Chattisgarh High Court
Delta Construction Systems Ltd vs South Eastern Coalfields Ltd on 17 March, 2009
Author: Sunil Kumar Sinha
Bench: Rajeev Gupta, Sunil Kumar Sinha
HIGH COURT OF CHATTISGARH AT BILASPUR
Writ Petition C No 3098 of 2008
Delta Construction Systems Ltd
...Petitioners
Versus
1. South Eastern Coalfields Ltd
2. Chief General Manager
3. M/s Cuprum Bagrodia Limited
...Respondents
! Mr Manindra Shrivastava, Sr. Advocate with Mr Prafull Bharat and Mr. Amrito Das, Counsel for the petitioner
^ Dr N K Shukla, Sr Advocate with Ms. Ritu Mishra,Counsel for respondents No 1 & 2
Mr Prashant Mishra, Sr. Advocate with Mr. Varunendra Mishra, Counsel for respondent No 3
Honble Shri Rajeev Gupta,J,Honble Shri Sunil Kumar Sinha
Dated:17/03/2009
: Judgment
Writ Petition under Article 226 of the Constitution of India
JUDGMENT
(17.03.2009) Following judgment of the Court was delivered by Sunil Kumar Sinha, J.
(1) South Eastern Coalfields Limited (S.E.C.L.), a subsidiary of Coal India Limited, issued NIT No. GM (P&P)/SECL/HIGHWALL/ SHARDA/2007/2 (Global Tender Notice) on 30.7.2007 for introduction of Highwall Mining Technology with associated equipments (H M Package) for cutting and loading of coal (without blasting) in its mines on hiring basis inclusive of certain ancillary works. The qualification criteria of the bidders were specified vide Para-2.0 of the NIT and specific qualifications were defined vide Para-2.1, which reads as under:
"2.0 Qualification criteria of bidder:
2.1 The bidders shall be a private, public or government owned legal entity or combination of them in the form of Joint Venture (JV) from India and/or abroad and must be registered under Section (3) of the Indian Companies Act 1956. In the case of a JV, unless otherwise specified, all parties shall be jointly and severally liable.
A. The Bidder must have experience in manufacturing and supplying of Highwall mining equipment in the preceding 7 years ending on 31/03/2007 that produced at least 0.40 million tonne of coal per Highwall mining equipment per annum, and The Bidder should be able to procure / mobilize Highwall mining equipment, other equipment, machines and required resources within a period of 12 months from the date of the contract coming into force.
OR B. The Bidder must have experience in operation of Highwall mining equipment in the preceding 7 years ending on 31/03/2007 that produced at least 0.40 million tonne of coal per Highwall mining equipment per annum, and The Bidder should be able to procure / mobilize Highwall mining equipment, other equipment, machines and required resources within a period of 12 months from the date of the contract coming into force.
OR C. The bidder must have a legally binding agreement with an organization which have successfully operated Highwall mining equipment in the preceding 7 years ending on 31/03/2007, that produced at least 0.40 million tonnes of coal per Highwall mining equipment per annum.
The agreement must clearly confirm in no uncertain terms that the bidder would have all the support and services from the said organization upto the period/tenure of the contract, and The Bidder should be able to procure / mobilize Highwall mining equipment, other equipment, machines and required resources within a period of 12 months from the date of the contract coming into force.
OR D. The bidder must have a legally binding agreement with a manufacturing organization which have successfully manufactured and supplied Highwall mining equipment in the preceding 7 years ending on 31/03/2007 that produced at least 0.40 million tonnes of coal per Highwall mining equipment per annum.
The agreement must clearly confirm in no uncertain terms that the bidder would have all the supports and services from the said organization upto the period/tenure of the contract, and the Bidder should be able to procure/mobilize Highwall mining equipment, other equipment, machines and required resources within a period of 12 months from the date of the contract coming into force".
The same are again repeated under Para-3 of the NIT showing as the qualification of the Tenderer. This was one of the qualification criteria which the bidder was required to fulfill at the time of making bid.
(2) 3 Tenderers including the petitioner and respondent No.3 dropped the tenders. Their technical bids were opened by the Tender Committee constituted by the S.E.C.L. which includes the following officials and the Committee examined the bids submitted by the bidders:
1. DT (P&P) - Chairman
2. Chief General Manager (P& P)
3. Chief General Manager (S&R)
4. Chief General Manager (Production)
5. Chief General Manager (CMC)
6. Chief General Manager (Sohagpur)
7. Regional Director, CMPDI, RI-V, Bilaspur
8. General Manager (Finance) (3) After examination of the technical bids of respective tenderers, the Tender Committee decided to obtain some clarification from the bidders. The points for clarification, were formulated by the Committee itself.
