Delhi High Court - Orders
Aan Engineering Industries Limited vs Union Of India & Ors on 1 June, 2022
Author: Vipin Sanghi
Bench: Sachin Datta, Vipin Sanghi
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 9004/2022 and C.M. Nos.27129/2022 & 27131/2022
AAN ENGINEERING INDUSTRIES LIMITED ..... Petitioner
Through: Mr.Anand Shankar Jha and
Ms.Meenakshi S. Devgan, Advs.
Versus
UNION OF INDIA & ORS. ..... Respondents
Through: Mr.Chetan Sharma, ASG with
Mr.Vikram Jetly, CGSC, Ms.Shreya
Jetly and Mr.Amit Gupta, Advs.
CORAM:
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE SACHIN DATTA
ORDER
% 01.06.2022 C.M. No. 27130/2022 (Exemption) Exemption allowed, subject to all just exceptions. The application stands disposed of.
W.P.(C) 9004/2022 and C.M. Nos.27129/2022 & 27131/2022
1. The present petition has been preferred seeking the following reliefs:-
"(a) Pass a writ in the nature of mandamus or any other appropriate order or direction to quash Letter dated 24.05.2022 issued by Respondent No. 2 holding the Petitioner to be Non-Compliant to RFP Parameters during DGQA Technical Evaluation; and
(b) Pass a writ in the nature of mandamus or any other appropriate order or direction to Respondent No. 2 and 3 to allow the Petitioner to participate in User Trials, as per Clause 10(b) read with Appendix C-1 to C-4 of RFP dated 11.01.2018; and
(c) Pass a writ, order or direction in the nature of mandamus, directing Respondent No. 2 and 4 to take re-trial of Drop Test and Hermatical Sealing Test of electronic fuze samples of all shortlisted bidders at a neutral common Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 1 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58 location; or
(d) Pass a writ, order or direction in the nature of mandamus or any other writ, order or direction, thereby to Quash Letters dated 24.05.2022 issued by Respondent No. 4, in so far as it holds that crack at nose portion of sample fuze during Drop Test amounts to violation of RFP parameters AND refused to accept fresh/substituted sample for Hermetical Sealing Test; or"
2. The background in which the present petition has been filed is that a Request For Proposal (RFP) dated 11.01.2018 was issued by the Directorate of General of Ordinance Services (DG-OS) for procurement of 4,99,400 Electronic Fuzes for Artillery Guns under the "Manufacture of Ammunition for Indian Army by Private Indian Industry" initiative of the Government of India.
3. The original RFP was issued on 25.03.2017. Vide corrigendum No. 8 dated 11.01.2018, the quantity was reduced (from 6,00,000 to 4,99,400) and public sector undertakings were also allowed to participate.
4. The petitioner has referred to certain previous litigations at different stages of the tender process, and sought to contend that the respondent has been seeking to disqualify/reject the petitioner since the outset of the tender process, and having failed to do so on account of intervention of this Court on earlier occasion, has issued the impugned letter dated 24.05.2022 declaring that the petitioner firm is non-compliant with the technical requirements of the RFP.
5. The reasons for declaring the petitioner non-compliant with the RFP parameters during the technical evaluation conducted by DGQA between 07.03.2022 to 10.05.2022 have been duly conveyed to the petitioner vide communication dated 24.05.2022 (Annexure P-1 Colly.). In essence, the petitioner's disqualification is on account of the outcome of the "Hermatical Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 2 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58 Sealing Test" and "Fuze Drop Test". Relevant portions of the communications dated 24.05.2022 is reproduced hereunder:-
" QA3A329/Proc
The General Manager
M/s AAN Engineering Industries Limited, GURUGRAM-122 001 PROCUREMENT OF ELECTRONIC FUZES FOR 105mm, 130mm & 155 mm ARTY AMN AND FUZE HAND SETTER BY PRIVATE INDIAN INDUSTRY UNDER MAKE IN INDIA: COMMENTS OF
1. ........
2. Emails of M/s AAN Inds on observations in Hermetical Sealing Test of one container recorded by Board-V was "Water drops were found up to 3rd thread of cap / container and water drops were observed at the base of the Fuze also ". The Firm is willing to re-offer a set of 05 Fuze containers to DGQA for Hermetical Sealing Test and also requested that the above observation on the said AAN Fuze samples should not have any technical bearing on DGQA Technical Evaluation Report.
CQA(A) Comments. The decision on re-offering of Fuze container samples for Hermetical Sealing test does not come under the purview of this Controllerate. The DGQA Technical Evaluation had been conducted on the directions of MGS/EM Br. The decision on re-evaluation of the Hermetical Sealing test after improvement rests with MGS/EM Br.
3. Based on the Hermetical Sealing Test of one container recorded by Board-V, the effect of this Fuze in technical bearing have been incorporated in the DGQA Technical Evaluation Report accordingly.
......"
