Patna High Court
Core Projects And Technologies vs The State Of Bihar & Ors on 18 August, 2010
Author: Shiva Kirti Singh
Bench: Shiva Kirti Singh
LETTERS PATENT APPEAL No.937 OF 2010
Against judgment and order dated 03.05.2010 passed in C.W.J.C. No.
5669 of 2010.
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CORE PROJECTS AND TECHNOLOGIES LTD., A COMPANY DULY
INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT,
1956 AND HAVING ITS REGISTERED OFFICE AT BLOCK NO. 1-8, BLDG
NO.4, SECTOR III, MILLENNIUM BUSINESS PARK, MAHAPE, NAVI
MUMBAI AND HAVING ITS CORPORATE OFFICE AT LOTUS BUSINESS
PARK, 10TH FLOOR, PLOT NO. C-21, DALIA INDUSTRIAL ESTATE, OFF
LINK ROAD, OPP. FUN REPUBLIC CINEMA, ANDHERI LINK ROAD,
ANDHERI (W), MUMBAI-400 053, THROUGH MR. VIJAY KUMAR MALIK,
DIRECTOR- EDUCATION (INDIA), S/O SRI M.R.MALIK, R/O FLAT NO. 131,
MONISHA TOWERS, LOKHANDWALA, 4TH CROSS LANE, ANDHERI (W),
MUMBAI-400053----------------------------------------------------------------(Appellant)
Versus
1-THE STATE OF BIHAR, THROUGH ITS CHIEF SECRETARY, GOVT. OF
BIHAR, PATNA, BIHAR.
2-THE PRINCIPAL SECRETARY, DEPARTMENT OF I.T., GOVT. OF BIHAR,
PATNA, BIHAR .
3-THE PRINCIPAL SECRETARY, DEPARTMENT OF EDUCATION, GOVT.
OF BIHAR, PATNA, BIHAR .
4-BIHAR STATE ELECTRONICS DEVELOPMENT CORPORATION LTD.
(BELTRON), THROUGH ITS MANAGING DIRECTOR, BELTRON
BHAWAN, SHASTRI NAGAR, PATNA (BIHAR)
5-M/S EDUCOMP SOLUTIONS LTD., 1211, PADMA TOWER NO. I, 5
RAJENDRA PLACE, NEW DELHI-110008--------------------------(Respondents)
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For Appellant:- Mr. U.U. Lalit, Sr. Advocate
Mr. Arunabh Chaudhary, Advocate
Mr. Anupam Lal Das, Advocate
Mr. Rajesh Ranjan, Advocate
Mr. Raktim Gogoi, Advocate
Mr. Sanjeev Kumar, Advocate
For Respondent No.5:- Mr. Jaideep Gupta, Sr. Advocate
Mr. Y.V. Giri, Sr.Advocate
Mr. Rakesh Ojha, Advocate
Ms. Soni Srivastava, Advocate
Mr. Inder Raj Gill, Advocate.
For Respondent No.4:- Mr. P.K. Shahi, Sr. Advocate
Mr. Shiva Jee Pandey, Sr. Advocate
Mr. Vikash Kumar , Advocate
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P R E S E N T
THE HON'BLE THE CHIEF JUSTICE
THE HON'BLE MR. JUSTICE SHIVA KIRTI SINGH
Shiva Kirti Singh. J This Letters Patent Appeal is directed against order
dated 03.05.2010 whereby learned Single Judge dismissed the writ
application bearing CWJC No. 5669 of 2010 preferred by the
appellant/writ petitioner on the ground that the official respondents were
not obliged either under law or under the terms of E-tender notice inviting
request for proposal (RFP for brevity) to consider the experience of a
Subsidiary Company of the appellant for the purpose of eligibility so as to
open and consider the technical and commercial bid of the appellant for
supply, installation, maintenance of IT infrastructure (Establishment of
Computer Lab, Hardware, Networking Software, Uninterrupted Power
Supply etc.) and Computer Education Services (Faculty, Curriculum,
Courseware, Testing and Certification, Teachers Training etc.) in 600
schools in the Rural and Urban areas of the State of Bihar on Build Own
Operate and Transfer (BOOT) basis.
2. In substance, the writ Court found no good ground to
interfere with the impugned decision of Respondent No.4, the Bihar State
Electronic Development Corporation Limited (Beltron) dated 18.03.2010
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contained in Annexure-11 to the writ petition disclosing the reasons for
disqualification of the appellant's bid at the preliminary stage itself.
3. The facts relevant for the purpose of present appeal are
in brief mentioned hereinafter. On 19.02.2010 respondent no.4 issued E-
tender notice inviting request for proposal for supply and installations of
hardware, software etc. and for the Computer Education Services noticed
above.
4. The said E-tender was subsequently revised on
22.02.2010. The said E-tender notice for RFP is Annexure-1 to the memo
of appeal. As per E-tender notice the submissions of proposals/bids was to
be accompanied by earnest money deposit (EMD) in form of a demand
draft/bank guarantee of Rs.1 Crore issued by a Nationalized Bank with
validity for a period of six months.
