Uttarakhand High Court
Ms Spx Dry Cooling Technologies Belgium vs Bharat Heavy Electricals Ltd. And ... on 25 October, 2016
Equivalent citations: AIR 2017 UTTARAKHAND 31
Author: Sudhanshu Dhulia
Bench: Sudhanshu Dhulia
(Reserved Judgment)
Reserved on:- 21.10.2016
Delivered on:- 25.10.2016
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Writ Petition (M/S) No.2695 of 2016
M/s Spx Dry Cooling Technologies
Belgium .........Petitioner
Versus
Bharat Heavy Electricals Limited
& another ........Respondents
Present:- Mr. Sunil Gupta, Mr. Sharad Sharma, Senior Advocates
assisted by Ms. Indu Sharma, Advocate for the
petitioner.
Mr. V.K. Kohli, Senior Advocate assisted by Mr.
Jitendra Chaudhary and Ms. Rajni Supyal, Advocates
for the respondents.
Hon'ble Sudhanshu Dhulia, J. (Oral)
M/s Spx Dry Cooling Technologies Belgium is a company (from hereinafter referred to as "the petitioner"), is in the dry cooling business. The respondents/Bharat Heavy Electricals Limited (from hereinafter referred to as "BHEL"), is a public sector corporation, at Ranipur, Haridwar, Uttarakhand. As per the pleadings in the petition, BHEL in anticipation of a contract of 660MW of North Karanpura Power Project of NTPC sought Expression of Interest (in short "EOI") for a technical collaboration agreement for "Air Cooled Condenser" (from hereinafter referred to as "ACC") with the petitioner on 27.04.2013. Admittedly, at this stage BHEL was having multiple rounds of discussions with various prospective technology suppliers for ACC, 2 including the present petitioner. On 27.04.2013, it invited EOI from all such possible suppliers of technology, including the petitioner. Between 27.04.2013 to 17.01.2014, according to the petitioner, there were several rounds of discussions between the petitioner and the respondents, as regarding the collaboration on this particular technology, which is ACC. On 28.02.2014, BHEL's bid was successful as regarding the power project and it was awarded the North Karanpura Power Project by NTPC. Between 28.06.2014 to 02.07.2014, the first tender process started, which has been referred to by the petitioner as V-1 process or Version-1. In this process, the prospective suppliers of technology i.e., ACC were to do the following:- supply + erection & commissioning but it did not include transfer of technology. Admittedly, thereafter on 02.07.2014, this V-1 was dropped citing unavoidable circumstances but according to the petitioner, the project V-1 was dropped as none of the prospective bidders including the petitioner showed any interest in the mere supply of technology without there being a long term interest and collaboration with BHEL, which included the transfer of technology.
2. On 08.12.2014, the second tender process, which is referred to as Version-2 or V-2 process starts. The scope of the tender now includes technology collaboration agreement or TCA + Supply + Turnkey Erection & Commissioning. Petitioner submitted a variant bid for only TCA supply + supervision of erection & commissioning i.e., excluding Turnkey basis. Thereafter, there seems to be a re-tendering of the process where the scope of tender was TCA + Supply + Supervision of Erection & Commissioning in which three companies participated, including the petitioner. On 3 19.10.2015 the technical bid and on 07.05.2016 the financial bid were opened and the petitioner being in L-1 at Rs.995/- Crores was invited for negotiations where petitioner gave his final offer at Rs.920/- Crores.
3. According to the petitioner, thereafter, over six rounds of negotiations were held between him and the respondents at Haridwar and Delhi, but nothing was finalised. On 01.09.2016, BHEL published on its website new proposal inviting fresh tender bids for the work called as "Air Cooled Condenser Package for 3 X 660MW North Karanpura Project", which the BHEL calls as Version-3 or V-3. The scope of the tender now is Supply + Supervision of Erection & Commissioning with no TCA or transfer of Technology. The petitioner soon lodged a protest/representation with BHEL on grounds that the petitioner and BHEL were already moving ahead towards finalisation of contract, considering that the petitioner was L-1 and that it met all other standards and it was therefore only logical that this should have culminated in the signing of the contract and it is extremely unfair on part of BHEL to have backed out of the negotiations. The representation dated 15.09.2016 is annexed as Annexure No.13 to the writ petition. In their representation dated 15.09.2016, the petitioner referred to an E-mail of BHEL dated 02.09.2016 wherein the reasons for dropping V-2 by BHEL were said to be as under:-
"Please note that despite several rounds of negotiations at Haridwar & Delhi and sufficient opportunities given to you, your final discounted prices were much higher than our expectations."