" QA3A329/Proc
The General Manager
M/s AAN Engineering Industries Limited, GURUGRAM-122 001 PROCUREMENT OF ELECTRONIC FUZES FOR 105mm, 130mm & 155 mm ARTY AMN AND FUZE HAND SETTER BY PRIVATE INDIAN INDUSTRY UNDER MAKE IN INDIA: COMMENTS OF Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 3 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58
1. ........
2. Emails of M/s AAN Inds on the issue (i.e. crack on nose portion observed in four Fuze samples during Drop test) at para 1 above of Electronic Fuzes have been perused and analysed as per supporting Technical document and in accordance with MIL-STD 331C. Comments are as under:-
The Drop Tested Fuzes observation "Crack at Nose portion observed in 12P (130mm Proximity Fuze), 12P(130mm PD Fuze) 12P(155mm PD Fuze) and 12P(155mm Time Fuze)". Vide your letters above, it has been explained that at the completion of this test, the Fuze shall be safe for transportation, storage, handling use in accordance with clause 4.6.2.1 (a) of the general requirements of MIL-STD 331 C. The fuze does not have to be operable. In addition, the said fuze is safe wrt removing of explosive components inside the fuze. Hence, Fuze Sample No. 12P (130mm Proximity Fuze), 12P(130mm PD Fuze), 12P(155mm PD Fuze) and 12P(155mm Time Fuze) are safe for safety firing applications.
"Safe for Use" as per Para 4.6.2.1 (a) of MIL STD 331 C is reproduced below:-
The fuze shall maintain its safety features in a condition which will not create a hazard for personnel or cause any subsequent action which will compromise the safety conditions required during handling, transportation, storage and use. Fuze use includes installation and firing or release of the weapon where damage or irregularity does not prevent assembly of the fuze to the weapon or loading.
CQA(A) Comments. The justification for Fuze samples given by M/s AAN is not the correct interpretion of para 4.6.2.1(a) of MIL-STD 331C since the original configuration of Fuzes have changed and fuzes have developed cracks post Drop test. These defective fuzes if fired will experience high firing stress (pressure in the range of389 to 425 MPa) inside the barrel and may result in major defect/accident of the weapon.
3. Accordingly, the decision not to fire these Fuze samples has been intimated to concerned BOO by CQA(A) alongwith HQ DQA (A) vide CQA (A) Pune letterNo.QA3A329/Proc dated 26 Mar 2022. The effect of these Fuzes on technical bearing have been incorporated in the DGQA Technical Evaluation Report accordingly.
...."
6. The petitioner has sought to dispute/contest the findings recorded in the aforementioned communications and has sought to assail the view taken by Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 4 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58 the tender evaluating authorities on the aforesaid technical aspects. It is also suggested that this Court may appoint any retired DGQA to appraise/re-appraise as to whether the petitioner meets the prescribed technical criteria.
7. Learned ASG who appears for the respondent while refuting the contentions of the petitioner has drawn attention to the following averments in the writ petition:-
"12. The refusal to submit and substitute samples for Hermetical Sealing Test amounts to excessive emphasis on technicality. Hermetical Sealing Test requires the electronic fuze to be kept in a box which shall be immersed in water. Sometime water drops come due to the manner in which packing is sealed by the person at site. Further, the Petitioner had also mentioned that they are ready and willing to provide/ substitute other samples and also make design changes to arrest the problem of water droplets found on the fuze bottom."
8. It is contended by the learned ASG that the above averment itself demonstrates that the petitioner could not meet the prescribed parameters and that is why it proposed to substitute the samples and also make designs changes to arrest the problem of water droplets found on the fuze bottom.
9. We have heard learned counsel for the parties and have given our thoughtful consideration to the matter.
10. The scope of judicial review in such matters is no longer res integra. It is well settled that this court will not sit in appeal over expert evaluation by the tender evaluating authorities, particularly when the technical evaluation has been carried out by a highly qualified technical experts, as in the present case. It is also well settled that the employer of a project is the best person to understand and appreciate its requirement and interpret its documents. In this regard reference may be had to the dicta laid down in Agmatel India Pvt. Ltd.
Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 5 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58Vs. Resoursys Telecom and Ors., 2022 SCC OnLine Sc 113 where the Supreme Court has reiterated as follows:-
"Interpretation of Tender Document: Relevant Principles
38. The scope of judicial review in contractual matters, and particularly in relation to the process of interpretation of tender document, has been the subject matter of discussion in various decisions of this Court. We need not multiply the authorities on the subject, as suffice it would be refer to the 3-Judge Bench decision of this Court in Galaxy Transport Agency (supra) wherein, among others, the said decision in Afcons Infrastructure Limited (supra) has also been considered; and this Court has disapproved the interference by the High Court in the interpretation by the tender inviting authority of the eligibility term relating to the category of vehicles required to be held by the bidders, in the tender floated for supply of vehicles for the carriage of troops and equipment. This Court referred to various decisions on the subject and stated the legal principles as follows: -
"14. In a series of judgments, this Court has held that the authority that authors the tender document is the best person to understand and appreciate its requirements, and thus, its interpretation should not be second-guessed by a court in judicial review proceedings. In Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC 818, this Court held:
"15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given."