Almost identical clarification was sought from all the bidders. Ultimately, the Tender Committee recorded the following conclusion and rejected the technical bid of the petitioner on 5.5.2008:
"B. M/s Delta Construction Systems Limited, Hyderabad:-
M/s Delta Construction Systems Limited., Hyderabad has entered into a legally binding agreement with M/s. ICG Addcar Systems LLC. USA for the subject tender. As per the documents furnished by the bidder, they have manufactured 24 machines upto Mar, 2007 and their machine having Sr. No. 18 has achieved production more than 0.4 million tonnes during 2004-07. However, M/s Delta Construction Systems Limited has offered Narrow Bench machine which is a new machine launched in 2007 only. Even if it would had been launched in early January, 2007 its operation period is maximum three months upto 31-3-2007. The bidder has not furnished the data of coal produced from this machine upto 31-3-2007.
It shall be incorrect if to meet the eligibility criteria, performance of some other machine is considered whereas the bidder would supplied a different machine which has been manufactured recently and bidder has not furnished its performance record. As such the offer of M/s Delta Systems Ltd. Hyderabad is not meeting the NIT criteria and does not qualify for opening of their price part." (See Para-12 of the return filed by respondents No.1 & 2 & Annexure-R/1, page-46) Thus, the technical bid of the petitioner was rejected on the sole ground that the petitioner did not fulfill the qualification criteria No. 2.1-D under which the petitioner had claimed its eligibility because it had offered a narrow bench machine which was launched in the year 2007 only and the machine had not a proven track record of 7 years upto 31.3.2007 as required under the said Clause.
(4) Mr. Manindra Shrivastava, learned Senior Counsel appearing on behalf of the petitioner, would submit that the NIT does not require the tenderer to submit the bid bases on proven machine model, rather it required a tied up with a manufacturer with history of proven technology to provide equipment and services which the petitioner has entered into with ICG ADDCAR SYSTEM LLC in USA as the same has successfully supplied Highwall mining equipment in the preceding 7 years ending on 31.3.2007 that has produced more than 0.40 million tonnes of coal per Highwall mining equipment per annum. In sum and substance, the argument of Mr. Srivastava was that track record of the organization with which the agreement has been entered into was to be seen and not that of the machine or the equipment which would be procured/supplied/used for the mining operation to be conducted. Therefore, S.E.C.L. has arbitrarily rejected their technical bid on the basis of the offered machine being launched in the year 2007.
(5) On the other hand, Dr. N.K. Shukla, learned Senior Counsel appearing on behalf of respondents 1 & 2 has supported the decision taken by the Tender Committee. He would submit that the S.E.C.L. has to see the production capacity of the machine which is going to be offered for use in the mining works and for this, proven track record of the machine for last 7 years was to bee seen and not that the track record of the company which has to supply that machine. He argued that the mother organization may have a proven track record of more than 7 years of manufacturing good machines, but, if the proven track record of a particular machine which the bidder has offered to supply after procuring it from the organization is not as required by the S.E.C.L., then, the track record of the company would do nothing better in execution of the contract work. He also argued that the decision has been taken by the Expert Committee, referred to above, looking to all technicalities and keeping in mind the production factor which cannot be reviewed by a court unless it is shown to be arbitrary, malafide or lacking in other factors which may violate Article 14 of the Constitution. (6) Mr. Prashant Mishra, learned Senior Counsel appearing on behalf of respondent No.3, also supported the arguments advanced on behalf of respondent No. 1 & 2. (7) We have heard the learned counsel for the parties at length and have also perused the records of the Writ Petition.
(8) In the matter of Tata Cellular -Vs- Union of India, AIR 1996 SC 11, referred to by all the parties, it was held by the Apex Court that "The principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Art. 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Art. 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down." It was further held that "The duty of the court is to confine itself to the question of legality. Its concern should be :
1 Whether a decision-making authority exceeded its power ?
2 committed an error of law;
3 committed a breach of the rules of natural justice; 4 reached a decision which no reasonable Tribunal would have reached; or 5 abused its powers.
Therefore, it is not for the court to determine whether particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds, upon which an administrative action is subject to control by judicial review can be classified as follows:
(i) Illegality: This means the decision-
maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety."
The Apex Court further held that "The principles deductible relating to scope of judicial review of administrative decisions and exercise of contractual powers by government bodies are :
(1) The Modern trend points to judicial restraint in administrative action.
(2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair-play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere.
However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."
(9) In the matter of Sterling Computers Ltd. -Vs- M/s. M & N Publications Ltd. and others, AIR 1996 SC 51, the Apex Court held that "While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process." By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry. But at the same time the Courts can certainly examine whether "decision making process" was reasonable rational, not arbitrary and violative of Art. 14 of the Constitution. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Art. 14 of the Constitution, the Court cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court amounts to encroachment on the exclusive right of the executive to take such decisions." (10) In the matter of M/s. Monarch Infrastructure (P) Ltd.
