Orissa High Court
Nestor Pharmaceuticals Ltd And Another vs State Of Odisha And Another on 12 April, 2017
Equivalent citations: AIR 2017 ORISSA 133
Author: Vineet Saran
Bench: Vineet Saran
HIGH COURT OF ORISSA : CUTTACK
W.P.(C) No.16897 of 2016
In the matter of an application under Articles 226 and 227 of
the Constitution of India
AFR
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Nestor Pharmaceuticals Ltd
& another ... Petitioners
-Versus-
State of Odisha & another ... Opp. Parties
For Petitioners : Mr. Asok Mohanty, Sr. Advocate
and
M/s. B. Jena & A. Naik
For Opp. Parties : M/s. B.P. Tripathy, R. Achary,
T. Barik, A. Pati & S. Hidayutullah
[For O.P. No.2]
Mr. B.P. Pradhan, A.G.A.
[For O.P. No.1]
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P R E S E N T:
THE HONOURABLE THE CHIEF JUSTICE MR. VINEET SARAN
AND
THE HONOURABLE SHRI JUSTICE K.R. MOHAPATRA
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Decided on : 12.04.2017
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Vineet Saran, CJ. Opposite party-The Odisha State Medical
Corporation Limited (for short, 'Corporation') published a
notice on 27.05.2016 inviting e-tenders from the bidders for
"Supply of drugs and medical consumables (Group-I) for the
year 2016-17 on rate contract basis". The last date for
submission of tender was initially fixed for 11.07.2016, which
was extended up to 29.07.2016. In terms of Paragraph-6.14 of
the tender document, prior to the filing of the tenders, the
prospective bidders were invited for a pre-bid meeting, which
was held on 04.06.2016. The petitioner-Company submitted
its bid on 25.07.2016 for 31 items for supply of drugs and
medical consumables. Then by order dated 15.09.2016
passed by the Tender Evaluation Committee, the bid
document of the petitioner was rejected on the ground that
"original EMD instrument in shape of BG not
furnished/uploaded". Then on 21.09.2016, the petitioner
made a representation to opposite party no.2-Corporation,
which was not considered, and on 22.09.2016, the financial
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bids of the other qualified bidders were opened. On the next
very day, i.e. on 23.09.2016, the petitioner-Company filed this
writ petition challenging the rejection of its bid document vide
order dated 15.09.2016 passed by the Tender Evaluation
Committee and for directing the opposite party no.2 to accept
the bid of the petitioner with regard to 31 items, for which it
had participated.
2. We have heard Shri Asok Mohanty, learned Senior
Counsel appearing along with Shri A. Naik, learned counsel
for the petitioner; as well as Shri B.P. Tripathy, learned
counsel for the contesting opposite party no.2-Corporation
and also Shri B.P. Pradhan, learned Addl. Govt. Advocate for
the State-pro forma opposite party no.1. Pleadings between
the contesting parties have been exchanged and with consent
of learned counsel for the parties, we are disposing of the writ
petition at the admission stage.
3. The undisputed facts of the case are that clause
6.5 of the tender document relating to 'Payment for e-tender',
provided for the Bank Guarantee (BG) format for furnishing
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Earnest Money Deposit (EMD) which was to be submitted in
the format provided under Annexure-IV to the document or
else it was liable to be rejected.
4. The dispute in the present petition is with regard to
the nature of the Bank Guarantee for an amount of
Rs.96,84,000/- which was submitted by the petitioner, which
was not in the format of Annexure-IV but was as per the
Structured Financial Messaging System (SFMS).
5. It is not disputed that during the pre-bid meeting
held on 04.06.2016, a clarification was sought by a
prospective bidder, to which the Corporation gave a reply,
because of which, learned counsel for the petitioner contends
that the petitioner was required to, or could have submitted
the Bank Guarantee through Structured Financial Messaging
System (for short, 'SFMS'). Learned counsel for the petitioner
submits that because of such clarification, the petitioner had
actually submitted Bank Guarantee through SFMS, regarding
which the details had been given in the clarification
submitted by the Corporation.
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6. The relevant query and the clarification given,
being vital for the decision of this case, are reproduced herein
below:
Queries raised by the Clarifications/amendments in
prospective bidders response to the queries
Clear Explanation:
What will be minimum validity of
the Bank Guarantee for EMD EMD in shape of Bank Guarantee
shall be valid up to 27.05.2017.
Bank Guarantee from Structured
Financial Messaging System
(SFMS) enabled bank shall only be
accepted.
The Bank Details for generating
Bank Guarantee is as follows:
IFS Code: UBIN0538086
Branch Code: 538086
7. The contention of the learned counsel for the
petitioner is that besides responding to the query made,
which was relating to the minimum validity of the Bank
Guarantee to be furnished, the Corporation had further
clarified that the Bank Guarantee was to be from SFMS
enabled bank only and the bank details for generating such
Bank Guarantee was also provided. The submission, thus, is
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that it would clearly mean that the SFMS mode of furnishing
Bank Guarantee was an acceptable form.
