at its sole option, reject or refuse to accept the Goods, and the Vendor agrees promptly to."
"11. Title:
Unless otherwise expressly provided in the Contract, title in and to the Goods shall pass from the Vendor to UNOPS upon delivery of the Goods and their acceptance by UNOPS in accordance with the requirements of the Contract.
"20. Termination for Default:
20.1 UNOPS, without prejudice to any other remedy for breach of Contract, by written notice of default sent to the Vendor, may terminate the Contract, in whole or in part if:
20.1.1 the Vendor fails to deliver any or all of the Goods within the period specified in the Contract:10
20.1.2 the Vendor fails to perform any other obligation under Contract;"
Moreover, Clause 32 and 33 relate to the mechanism by which any dispute arising the said ITB is required to be resolved. Clause 34 of the general conditions of contract reads as follows:
"34. Privileges and immunities.
Nothing in or relating to this Contract shall be deemed a waiver, expressed or implied, of any of the privileges and immunities of the United Nations, of which UNOPS is an integral part."
In the supplementary affidavit affirmed on 16th June, 2011, the appellants disclosed an agreement between the Respondent No.7 and UNOPS which was executed on 11th October, 2010. It was submitted that the said agreement would clearly show that the Respondent No.7 is exercising of control in respect of the said procurement and ultimately the said equipments are for a public purpose. Since, the Respondent No.7 was unable to the work on its own, they have entrusted UNOPS to procure the said equipments. In view of the aforesaid it was argued that this Court should take the functional aspect rather than the structural and or constitutional status of UNOPS for the purpose of entertaining the present writ petition against the decision of the UNOPS to reject the writ petition.
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Mr. Saktinath Mukherjee, the learned Senior Counsel appearing on behalf of the appellant in referring to the said agreement dated 11th October, 2010 submitted that the agreement would really show that for the purpose of procuring and providing related service as specified in the said agreement, the Respondent No.7 would pay the standard management fee to the Respondent No.8 and UNOPS would maintain a separate ledger account through which all UNOPS receipts and disbursements for the purpose of the said agreement would be channeled.
Much emphasis was laid on Clause 1 of Article 1, Clauses 4 and 6 of Article 2, Clauses 2,3a,3b,and 4a, 5a,5b,5c of Article 3, Clause 2 of Article 6, Clause 1a,1b of Article 4, of the said Procurement and Related Services Agreement herein.
On the basis of the aforesaid Clauses it was argued that the Respondent No.7 exercised the control over the said procurement and having regard to the fact that the agreement itself describes UNOPS as a "procurement agent" in relation to supply of various medical equipments to Government hospitals, the decision of the UNOPS is amenable to writ jurisdiction. In other words, it is submitted that the State Government and the Corporation are amenable to writ jurisdiction because of the status and functions performed and UNOPS is merely acting on behalf of the Corporation and the nature of the functions and the field 12 of its operation making it amenable to the writ jurisdiction. Our attention was drawn to the following decisions:
i) AIR 1960 Cal 395
ii) AIR 1989 SC 1607, Paragraphs 14, 15,16, 19 & 21
iii) AIR 1998 SC 295 Paragraph 4
iv) (2010) 1 CHN 760(DB)(paragraph 9)
v) 1987 (1) ALL ER 463
vi) (Approvingly referred in 1994 (6) SCC 651 para 27 and 2005 (6) SCC 657 para 12)"
It was argued by placing reliance on the said decisions that the recent trend of judicial pronouncements lean more towards on the functional aspect than on the structural and/or constitutional status and having regard to the fact that it is essentially a function of the Government to procure such equipments for its own hospitals, irrespective of the fact that whether any agency was appointed for procuring such material or not the action of such agency if it is found to be in violation of Article 14 of the Constitution of India would be amenable to writ jurisdiction. Since the field of operation is having a public character and public accountability is in question. It was submitted on the basis 13 of the aforesaid decisions that this Court should admit the writ petition and set aside the order of rejection passed by UNOPS.
The writ petitioner in effect would argue that the relationship between the State Government and the State Corporation vis-à-vis UNOPS is that of a principal and agent where the Respondent No.7, which is an organ of the State is the disclosed principle. The acts and the conducts of the said agent is binding on the said principle and there is no dispute in this case that the Respondent No.7 accepted the decision of UNOPS and had started procuring medical equipments from the private Respondent No.9 being Medi-Waves Inc. The petitioner states that if it could demonstrate that UNOPS has taken a decision which is contrary to and/or in violation of Article 14 and 19(1)(g) of the Constitution of India, this Court in exercise of its writ jurisdiction can even set aside such decision.