5. A pre-bid conference was to be held on 04.03.2010 of
the prospective bidders to consider requests for clarifications. The bid was
required to be in three parts; (i) "pre qualification documents" containing
earnest money deposit and all the pre qualification documents; (ii)
"Technical Proposal" complete with all technical details and (iii)
"Commercial Proposal" containing price schedule. The last date for
submission of bids/proposals through E-tendering as per the Tender notice
was 12:00 Noon of 8th March, 2010.
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6. On 04.03.2010 the appellant submitted certain queries
for clarification and on the same day the Pre Bid Conference was held as
per schedule with the prospective bidders which included the appellant
and three others including the successful bidder, EDUCOMP( respondent
no.5 herein). On 06.03.2010 certain amendments were made to the RFP
document. The amendments are Annexure-3 to the memo of appeal. By
another corrigendum dated 06.03.2010, respondent no.4 extended the last
date for submission of bids till 12:00 Noon of 10.03.2010. On 09.03.2010
the appellant, through a letter requested respondent no.4 for extension of
the last date by further seven days on the ground that adequate space in
the server of the respondent no.4 was not allotted for uploading the
required documents and that arranging the EMD of Rs.1 Crore from a
Nationalized Bank would require some time. The appellant received no
response to its request for extension of time and therefore submitted its E-
bid on 10.03.2010 within time. Only one other bidder namely, NIIT
submitted its E-bid within time i.e., by 12:00 Noon on 10.03.2010. On
10th March, 2010 at 3:00 P.M. respondent no.4 extended the date of
submission of the E-tender by one week. This was protested by the
appellant. The extension notice providing fresh tender schedule is
Annexure-9 to the memo of appeal. It contains a notice and clarifications
to the effect that those bidders who have submitted their bids may re-
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submit it by the appropriate time and only those bidders who had
purchased the tender document as on 4th March, 2010 were only eligible
to request for E-forms. Respondent no.5, the Successful Bidder submitted
its bid/proposal on 16.03.2010. The pre-qualification bids were opened as
per schedule on 16.03.2010 at 3:00 P.M. and its results were announced
on 18.03.2010. Then the appellant came to know from the impugned
decision in Annexure-11 that its pre-qualification bid was rejected for the
reason mentioned in the following words:-
"The Committee has received Profit Loss Account of Core
Projects and Technologies Limited and Experience Certificate of Core
Education and Consulting Solutions Inc. Hence, disqualified".
7. The two issues raised before the writ Court as well as
in this appeal for challenging the impugned decision of respondent no.4
are as follows:-
"(i) Whether the rejection of the Bid submitted by the
Appellant/Petitioner on grounds mentioned in the rejection order is
sustainable in view of the terms and conditions of the tender?
(ii) Whether the extension of the date for submission of
the bids after the time for receipt of the bids on 10.03.2010 was already
over is permissible and sustainable in law?"
8. In context of issue no.1 the submission on behalf of the
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appellant is that the appellant-company is entitled to rely upon the
requisite qualification and experience of another company which is its
Subsidiary company because the provisions of the Company Law and the
law declared by Courts on this subject permit such a course of action and
the tender notice also contains several materials in support of a Subsidiary
Company being treated as part and parcel of its Holding company such as
the appellant. According to learned senior counsel for the appellant, the
respondent no.4 erred in law in treating Core Education and Consulting
Solution Incorporate to be a different entity in the context of required
experience and that such decision was so arbitrary which could not have
been taken by a prudent businessman.
9. In order to appreciate the submissions in respect of
issue no.1 it would be convenient to extract the eligibility criteria
contained in Clause 17 of the notice:-
" 17. Eligibility Criteria
The bidder shall meet the following criteria for
eligibility:
(a) The bid shall be submitted by an individual
organization only. Consortium is not allowed. For
supply of Hardware, peripherals and other
equipments/materials the education service
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provider may have a back end tie-up with the
manufacturer/supplier, however for the bidder
will be responsible in totality.
(b) The bidder should be an Information
Technology & Communication Company &
specializing in IT learning services with adequate
experience of executing similar projects for at
least 300 schools. School should be acknowledged
by Government as of 31st Dec 2009.
(c) The bidder should have an average annual
sales turnover of INR 100 Crores and above in the
last three financial years.
(d) The Net Worth of the bidder should be
positive. The bidder is required to submit its
audited balance sheet or copy of the annual report
duly signed in original by the authorized
signatory.
(e) The bidder must have experience of
completed/executing dually supported by
Acceptance Test document at least any one of the
following:
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1. Project of comprising of hardware,
system software, trainer and learning
services of Rs. 20 Crores.
2. 2 Projects of comprising of hardware,
system software, trainer and learning
services of Rs. 10 Crores.
3. 3 Projects of comprising of hardware,
system software, trainer and learning
services of Rs.7 Crores.