4. The petitioner in its representation stressed that they are very much disturbed by the unfair treatment metted out to them at the hands of BHEL and 4 the reasons why they say so is because in the V-2 process, BHEL gave no prices expectation, whereas in V- 1 the estimated value of the project was 1,000/- Crores and the present V-2 version which included transfer of technology, which was not there earlier in V-1, the price expectation can only be higher than 1,000/- Crores, and since the final price of the petitioner was 920/- Crores, the contention of BHEL that they are not going ahead with the petitioner because the price is higher is not a justifiable reason.
5. The petitioner has further accused BHEL that for the past two years or so, all they were doing in their negotiations with the petitioner was nothing but finding out the best possible price and the technology for themselves. The implication of the petitioner would be that the past negotiations, discussions, etc between the two were nothing but a play on part of BHEL to get technological secrets and knowhow from the petitioner. BHEL was never actually serious in entering into a business relationship with the petitioner and this treatment at the hands of a public sector undertaking, which is an instrumentality of the State is particularly deplorable. There were further allegations in the representation that when BHEL had dropped V-1, it ought not to have opened the sealed bid tender and it ought to have been returned to the petitioner untampered, which has not been done. It has further been alleged that BHEL has used its drawings and technical knowhow during the negotiations in V-1 and V-
2. This allegation is also linked by the petitioner from the fact that now finally in V-3 version, which has now been published they have again reverted back to a V-1 version 5 which is without transfer of technology. The prayers, therefore, being sought from this Court are as follows:-
"(i) Issue a writ, order or direction, in the nature of certiorari quashing the impugned orders publication dated 01.09.2016 as well as impugned order dated 26.09.2016 issued by respondent no. 2 annexed as Annexure Nos. 10 and 14 to the writ petition.
(ii) Issue a writ, order or direction, in the nature of mandamus commanding the respondents to execute the contract as concluded in favour of the petitioner by its placement as L-1."
6. In this case, counter affidavit and rejoinder affidavit have been exchanged.
7. At the time of filing of the present writ petition, a learned Single Judge of this Court had passed the following interim order, which reads as under:-
"Mr. Sharad Sharma, Senior Advocate, assisted by Mrs. Indu Sharma, Advocate for the petitioner.
Mr. V.K. Kohli, Senior Advocate assisted by Mr. I.P. Kohli, Advocate for the respondents. Heard learned counsel for the parties. Counter affidavit filed by the respondents is accepted on record.
List on 20.10.2016 in Daily Cause List. Rejoinder affidavit, if any, be filed by 17.10.2016.
In the meantime, it is provided that the respondents may proceed further in pursuance of the advertisement dated 01.09.2016, but they should not finalize the bid till 20.10.2016.
The petitioner is also permitted to apply. In case, the petitioner applies in pursuance of the advertisement dated 01.09.2016, this will not take away its right to challenge the orders impugned.
Interim relief application stands disposed of. Let a certified copy of this order be issued today itself."6
8. The last date of submission of the bid was 20.10.2016. According to the petitioner as well as respondents, five bids have been submitted, which includes the fresh bid submitted in the present V-3 process by the petitioner himself.
9. The case of the respondents/BHEL before this Court is that the petition is pre-mature. No cause of action in law has actually arisen. Petitioner cannot claim any right vested or otherwise which may compel BHEL to enter into a contract with the petitioner. What had happened earlier was only an invitation of an offer and the submission of an offer by the bidders, including the petitioner. This bid has not been accepted. There has been no "contract", as of now, which is again an admitted position both by the petitioner as well as respondents and thereafter, BHEL relies upon condition 22, which says that BHEL has a right to reject any or all the quotations without assigning any reasons thereof.
10. It was further submitted by Sri V.K. Kohli, Senior Counsel for BHEL that BHEL with a view to explore business opportunities in the area of Air Cooled Condenser was looking for a possible technological collaboration with such companies who had expertise in this technology and with motive it had invited Expression of Interest (EOI) in May, 2013 with petitioner as well as from other similar companies having this expertise. In their counter affidavit BHEL has given reasons that they had made their assessment as to the overall cost of the project but it is possible that their estimates may be wrong earlier. The learned senior counsel would further submit that initially the V-1 project was for supply of 7 turnkey erection & commissioning and technology collaboration agreement. In the V-2 project, it was modified to transfer collaboration agreement TCA + supply TCA and supervision of erection and commissioning. In other words, turnkey basis was excluded and as to the "erection and commissioning", only supervision was to be done by the bidder. This itself would reduce the cost substantially. In their counter affidavit, however, BHEL has not disclosed as to what is its estimated cost, nor was it spelled out by the senior counsel. However, the Senior Counsel for the respondents Mr. V.K. Kohli on his own submitted before this Court that their estimate in the V-3 version is that the cost should be substantially lower than what has been quoted by the petitioner, and it is for this reason that they are going with the Version-3.