Per contra, the advocate on record on behalf of the Respondent No.7 or 9 submitted that in view of the discharge reported in 2003 (4) SCC 225 (G.Bassi Reddy Vs. International Crops Research Institute & Anr.) the writ application is not maintainable. It was submitted that in the said decision, the Hon'ble Supreme Court dealt with the United Nations (Privileges and Immunities) Act, 1947 in respect of International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) and held:14
Pr.1: "....... The dismissals are the subject-matter of these appeals. Both the Division Benches held that ICRISAT was an international organization and was immune from being sued because of a notification issued in 1972 under the United Nations (Privileges and Immunities) Act, 1947 and that a writ under Article 226 could not be issued to ICRISAT."
Pr.10: "ICRISAT has programmes in Tanzania, Sudan, Niger, Mali, Nigeria, Senegal and Upper Volta under the United Nations Development Programme (UNDP) and in 1948 set up a second centre in Niger. It has also entered into agreements with Niger, Malawi, Mali, Nigeria, Kenya and Zimbabwe for establishing centres and regional programmes in these countries."
Pr.26: "The facts which have been narrated earlier clearly show that ICRISAT does not fulfil any of these tests. It was not set up by the Government and it gives its services voluntarily to a large number of countries besides India. It is not controlled by nor is it accountable to the Government. The Indian Government's financial contribution to ICRISAT is minimal. Its participation in ICRISAT's administration is limited to 3 out of 15 members. It cannot, therefore, be said that ICRISAT is a State or other authority as defined in Article 12 of the Constitution."
Pr.28: "A writ under Article 226 can lie against a "person" if it is a statutory body or performs a public function or discharges a public or statutory duty (Praga 15 Tools Corpn. Vs. C.A. Imanual, Shri Anandi Mukta Sadguru Trust Vs. V.R. Rudani SCC at P.698 and VST Industries Ltd. Vs. Workers' Union). ICRISAT has not been set up by a statute nor are its activities statutorily controlled. Although, it is not easy to define what a public function or public duty is, it can reasonably be said that such functions are similar to or closely related to those performable by the State in its sovereign capacity. The primary activity of ICRISAT is to conduct research and training programmes in the sphere of agriculture purely on a voluntary basis. A service voluntarily undertaking cannot be said to be a public duty. Besides ICRISAT has a role which extends beyond the territorial boundaries of India and its activities are designed to benefit people from all over the world. While the Indian public may be the beneficiary of the activities of the Institute, it certainly cannot be said that ICRISAT owes a duty to the Indian public to provide research and training facilities. In Praga Tools Corpn. Vs. C.V. Imanual this Court constructed Article 226 to hold that the High Court could issue a writ of mandamus "to secure the performance of a public or statutory duty in the performance of which the one who applies for it has a sufficient legal interest." The Court also held that : (SCC p.589, para 6) "[A] in application for mandamus will not lie for an order of reinstatement to an office which is essentially of a private character nor can such an application be maintained to secure performance of obligations owed by a company towards its workmen or to resolve any private dispute. (See Sohan Lal v. Union of India.)"
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It was submitted that United Nations Office for Project Services ('UNOPS'), is an inter governmental organization established by the United Nations (UN) General Assembly by resolution 48/501. UNOPS is a service provider to the United Nations System, international financial institutions and member-States for management of project and procurement which cuts across all sectors and is created by the charter and mandate of the United Nations. UNOPS employs almost 6,000 personnel annually from different countries of the world with its headquarters in Copenhagen, Denmark, a network of five regional offices and a further 20 operations and project centres, UNOPS oversees activities in more than 80 countries.
In spite of our repeated notice Respondent No.8 chose not to appear and the learned Counsel appearing on behalf of the Respondent No.7 communicated the said decision of the Respondent No.8, it was submitted that the Respondent No.8 claims immunity.
On the aspect of the maintainability of writ we think that the writ petition is maintainable against the State respondents. It is not essential for us to hold that the writ petition is maintainable against UNOPS since UNOPS in this entire transaction was merely acting as a procurement agent. UNOPS is not a State within the meaning of Article 12 of the Constitution of India.