8. Learned counsel has further relied on the
instructions issued by the Ministry of Finance vide
communication dated 17.07.2012 to all the Chief Executive
Officers of the Public Sector Banks, which provided that no
Public Sector Bank can issue any Letter of Credit (LC) or
Bank Guarantee (BG) after 01.08.2012 except through SFMS.
Learned counsel has thus submitted that in terms of the
aforesaid instructions issued by the Ministry of Finance to all
the Public Sector Banks, and also in terms of the
aforementioned clarification issued by the Corporation in
response to the query raised by the prospective bidder, the
position stood clear that SFMS mode of providing Bank
Guarantee was acceptable or rather required to be accepted.
9. Learned counsel for the petitioners has further
submitted that the Bank Guarantee furnished by the
petitioner, having been so submitted in a mode which was
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duly acceptable in banking terms, and also so directed by the
Ministry of Finance vide its communication dated 17.07.2012,
ought not to have been rejected as there is no evidence to the
effect that such Bank Guarantee so furnished by the
petitioner was not an acceptable or valid guarantee.
10. Shri Mohanty, learned Senior Counsel has also
relied upon the communication of the Corporation dated
12.09.2016whereby the Corporation has itself sought clarification from the Assistant General Manager of Union Bank of India as to whether such Bank Guarantee through SFMS, as furnished by the petitioner, would be acceptable or not. According to the petitioner, the very fact that such clarification was sought by the Corporation would mean that after having issued the clarification in this regard in the pre- bid meeting, the Corporation had prima facie been of the view that SFMS mode of providing Bank Guarantee was in fact acceptable, or else they would have outright rejected the same.
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11. In support of his submission that the Corporation could have relaxed the procedural conditions, which were not essential conditions of the bid documents, especially where it would be financially beneficial for the Corporation, learned counsel for the petitioner has relied on the following decisions:
(i) M/s. Poddar Steel Corporation vs. M/s.
Ganesh Engineering Works and others, (1991) 3 SCC 273;
(ii) Rashmi Metaliks Ltd. & Anr. Vs. Kolkata Metropolitan Development Authority & Ors. 2013 (6) Supreme 521;
(iii) B.S.N. Joshi & Sons Ltd. vs. Nair Coal Services Ltd. and others (2006) 11 SCC 548;
12. Per contra, Shri B.P. Tripathy, learned counsel appearing for the opposite party-Corporation has contended that clause 6.5 clearly provides that "Bank Guarantee submitted in format other than Annexure-IV will be liable for rejection". It is contended that such being the condition, coupled with the fact that unless there was proper 9 amendment in the technical specifications as well as terms and conditions of the tender made after the pre-bid meeting, the Bank Guarantee submitted in any form other than Annexure-IV, could not have been accepted. As regards pre- bid clarification given to the query made, which has been reproduced herein above, learned counsel has contended that though after answering the query relating to the minimum validity period of the Bank Guarantee, further clarification was not required to be given. However, even the further clarification which was given, only provided that Bank Guarantee from SFMS enabled bank was to be accepted, which, according to him, would mean that the normal Bank Guarantee, as provided under Annexure-IV, was to be given only from a bank which was SFMS enabled. He has, however, not been able to explain as to why the bank details for generating Bank Guarantee were also given in the clarification provided by the Corporation.
13. Shri Tripathy has, however, submitted that in response to the query made by the Corporation from the bank 10 vide communication dated 12.09.2016, the bank had responded on 14.09.2016 stating that the original Bank Guarantee would be required for invoking the Bank Guarantee, and thus relying on the said communication the Corporation rejected the tender of the petitioner.
14. We have heard learned counsel for the parties at length and carefully perused the record.
15. What is to be considered by this Court is whether the petitioner-Company was genuinely misguided by the clarification issued by the Corporation in its pre-bid meeting held on 04.06.2016.
16. By having specifically stated that the Bank Guarantees from SFMS enabled bank were to be accepted and thereafter also giving bank details for generating such Bank Guarantee, what we find is that the Corporation was open to accept the Bank Guarantees furnished in the SFMS formant also. If the same was not so, the Corporation would not have sought for clarification from the bank vide its communication dated 12.09.2016. Even otherwise, the Bank Guarantee in 11 SFMS format is an acceptable mode, as even the Ministry of Finance had directed all the Public Sector Banks not to issue Bank Guarantees after 01.08.2012 except through SFMS. It may be true that even after 01.08.2012, banks may be issuing Bank Guarantees in formats other than SFMS format, but the very fact that the Ministry of Finance has issued specific instructions with regard to Bank Guarantee to be issued in SFMS format would necessarily make it an acceptable mode, coupled with the fact that while giving its clarification, the Corporation had given the bank details for issuing Bank Guarantee in SFMS format. Thus, the Bank Guarantee, in SFMS format as submitted by the petitioner cannot be faulted and be a reason for rejection of the bid of the petitioner on such ground.