11. Definitely, no right has accrued to the petitioner as yet. Therefore, assuming that there has been a rejection of the bid at the hands of the BHEL, petitioner cannot challenge this action of BHEL on the basis of any accrued right.
12. Learned Senior Counsel for the petitioner Mr. Sunil Gupta very fairly admits though that this is the position, but his case is not based on any accrued rights. He is only on the conduct of BHEL, which is an instrumentality of the State and considering the long negotiations it had done with BHEL where admitted position is that he had qualified the technical as well as the financial bid and was L-1 and after the long series of negotiations with the respondents, their prices which have been quoted is also 920/- Crores which is much less than the estimated cost (of Version-1) of Rs.1,000/-
8Crores, there is no plausible reason why BHEL should not have awarded the contract in his favour. Much emphasis has also been laid down on the fact that BHEL is not a private company and it is a public sector company and therefore it has to set high standards of fairness, transparency, goodwill, etc.
13. In order to further establish his case of BHEL being unfair and arbitrary, the learned senior counsel for the petitioner would argue that the sole ground for rejection of his bid is that it does not match upto the expectation of the respondents as regarding the price. In other words, their price is very high. Here the contention of the petitioner is that when as per its own estimate the cost of the project was 1,000/- Crores, without technological transfer in Version 1, the price of the petitioner at 920/- Crores cannot be said to be high. Further, assuming that there has been some change in the conditions of the contract then in these changed conditions BHEL must specify as to what was the price it actually expected.
14. In spite of the effective persuasion of learned senior counsel for the petitioner, it will not be proper, nor is it warranted for this Court to enter into this arena of price fixation, nor can a writ jurisdiction be an appropriate place for these discussions.
15. In a recent judgment of the Hon'ble Apex Court, i.e., in the case of Bakshi Security and Personnel Services Private Limited Vs. Devkishan Computed Private Limited and others reported in (2016) 8 SCC 446, which has been relied upon by the petitioner himself, the Hon'ble Apex Court has observed 9 "that the writ jurisdiction cannot be utilised to make a fresh bargain between parties."
16. Emphasising the point of fairness and impartiality in grant of government contracts, the learned Senior Counsel for the petitioner Sri Sunil Gupta relying upon a decision of the Hon'ble Apex Court in the case of Ramana Dayaram Shetty Vs. International Airport Authority of India and others reported in (1979) 3 SCC 489, would argue that an instrumentality of State cannot be forced to enter into a contract but when it does, it must do fairly without discrimination and with no room for arbitrariness. This, the learned senior counsel for the petitioner would argue as his entire case is based on the fact that though legally speaking no rights have crystallised in his favour as of now, inasmuch as, there is no contract in his favour, yet the admitted position is that he was declared technically sound and in the financial bid he had quoted the lowest price. Thereafter, in the series of negotiations BHEL only tried to extract as much knowledge from them as it could, regarding the technical aspect of the project and other aspects as well, and have now ultimately backed out of the project. This, the petitioner alleges is unfair and arbitrary. He would also rely upon the fact that he had given certain drawings which though the petitioner has not specifically stated but the argument would be that he had an intellectual property in these drawings, of which an unfair advantage has now been taken by BHEL.
17. As regarding the assertion of Clause 22 by the respondents that it has the powers to reject any contract, the petitioner relies upon the case of Union of India & others Vs. Dinesh Engineering Corporation & 10 another reported in (2001) 8 SCC 491, and would then submit that the Hon'ble Apex Court has held that a public authority has a discretion in the award of contract yet this is not an unfettered discretion. A public authority is bound to follow the norms recognised by Courts while dealing with public property. "This requirement is necessary to avoid unreasonable and arbitrary decisions being taken by public authorities whose actions are amenable to judicial review. Therefore, merely because the authority has certain elbow room available for use of discretion in accepting offer in contracts, the same will have to be done within the four corners of the requirements of law, especially Article 14 of the Constitution."
18. Learned Senior Counsel for the petitioner has further relied upon the judgment of Bakshi Security (Supra) of the Hon'ble Apex Court, whereby the Hon'ble Apex Court while allowing the appeal of the appellant set aside the decision of the Gujarat High Court and directed the Government of Gujarat to proceed with the finalisation of the contract in favour of the appellant. In Bakshi Security case (Supra), even though the respondents had not fulfilled the essential conditions of eligibility of a contract, the contract was awarded in its favour and this was ultimately challenged and it is validity of this contract which had come before the Hon'ble Apex Court and hence the order as referred above was passed.