We are proceeding on the basis that the selection of UNOPS of the Respondent No.9 was accepted by the State and the State has decided to receive 17 such equipments procured by UNOPS from the Respondent No.9. Moreover, it appears from the record that on an earlier occasion, the present appellant filed a writ petition being AST No.45 of 2011. In the said writ application, an order was passed on 7th February, 2011. It appears that the principal grievance of the writ petitioner was that although the writ petitioner was the lowest bidder and he was directed to demonstrate the equipments which according to the writ petitioner had performed satisfactorily but UNOPS did not decide the fate of the bid although a substantial period had expired. The writ petitioner apprehended that authority was contemplating to reject his lowest bid and accordingly the writ petitioner sought a mandamus commanding the 7th Respondent (UNOPS) to communicate the reasoned decision concerning his bid.
The learned single Judge disposed of the said application by directing UNOPS to communicate the decision concerning the bid of the writ petitioner. The relevant portion of the order is reproduced hereinbelow:
"After hearing counsel for the parties, I am of the view that it will be appropriate to dispose of the petition directing the seventh respondent to communicate the decision concerning the petitioner's bid.
For these reasons, I dispose of the petition ordering as follows. Within three working days from the date of communication of this order the seventh respondent shall communicate the decision of the competent authority concerning the 18 petitioner's bid. If the bid is rejected, then the reasons recorded by the authority shall be communicated. I have not gone into the merits of the case."
The said decision was not challenged nor anyone at that time raised the issue of maintainability of the said writ petition. The communication of the reason by UNOPS is now the subject-matter of the present writ application.
The very fact that the decision was accepted by the State and they are in the process of implementing it, it cannot be said that if there is any illegality and or irrationality and/or procedural impropriety and/or arbitrariness in the matter of selection, the writ petition would not be maintainable. In fact, the writ petitioner in this proceeding is challenging the manner in which UNOPS acting as an agent of the State respondents rejected their bid and which according to them is arbitrary.
Let us think of a situation where a private body is entrusted by the State to procure some materials and/or equipments which are to be utilized for a public purpose. The State appoints such private body to act on its behalf to procure such materials. If it is revealed that such body has acted illegally in discharging its function and the selection of bidder has been made arbitrarily and the State even after becoming aware of it did not take any steps, the process of such selection can be challenged on the ground of arbitrariness, illegality and impropriety. After all, if the process is bad, the State would be required to pay 19 from public exchequer amounts which ought not to have been paid to such bidder who had been chosen illegally or arbitrarily as the case may be. The acts of the agent binds the principal and hence in such matters of public largess if it suffers from any of the aforesaid illegalities, a writ petition would be maintainable.
In the instant case, the appellants urged the manner in which they have been left out and the manner in which the Respondent No.9 awarded the contract was illegal, arbitrary and suffers from procedural irregularity. It was also argued that the selection of Respondent No.9 lacks transparency. In such a situation where a party feels aggrieved that he has been unfairly and arbitrarily dealt with irrespective of the fact that such decision was of a private body, the writ petition would be maintainable, since the said private body was acting on behalf of the State in relation to a public project and public exchequer is involved.
The judgment relied upon by the Respondent No.7 and 9 reported in 2003 (4) SCC 225, however, has no manner of application in the instant case. The said matter arises out of an order of dismissal issued by the International Crops Research Institute and it was essentially an employer-employee dispute arising out of the contract of the employment. Admittedly, the ICRISAT is not coming within the purview of Article 12 nor the employment of the person dismissed can 20 be said to be in any public employment. The facts of the case and the case that were deciding are clearly distinguishable on facts.
However, this finding of us would be a pyrrhic victory for the appellant and even with the loss of Nelson's eyes in the Battle of Trafalgar, the battle may not have been ultimately won.
It appears to us that the grounds for rejecting the said bid as mentioned in the said letter dated 5th April, 2011 was on proper and correct interpretation of Clause 4.2 of Section I to Instructions to Bidders.
For appreciation of the grounds on which such bid was rejected on 5th April, 2011, Clause 4.2 of the Bid Document forming ITB is reproduced hereinbelow:
"4. Eligible Bidders 4.2A Bidder shall not have "a conflict of interest". All Bidders found to have conflict of interest shall be disqualified. Bidders may be considered to have a conflict of interest with one or more parties in this bidding process, if they:
i) are or have been associated in the past, with a firm or any of its affiliates which have been engaged by UNOPS to provide consulting services for the preparation of the design, specifications, and other 21 documents to be used for the procurement of the Goods to be purchased under these Bidding Documents; or
ii) Submit more than one bid in this bidding process, except for alternative offers permitted under Instructions to Bidders Clause 13.