-Vs- Commissioner, Ulhasnagar Municipal Corporation and others, AIR 2000 SC 2272, the Apex Court further held that further sum up the legal position in such matters that "(i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest; (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate; (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons & Broadly stated, the courts would not interfere with the matter of administrative action or changes made therein unless the Government's action is arbitrary or discriminatory or the policy adopted has no nexus with the object it seeks to achieve or is malafide." (11) In the matter of Association of Registration Plates
-Vs- Union of India and others, (2005) 1 SCC 679, the Apex Court held that "Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated against, to the detriment of public interest." It was further held that "In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, (as it was in that case), greater latitude is required to be conceded to the State authorities. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable."
(12) In the matter of Directorate of Education and others
-Vs- Educomp Datamatics Ltd. and others, (2004) 4 SCC 19, the Apex Court again held that "The terms of tender prescribing eligibility criteria are not only open to interference when arbitrary, discriminatory or biased but not open to interference merely because Court feels that some other terms would have been more preferable." (13) The Apex Court further held in the matter of Master Marine Services (P) Ltd. -Vs- Metcalfe & Hodgkinson (P) Ltd. and another, (2005) 6 SCC 138 that "The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision, considerations which are of paramount importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of the requisite specifications and whether the person tendering is of the ability to deliver the goods or services as per specifications. The State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation."
(14) It is, therefore, clear that the decisions of the State, or its corporation or the authority or any instrumentality in the matter of selection for awarding contract has not to be interfered by a Court in its power of judicial review unless it is shown to be illegal, irrational, arbitrary or violative of provisions of Article 14 or suffering from any procedural impropriety or that the policy adopted has no nexus with the object it seeks to achieve or is malafide or shown to be taken on extraneous considerations. When the matter is technical and needs expertise and a decision by the Expert Committee has been taken within the norms of contract conditions with a view to choose a best bidder, the Court being a non-expertise cannot take a different view. The scope of interference in such matters, under the power of judicial review are very limited which are generally on the principles referred to above in various decisions of the Apex Court. The Government or its instrumentalities while making such selection are free to see that the services offered are of requisite specifications and the person tendering is of the ability to deliver the services as per specification. And, if the decision is not vitiated for the above reasons, that should be allowed to continue.
(15) In case on hand, admittedly, the petitioner is not a manufacturing Unit, therefore, it has offered its candidature under Clause 2.1-D of the NIT and in case, the contract is awarded to the petitioner, it would be executing its works by procuring Highwall mining equipment and other equipment and machine which it would be getting from the organization with which it has entered into a legally binding agreement. Therefore, ultimately, the mining work would be executed by such equipments, which the petitioner would be getting from the mother organization. In the present case, after submission of the tender, on 16.1.2008 (Annexure-P/5), the Tender Committee has asked for some clarifications from the petitioner, in which, query No. 16 is with regard to the New ADDCAR narrow bench machine which has been offered by the petitioner. The query says that the machine should be a proven one which needs clarification. The petitioner, vide letter dated 26.1.2008 (Annexure-P/7), had replied to the said query that the narrow bench machine is a evolved system with a proven design concepts to reduce the foot print of the equipment in order to operate in minimum bench width as desired by some customers of ICG Addcar Systems LLC in USA. This equipment, i.e. basically the launch vehicle has different configuration than earlier launch vehicle designs and is organized in a compact manner to reduce the foot print and hence the operating bench requirement and does not functionally deviate from the proven concepts. The first machine built to this state of the art design is already up and running to the customer expectations in Ohio, which was recently visited by DGMS and Singareni team from India. (16) Mr. Shrivastava has not disputed that the machine which was offered by the bidder for mining operation (narrow bench machine) was launched in the year 2007. Therefore, there cannot be a track record of 7 years of this machine till 31.3.2007. He very much insisted that the proven track record in the essential qualification is that of the organization and not on the equipment. In our considered view such meaning cannot be given to the essential qualification laid down in Clause 2.1-D of the NIT and it cannot be interpreted like this. The present bid is a commercial transaction, in which, the S.E.C.L. has mainly insisted upon the production capacity and in all the criteria i.e. from 2.1-A to 2.1-D, they have mentioned about production of at least 0.40 million tonnes of coal per Highwall mining equipment per annum. An organization may have various Highwall mining machines to its credit which may produce more than 0.40 million tonnes of coal per annum but if those machines are not offered in particular mining operation, the said production shall not be achieved. Therefore, what is important is the machine which a bidder is offering to deploy in the contract work which may produce at least 0.40 million tonnes of coal per annum and not that the organization which has produced such machine. Therefore, the manner in which the learned counsel for the petitioner is interpreting the qualification criteria of the bidder is not proper and the interpretation given by the Tender Committee appears to be reasonable, just and proper that the machine offered by the petitioner does not have a proven track records of 7 years upto 31.3.2007 and the petitioner is lacking in such essential qualification. The arguments advanced by the learned counsel for the petitioner in this regard cannot be sustained and such decision taken by the Expert Committee cannot be held to be arbitrary, irrational, illegal or malafide on the basis of alleged interpretation of the terms of NIT.