(page 825) (emphasis supplied)
15. In the judgment in Bharat Coking Coal Ltd. v. AMR Dev Prabha 2020 SCC OnLine SC 335, under the heading "Deference to authority's interpretation", this Court stated:
"51. Lastly, we deem it necessary to deal with another fundamental problem. It is obvious that Respondent No. 1 seeks to only enforce terms of the NIT. Inherent in such exercise is interpretation of contractual terms. However, it must be noted that judicial interpretation of contracts in the sphere of commerce stands on a distinct footing than while interpreting statutes.Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 6 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58
52. In the present facts, it is clear that BCCL and India have laid recourse to Clauses of the NIT, whether it be to justify condonation of delay of Respondent No. 6 in submitting performance bank guarantees or their decision to resume auction on grounds of technical failure. BCCL having authored these documents, is better placed to appreciate their requirements and interpret them. (Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC 818)
53. The High Court ought to have deferred to this understanding, unless it was patently perverse or mala fide. Given how BCCL's interpretation of these clauses was plausible and not absurd, solely differences in opinion of contractual interpretation ought not to have been grounds for the High Court to come to a finding that the appellant committed illegality." (emphasis supplied)
16. Further, in the recent judgment in Silppi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133, this Court held as follows:
"20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the state instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case." (emphasis supplied)
17. In accordance with these judgments and noting that the interpretation of the tendering authority in this case cannot be said to be a perverse one, the Division Bench ought not to have interfered with it by giving its own interpretation and not giving proper credence to the word "both" appearing in Condition No. 31 of the N.I.T. For this reason, the Division Bench's conclusion that JK Roadways was wrongly declared to be ineligible, is set aside.
18. Insofar as Condition No. 27 of the N.I.T. prescribing work experience of at least 5 years of not less than the value of Rs. 2 crores is concerned, suffice it to say that the expert body, being the Tender Opening Committee, consisting of four members, clearly found that this eligibility condition had been satisfied by the Appellant before us. Without therefore going into the assessment of the documents that have been supplied to this Court, it is well settled that unless arbitrariness or mala fide on the part of the tendering authority is alleged, the expert evaluation of Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 7 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58 a particular tender, particularly when it comes to technical evaluation, is not to be second-guessed by a writ court. Thus, in Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, this Court noted:
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
or Whether the process adopted or decision made is so arbitrary and irrational that the court can say:"the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";
(ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action." (pages 531-532) (emphasis supplied)
19. Similarly, in Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272, this Court stated as follows:
"26. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 8 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58 common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinised by the technical experts and sometimes third-party assistance from those unconnected with the owner's organisation is taken. This ensures objectivity. Bidder's expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or mala fide or procedure adopted is meant to favour one. The decision-making process should clearly show that the said maladies are kept at bay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints." (page 288)
20. This being the case, we are unable to fathom how the Division Bench, on its own appraisal, arrived at the conclusion that the Appellant held work experience of only 1 year, substituting the appraisal of the expert fourmember Tender Opening Committee with its own." (Underlining emphasis in the original; emphasis in bold supplied)
39. The above-mentioned statements of law make it amply clear that the author of the tender document is taken to be the best person to understand and appreciate its requirements; and if its interpretation is manifestly in consonance with the language of the tender document or subserving the purchase of the tender, the Court would prefer to keep restraint. Further to that, the technical evaluation or comparison by the Court is impermissible; and even if the interpretation given to the tender document by the person inviting offers is not as such acceptable to the Constitutional Court, that, by itself, would not be a reason for interfering with the interpretation given.
(emphasis supplied)"
Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 9 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:5811. The Supreme Court in Afcons Infrastructure Ltd. Vs. Nagpur Metrol Rail Corporation Ltd. and Anr., (2016) 16 SCC 818has held as follows:-
"15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given."
12. We may hasten to add that the scope of judicial review in tenders relating to defence procurement in highly specialised requirements, is even narrower than in the cases of ordinary commercial contracts.
13. We also find merit in the submission of the learned ASG that the very fact that the petitioner offered to provide/substitute its samples and also make design changes to arrest the problem of water droplets found on the fuze bottom, corroborates the view taken by the tender evaluating authorities.
14. We are also not inclined to accept the petitioner's contention that some retired DGQA be entrusted with the task of appraising/re-appraising the petitioner's technical evaluation.There is neither any factual nor legal justification to accede to such a request. The task of technical evaluation cannot be outsourced or delegated to a third party in the manner suggested by the petitioner. Even otherwise we find that the petitioner has not been able to establish any infirmity in the conclusion arrived at by the tender evaluating authorities, much less has it been able to establish any arbitrariness in the decision making process warranting any interference under Article 226 of the Constitution of India.
Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 10 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:5815. In the circumstances, the present writ petition is dismissed. However, no orders as to costs.
VIPIN SANGHI, ACJ SACHIN DATTA, J JUNE 1, 2022/rb Signature Not Verified Digitally Signed W.P.(C) 9004/2022 Page 11 of 11 By:RADHA BISHT Signing Date:03.06.2022 18:56:58