However, this does not limit the participation of subcontractors in more than one bid."
It is not in dispute that in respect of Schedule No.7, 14 & 21, two offers were submitted in which except for one party the other parties are common.
In the bid submitted by the proposed Joint Venture by the name of JNV, the name of the parties forming such Joint Ventures are as follows:
"i) M/s. Narayan Industries; ii) Variety Vyapaar (P) Limited;
iii) Shenzhen Jumper Medical Equipments Company Ltd."
In the bid submitted by the other Joint Venture, namely, CNV, the name of the parties forming such JV are as follows:
"i) M/s. Narayan Industries;
ii) Variety Vyapaar (P) Limited;
iii) Contec Medical Equipment Co.Ltd."
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While in JNV, M/s. Narayan Industries is the lead bidder in CNV, Variety Vyapaar was the lead bidder. It could be seen that Narayan and Variety exist in both the joint venture.
Clause 4.2.(ii) is very clear as to the eligibility of bidders, it clearly prohibits submission of more than one bid in the bid process, except for alternative offers permitted under instructions to bidders Clause 13. It appears that Narayan and Variety in permutation and combination gave bid which is directly hit by the aforesaid Clause. In our view such clause was inserted so as to prevent formation of cartel. The word "cartel" was considered by the Hon'ble Supreme Court in B.S.N Joshi's Case reported in AIR 2007 SC 437 in Paragraph 35 and 36 which is reproduced hereinbelow:
"35. It is significant to note that a finding was arrived at that the private respondents herein formed a cartel. What is a cartel has been stated in Advanced Law Lexicon, 3rd edition by P. Ramanatha Aiyar at page 693 in the following terms :
"Cartel" includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale of price of, or, trade in goods or provision of services."23
"36. In Union of India v. Hindustan Development Corporation [AIR 1994 SC 988, 1008], this Court held :
"The 'cartel' is an association of producers who by agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity. It amounts to an unfair trade practice which is not in the public interest."
It would be, thus, seen as in the instant case that such permutation and combination if allowed, would lead to formation of cartel which is expressly prohibited by the aforesaid clause.
On the face of record, it is, thus, apparent that their offers are liable to be rejected. In fact, it was only JNV who had challenged the order and not CNV. Merely by change of one partner, the other members of the JV cannot multiply the bids and in our considered opinion if any party is common in both the joint ventures then their bids as JV is liable to be rejected in terms of Clause 4.2A(ii) of the bid document and it should be considered to be more than one bid in the bidding process. The inclusion of Shenzhen Aeon Technology Co. Ltd. in JNV or Contec in CNV are the only differences which, however, in our considered opinion does not take away the said bids from the mischief of Clause 4.2A(ii) of the Bid Document.
24
UNOPS in terms of the order dated 7th February, 2011 examined the matter and rejected the said bid from Narayan Industries on the ground that it violates Clause 4.2 of the Bid Document. The reasons for rejecting the said bid has been explained in the letter dated 5th April, 2011, relevant portion whereof is reproduced hereinbelow:
"1. The matter has been comprehensively examined and the position is as follows:-
The lead bidder, Narayan Industries, and another Joint Venture partner VVPL have participated in the schedules (Schedules 7, 14 & 21) in another Joint Venture (CNV Medical Supplies which is a JV between Variety Byapaar (Pvt.) Ltd. Kolkata, Contec Medical Systems Co. Ltd. China and Narayan Industries, Kolkata with Variety Vyapaar (Pvt.) Ltd. Kolkata as the lead bidder). Thus records establish that M/s. Narayan Industries has conflict of interest in that he has submitted more than one bid in the bidding process, in terms of ITB Clause 4.2 of the bid, which reproduced below:
4. Eligible Bidders 4.2A Bidder shall not have "a conflict of interest". All Bidders found to have conflict of interest shall be disqualified. Bidders may be considered to have a conflict of interest with one or more parties in this bidding process, if they:
i) are or have been associated in the past, with a firm or any of its affiliates which have been engaged by UNOPS to provide consulting services for the preparation of the design, specifications, and other 25 documents to be used for the procurement of the Goods to be purchased under these Bidding Documents; or
ii) Submit more than one bid in this bidding process, except for alternative offers permitted under Instructions to Bidders Clause 13.