(17) Mr. Shrivastava, then, argued that acceptance of price bid of respondent No.3 is vitiated by extraneous considerations. He referred to the representation (Annexure- P/10) made by the petitioner after rejection of its price bid. His submission is that respondent No.3 had not submitted the legally binding agreement, as specified in the tender requirements, at the time of submission of tender which was one of the essential condition. We do not find any force in the said arguments. Condition No. 2.1.-D of the NIT (supra) never says that the legally binding agreement must be filed along with tender documents. A complete reading of this Clause would show that the requirement was only to have such agreement at the time of offering bid and not that the agreement must have been filed at that time along with tender. It is not disputed that respondent No.3 was having no agreement but the dispute is that the agreement was not filed along with the price bid. We find that a copy of the agreement has been filed on record as Annexure-R/3-1. The agreement was entered into on 1.5.2005 between respondent No.3 and its mother organization. Therefore, the contention of the petitioner has to be rejected and we do it accordingly. (18) Mr. Shrivastava also tried to canvas that the terms of the agreement produced by respondent No.3 are vague and therefore, it was not a legally binding agreement. We feel it inappropriate to examine the terms of the agreement at this stage so as to hold that whether it would be legally binding or not. It is for the S.E.C.L to be satisfied or dissatisfied with the terms and conditions of the agreement produced before them. Once a duly constituted agreement shown to be legally binding the parties is filed by a bidder, the terms of the technical bid are fulfilled. At this stage, the Court is not supposed to examine the meaning and to interpret the terms and conditions of the agreement, their viability or far fetching effects. The paramount consideration at this stage in this regard would be the satisfaction of the S.E.C.L. and if they are satisfied that the agreement produced by a bidder was good enough to secure their interest and the same is as per the conditions of the NIT, they shall be free to proceed with the tender process. The term "legally binding agreement"
with reference to the present NIT is wide enough. Mr. Shrivastava could not convince us as to how the agreement produced by respondent No.3 was not a legally binding agreement. The ground raised by the Mr. Shrivastava does not appear to be appealing and we reject it accordingly. (19) Mr. Shrivastava lastly argued that the offer of respondent No.3 was a conditional offer, as, vide a letter dated 1.12.2007 (Annexure-R/2), respondent No.3 asked for dewatering to be done by the S.E.C.L. He again referred to the representation of the petitioner dated 10.6.2008 (Annexure-P/10) as also Clause 16.2 of NIT in which it is state that "No additional terms/conditions other than prescribed in the tender documents will be entertained and conditional tender shall be rejected." The contents of the letter dated 1.12.2007 (Annexure-R/2) would show that it was merely a request of respondent No.3 for assistance from S.E.C.L. The relevant paragraph of the letter, on which, the petitioner is alleging that the offer was a conditional offer is quoted as under:
"5.0 Assistance from SECL:
In order to make the technology successful while we shall leave no stone unturned to achieve the objective in totality, but we would also like to place our submission to SECL to provide us the following assistance over and above the provision contained under "Obligation of SECL":- a. Shall provide necessary permission and access to site to allow the successful bidder for drilling additional boreholes for scientific studies.
b. Shall provide adequate pumps to dewater accumulated water already existing/rainwater/ water likely to come from the drivages within the mine boundary."
(20) The concept of conditional offer is not new in the realm of contractual law. An offer is a conditional offer when it is made only subject to the conditions specified therein. Mere request of a bidder for making assistance during the course of execution of the contract work would never constitute it as a conditional offer unless the intention is explicitly expressed or clearly implied that the offer made by bidder is subject to the above conditions only and if those conditions are not fulfill by the opposite party, the offer may be deemed to be or held to be rejected. Therefore, unless an element of definite intention to not enter into a contract under certain conditions appears in the request, the offer with such subsequent request as made in this case cannot be held to be a conditional offer. This is a corollary of well settled principle that the terms of offer must be certain. Distinction between the "conditional offer" and a "request to provide facility during the course of execution of the work with an intention to achieve it" has to be drawn. (21) For the reasons stated above, we are of the considered view that the contents of the alleged letter vide Para-5.0 (supra) do not constitute a conditional offer, on which, the offer (bid) of respondent No.3 would be termed as a "conditional tender" liable for rejection. (22) In the result, we do not find any substance in the petition. The petition is liable to be dismissed and is accordingly dismissed.
(23) There shall be no order as to the cost.
CHIEF JUSTICE JUDGE