17. The Apex Court, in the case of M/s. Poddar Steel Corporation vs. M/s. Ganesh Engineering Works and others, (1991) 3 SCC 273 : AIR 1991 SC 1579, has held that in a tender notice, the requirements can be classified into two categories, namely, those which lay down the essential 12 conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition that which may be only procedural.
While considering the case of M/s. Poddar Steel Corporation (supra), the Apex Court, in paragraph-6 of the said judgment, has held as under:
"It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank clause No.6 of the tender notice was not obeyed literally, but the question is as to whether the said non- compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases."13
18. Further, the Apex Court in the case of Rashmi Metaliks Ltd. vs. Kolkata Metropolitan Development Authority, 2013 (6) Supreme 521, while dealing with a case where the requirement of the tender document was that the tenderer should file the latest Income Tax Return which had not been filed, held that the Income Tax Return would have assumed the character of an essential term if one of the qualifications was either the gross income or the net income on which tax was attracted. In paragraph-13 of the said judgment, the Apex Court observed that such a clause is not an essential element or ingredient or concomitant of the subject NIT. In such facts, it was held that -
"....the filing of the latest Income Tax Return was a collateral term, and accordingly, the Tendering Authority ought to have brought this discrepancy to the notice of the Appellant- company and if even thereafter no rectification had been carried out the position may have been appreciable different...."
19. Further, the Apex Court in the case of B.S.N. Joshi & Sons Ltd. vs. Nair Coal Services Ltd. and others (2006) 14 11 SCC 548 has held that while rejecting a tender for reasons of non-compliance of terms which are not essential terms of contract, then where huge public money is involved, public sector undertakings may keep the principles of good corporate governance in mind and accept such tender which is economically beneficial to it. The relevant paragraph-69 of the said judgment is reproduced hereinbelow:
"69. While saying so, however, we would like to observe that having regard to the fact that huge public money is involved, a public sector undertaking in view of the principles of good corporate governance may accept such tenders which are economically beneficial to it. It may be true that essential terms of contract were required to be fulfilled. If a party failed and/or neglected to comply with the requisite conditions which were essential for consideration of its case by the employer, it cannot supply the details at a later stage or quote a lower rate upon ascertaining the rate quoted by others. Whether an employer has power of relaxation must be found out not only from the terms of the notice inviting tender but also the general practice prevailing in India. ........."
20. In the present case, learned counsel for the petitioners has submitted that the financial bids of all other 15 bidders are known and according to learned counsel, the bid of the petitioner-Company, which has yet not been opened, is substantially lower than the lowest bid submitted by other bidders for at least 6 to 8 of the items for which the petitioner-Company has submitted its bid, and if the bid of the petitioner is allowed to be rejected, the opposite party- Corporation would suffer a loss of nearly Rs.2.00 crores.
21. Applying the aforesaid principles of law as laid down by the Apex Court to the facts of the present case, we are of the opinion that so long as the Bank Guarantee submitted by the petitioner-Company was in the format, which was an acceptable one, as per the clarification issued by the Corporation itself in the pre-bid meeting held on 04.06.2016 and also as per the instructions of the Ministry of Finance issued on 17.07.2102, the deviation, if any, from the tender conditions could not be classified as that of an essential condition of the tender document, and is only to be treated as merely ancillary or subsidiary with the main object to be achieved by the condition.
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22. We are, thus, of the opinion that in the present case, the condition for providing the Bank Guarantee in a particular format was not essential, so long as the Bank Guarantee so furnished was a valid Bank Guarantee, and furnished in terms of the clarification issued by the Corporation in the pre-bid meeting, and the same was also in terms of the instructions issued by the Ministry of Finance dated 17.07.2012. As such, we are of the opinion that the impugned order dated 15.09.2016 passed by the Tender Evaluation Committee, rejecting the tender of the petitioner, is liable to be quashed.
23. Accordingly, for the foregoing reasons, the writ petition stands allowed, the order dated 15.09.2016 passed by the Tender Evaluation Committee of the opposite party- Corporation is quashed. The financial bid of the petitioner- Company, for the items for which the petitioner-Company had submitted its bid, shall be opened and dealt along with the financial bids of other bidders for such items. In case the petitioner-Company is found to be the lowest bidder for the 17 items in question, the opposite party-Corporation shall ensure that the contract for supply of such drugs and medical consumables, henceforth, be given to the petitioner-Company.
It is further clarified that in case certain supplies, for the items for which the petitioner-Company is found to be the lowest bidder, have already been made by any other party, the same shall be treated as proper supply but no further orders shall be given to such other party for the items for which the petitioner-company is found to be the lowest bidder and the contract for the remaining period for supply of such items shall be given in favour of the petitioner-Company.
No order as to costs.
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( VINEET SARAN ) CHIEF JUSTICE ..................................
( K.R. MOHAPATRA ) JUDGE The High Court of Orissa, Cuttack Dated the 12th April, 2017/PCP/SKJ