However, this does not limit the participation of subcontractors in more than one bid."
2. After due examination of records and the applicable rules and procedure, UNOPS has concluded that the bidder did not fulfill the formal criteria laid down in the bid document, and, therefore, was found to be non-responsive on the grounds of conflict of interest in terms of Bid Clause 4.2(ii) as indicated above.
3. Such deviations as above from basic eligibility conditions are considered to be material and significant, your bid has been treated as non-responsive. In doing so, the Bid Evaluation Committee of UNOPS has acted fully in accordance with the clauses of the bid document and the accepted principles of international bidding in an objective, transparent and equitable manner, and has been fair to all concerned bidders.
4. The bid protest lodged by you is found to be without merit and is accordingly rejected. You are, however, advised to conform to the eligibility conditions of the bid document while participating in future UNOPS bids." 26 We feel that UNOPS was perfectly justified in rejecting the said bid on that ground alone.
However, before we part with, it has come to our notice in the two applications that have been filed by the writ petitioner that the contract was awarded in the name of Medi-Waves Inc. and not in the name of joint venture. In fact, it was contended that no JV was formed pursuant to the award of contract in favour of the JV by the name of SA Technology Company Ltd. of which M/s. Medi-Waves Inc. is a lead member. Our attention was drawn to the notification of award dated 21st March, 2011 issued by UNOPS wherefrom it appears that UNOPS after evaluating the bid documents in respect of the said tender awarded the contract to SA Technology Co. Limited, a Joint Venture of Medi-Waves Inc. and Shenzhen Aeon Technology Co. Limited. The said letter was addressed to M/s. Medi-Waves Inc. as the lead member of the said Joint Venture SA Technology Co. Limited. Our attention was drawn by the Respondent No.7 to Clause 1.3 of Section 2 of General Conditions of Contract which is reproduced hereinbelow:
"1.3 If the Vendor is a joint venture, consortium or association, all of the Parties shall be jointly and severally liable to UNOPS for the fulfilment of the provisions of the Contract and shall designate one party to act as a leader with authority to bind the joint venture, consortium or association. The composition or the constitution of joint venture, consortium or association shall not be altered without the prior consent of UNOPS."27
Our attention was also drawn to Clause 8.2.1 of the Procurement Manual of 1st September, 2010, the relevant portion whereof is reproduced hereinbelow:
"8.2.1 Contract Requirements The Contractual agreement must contain the following element:
1) Identification of the parties contracted as well as the person authorized to act on behalf of the contracted party including: name, address and contact details. In the event that the contract is the result of a joint offer, UNOPS will usually contract with one entity which must always be the lead entity.
It was argued before us that no JVC was formed pursuant to the notification of award and accordingly the so-called execution of contract in favour of Medi-Waves by UNOPS was contrary to the aforesaid terms. It was argued on the basis of a ratio laid down in New Horizons Limited & Anr. v. Union of India & Ors. reported in 1995 (1) SCC 478 and Ganpati RV-Talleres Alegria Tract Pvt. Ltd. v. Union of India & Anr. reported in 2009 (1) SCC 589 that the expression Joint Venture is more frequently used in the United States which is distinct separate legal entity.
In the New Horizons case, the Hon'ble Supreme Court was considering as to whether the appellant NHL was a joint venture or not. In discussing the NHL, 28 the Hon'ble Supreme Court considered the expression "joint venture" ought not to have been held as follows:
"The expression "joint venture" is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject-matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. A joint venture can take the form of a corporation wherein two or more persons or companies may join together. A joint venture corporation has been defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking commonly found in oil, chemicals, electronic, atomic fields. Joint venture companies are now being increasingly formed in relation to projects requiring inflow of foreign capital or technical expertise in the fast developing countries. There has been similar growth of joint ventures in our country wherein foreign companies join with Indian counterparts and contribute towards capital and technical know-how for the success of the venture."