19. In the case at hand, the facts are quite different. Whereas in the cases cited by the petitioner, a contract had been awarded to another, here no such event has yet taken place. In fact, the process is still on.
11In the Version-3, fresh bids have been invited though by the Courts order. The petitioner himself has participated in the process.
20. The position of law as stated in the above two judgments is the settled position of law, however, the stage has not yet reached where there could be an application of the principles laid down by the Hon'ble Apex Court, as urged before this Court by the learned senior counsel for the petitioner Sri Sunil Gupta. In fact in Dinesh Engineering Corporation case, the aggrieved party was virtually debarred from competing with another i.e. EDC and virtually a monopoly had been created in favour of EDC. These are not the facts in the case before this Court.
21. In Bakshi Security case, the Hon'ble Apex Court has relied upon another decision i.e., Jagdish Mandal Vs. State of Orissa reported in (2007) 14 SCC
517. The relevant paragraph no. 22 of the said judgment reads as under:-
"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 is 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 12 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 tender/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.' "
22. Learned Senior Counsel for the respondents has relied upon the aforesaid decision of the Hon'ble Apex Court in the case of Jagdish Mandal (Supra), where it has been repeatedly stated that contractual matters are matters where normally an interference can be made only at an appropriate stage and where technical and 13 financial matters are at stake, expert opinion is to be respected. Interference should normally not be made as has been emphasised by Hon'ble Apex Court in a recent matter where Courts have been cautioned to apply judicial restraint instead. Learned Senior Counsel for the respondents further relied upon the decision of the Hon'ble Apex Court in the case of B.S.N. Joshi & Sons limited Vs. Nair Coal Services limited and others reported in (2006) 11 SCC 548, wherein the Hon'ble Apex Court held as under:-
"56. It may be true that a contract need not be given to the lowest tenderer but it is equally true that the employer is the best judge therefor; the same ordinarily being within its domain, court's interference in such matter should be minimal. The High Court's jurisdiction in such matters being limited in a case of this nature, the Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent on the face of record."
23. Learned Senior Counsel for the respondents has further relied upon a recent decision of Hon'ble Apex Court in the case of Montocarlo Limited Vs. NTPC Limited (decided on 18.10.2016), where again emphasis has been given to the courts to apply judicial restraint in dealing with dispute relating to contractual matters.
24. In a recent decision of the Hon'ble Apex Court in the case of Tamil Nadu Generation and Distribution Corporation Limited Vs. CSEPDI Trishe Consortium, [SLP (C) Nos. 28959-28960 of 2015], the Hon'ble Apex Court held as under:-
"At this juncture we are obliged to say that in a complex fiscal evaluation the Court has to apply the doctrine of restraint. Several aspects, clauses, contingencies, etc. have to be factored. These calculations are best left to experts and those who have knowledge and skills in the field. The financial 14 computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. The courts cannot really enter into the said realm in exercise of power of judicial review. An aggrieved party can approach the Court at the appropriate stage, not when the bids are being considered. We do not intend to specify. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently. But the present case is not a one of such nature. Once the price bid was opened, a bidder could not have submitted representations on his own and seek a mandamus from the Court to take certain aspects into consideration. We have stressed this aspect only to highlight the role of the Court keeping in mind the established principle of restraint."
25. Considering the above legal position and the facts of the matter, though this may be a case where the petitioner may genuinely feel aggrieved that he has not been given a fair treatment at the hands of respondents/BHEL, which is a public sector corporation, in spite of being L-1 and the long negotiations with BHEL where he expected to enter into a contract with BHEL, yet no relief can be granted to the petitioner for the following reasons:-
There is no accrued right in favour of the petitioner as yet. The rejection of petitioner's bid at the hands of BHEL is on the grounds that though it may be the lowest yet it is high for them as per their estimate and hence it is not financially viable for the respondents. This is an area which this Court will not look into at this stage. BHEL is a public sector company and as has been repeatedly stated by the senior counsel for the respondents before this Court that in the fresh bid they expect to get prices much lower than what has been 15 quoted by the petitioner, and therefore, it is in public interest that they should not enter into the contract with the petitioner at their present rate, and should rather go for a fresh bid. This is an argument with which this Court cannot find any fault with. As far as the petitioner's allegation that respondents have taken away the technical knowhow that would be an entirely separate matter with which we should not be concerned in the present case.
26. No relief, therefore, can be granted to the petitioner. The writ petition fails and is hereby dismissed.
27. The interim orders dated 03.10.2016 and 20.10.2016 are hereby vacated.
(Sudhanshu Dhulia, J.) 25.10.2016 Ankit