It was argued on the basis of the aforesaid decision that it is a joint responsibility of the members forming SA Technology Co. Limited and no 29 contract could have been executed on 7th April, 2011 between UNOPS and M/s. Medi-Waves Inc. During the course of submission a copy of the contract for supply of medical equipment entered into between UNOPS and M/s. Medi-Waves Inc. was made over to us. UNOPS was described as a procurement agent and on behalf of the respondent No.7 and M/s. Medi-Waves Inc. as a lead member of Joint Venture SA Technology Co. Limited. A copy of the contract that was made available to us shows that the said contract was signed on behalf of the UNOPS but the signature of the supplier was absent.
While we may appreciate that on 7th April, 2011 the said JVC could not have been formed immediately upon the notification of award and there is an obligation on the part of the parties to the Joint Venture to fulfil the obligations of the contract and one of the parties could be designated as a lead entity but that does not mean that the JVC would not be incorporated at all. The Respondent No.9 during the course of argument produced a letter dated 30th March, 2011 issued by the other partner of the Joint Venture Shenzhen Aeon Technology Co. Ltd. addressed to the UNOPS which is reproduced hereinbelow:
"To Date: 30th March, 2011
The Chairman,
UNOPS India,
#11,Golf Links, New Delhi
30
The undersigned have informed that out joint venture partner Medi-Waves Inc. having address at B-68, G.T.Karnal Road Ind. Area, Delhi-11033, India has been awarded with a contract to supply 10,696 nos. of Doppler to UNOPS. As per the requirement of ITB the undersigned nominates Medi-Waves Inc. to proceed with the contract with UNOPS. The undersigned will have consented that Medi-Waves Inc. can execute further contract with UNOPS on behalf of the Joint Venture.
Regards For Shenzhen Aeon Technology Co. Ltd."
Mr. Pratap Chatterjee, learned senior Counsel assisting Mr. Mukherjee submitted that it would appear that charade of paper work was going on between the parties to cover up the manner in which such contract was awarded to the Respondent No.9 and not to the Joint Venture, namely, SA Technology Company Limited. The learned Counsel representing the Respondent No.9 has fairly conceded before us that the said JV has not yet been formed. In our view, the contract clearly casts an obligation on the partners of the proposed JV to form a JV as soon as possible after the notification of the award and the parties forming JV would be jointly and severally liable to the UNOPS for the fulfilment of the obligations under the contract. The said JV upon formation would designate one party to act as a lead entity with authority to bind the Joint Venture. 31
Although Shenzhen Aeon Technology Co. Ltd. by its order dated 30th March, 2011 had agreed to nominate Medi-Waves Inc. to proceed with the contract and execute further contract but the fact remains that JV has not been formed. We are mindful of the fact that JV is a legal entity in the nature of partnership where the partners forming the JV entered into an arrangement between themselves to undertake some commercial enterprise jointly by contributing assets and share risks and in effect they are the main persons behind the JV to be incorporated or have been incorporated but still then the incorporation of JV, in our view, is an essential requirement to be fulfilled immediately after the notification of award. We have not been able to follow as to why even after the notification of award dated 7th April, 2011, JV was not formed. In fact, the formation of JV cannot be waived since that would militate against Clause 4.2 of Section 1 to Invitation to Bid. If such an interpretation is given then it would dilute and alter the eligibility criteria itself. The formation of JV cannot be forestalled or deferred on the specious plea that the lead member would take all the responsibility to execute the contract on behalf such JV. If the JV is not formed the continuation of a lead member of such non-existent, JV is meaningless and absurd.
Since now it has emerged that no JV has been formed and the contract has been awarded in favour of the Respondent No.9 on the representation that a JV would be formed upon award of contract. The Respondent No.7 is directed to communicate the same to UNOPS who in turn is expected to enquire and investigate into the matter and if it appears that the representation on the basis 32 of which such contract was awarded suffers from any such misrepresentation, it is expected that UNOPS would immediately cancel the said contract and intiate action in accordance with law against the Respondent No.9. So long the matter is not finally decided by the respondents in accordance with the aforesaid direction, the Respondent No.9 should not be permitted to effect any supply.
In the event it is ultimately found that contract needs to be cancelled, it is desirable to procure supply from the next successful bidder since a fresh tender would not only be time consuming but expensive as well and the public purpose would suffer. It is expected that the Respondent No.7 would take steps in the matter within three weeks from date.
For the reasons stated hereinabove, we dispose of the appeal along with the writ petition on the above terms.
(Pinaki Chandra Ghose, J.) I agree:
(Soumen Sen, J.)