(f) References (contact details, customer completion
certificate, customer satisfaction certificate etc.) for
these projects shall be provided. Projects executed
for bidder's own, bidder's group of companies or
bidder's JV companies shall not be considered.
(g) Qualification of Hardware (Server/Desktop)
supplier - Should have ISO 9001 certification, as
OEM with experience of supply & multilocational
installation at minimum of 400 different sites in the
State of Bihar.
(h) The bidder must have had at least 100
employees on roll over each of the last three years
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(as on December 31, 2009, 2008 & 2007).
(i) The bidder shall have Quality certification from
an accredited and internationally
reputed/renowned firm (viz. ISO 9001 and ISO
14000).
(j) The bidder should have office in Bihar. In case
bidder has no presence in Bihar, bidder shall
furnish an undertaking that an office shall be
opened in Bihar, with sufficient personnel and
inventory of spares within a month of selection as
Successful Bidder.
(k) The bidder shall have bank's certificate of
solvency.
(l) The bidder must have company registration
certificate, registration under Labour Laws
Contract Act, valid sales tax registration certificate
and valid service tax registration certificate.
10. On behalf of the appellant emphasis was laid on
definition of the term Affiliate in the definition Clause i.e. Clause-2 of the
notice. It defines Affiliate as under:
"Affiliate" shall mean any holding company or
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subsidiary company of a party to the Agreement or
any company, which is subsidiary of such a holding
company. The expressions "holding company" and
"subsidiary company" shall have the meaning
specified in section 4 of the Companies Act 1956 (as
amended from time to time).
11. Reliance was also placed upon Section 212 of the
Indian Companies Act to highlight that the Balance Sheet of holding
company is required to include particulars relating to its subsidiaries
including a copy of Balance Sheet of the subsidiary, a copy of its profit
and loss account and several other particulars. Reliance was also placed
upon the judgments of the Supreme Court in the case of (1) State of U.P.
& Ors Vs. Renusagar Power Company & Ors, (1988) 4 SCC 59, (2)
New Horizons Limited and Another Vs. Union of India & Ors,
(1995) 1 SCC 478 and some other cases noticed by the learned writ
Court in paragraphs-9 and 10 of the impugned judgment. Those
judgments clearly lay down the law that the Corporate veil can be lifted
or pierced when the Courts find that the Corporate personality is opposed
to justice, convenience or interest of revenue. The case of Renusagar
Power Company (supra) was related to payment of electricity duty
involving interest of revenue. The case of New Horizons Limited
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related to Government contracts and thus involved interest of revenue as
well as issue of justice. The present case also relates to award of contract
and therefore in view of law laid down by the Apex Court in New
Horizons Limited (Supra) respondent no.4 could have the option of
looking into the experience of a subsidiary company which was wholly
owned by the appellant-company provided the tender notice contained
provisions permitting such a course of action either by the express words
or by necessary implications.
12. It was rightly submitted on behalf of the respondents
that in the case of New Horizons Limited (supra) a joint venture was
permitted and the Apex Court in paragraph-26 came to a clear conclusion
that New Horizons Limited is a joint venture as claimed by it in the
tender and therefore the experience of its various constituents had to be
taken into consideration by the standard of a prudent businessman.
13. In the present case, as per definition, the word
"affiliate" refers to the subsidiary company of a holding company but
there is no provision in the tender notice which may lead to the
conclusion, explicitly or impliedly, that for the project at hand the
experience of the subsidiary company may be taken into account as
experience of the holding company. As a fact Clause 17 (a) highlights
that the bid is required to be by an individual organization only and
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consortium is not allowed. In view of such specific prohibition in the
tender notice, the view and course of action adopted by the respondent
no.4 in not accepting the experience of the subsidiary company as that of
the appellant company cannot be treated to be whimsical or arbitrary so
as to permit interference in exercise of writ jurisdiction. Even if two
views could be possible in interpreting the relevant eligibility clauses,
since the view taken by respondent no.4 is also a probable and possible
view, the writ Court was right in not interfering in the matter.
14. Clause 17 (b) stipulates that the bidder should be an
Information Technology and Communication Company and specializing
in IT learning services with adequate experience of executing similar
projects for at least 300 schools.
15. It was rightly submitted on behalf of the respondents
that the term "Bidder" has been defined in Clause-5 as well as Clause 19
of the Definition Clause in the notice inviting RFP and at both the places
it is an exclusive definition which does not include any subsidiary
company or "affiliate" of the firm offering the bid for solution, services
and or materials required in the RFP. It was further highlighted that the
requirement of submitting a profile of the bidder as per Appendix-2
along with pre qualification bid no doubt requires disclosure as to
whether the bidder is a Government or Public Sector undertaking or
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partnership firm or a Limited Company or member of a group of
Companies or subsidiary of a large corporation but that does not take
away from the requirement of experience in respect of the bidder that it
should be an IT and Communication company specializing in IT learning
Services nor it seeks to enlarge the definition of term "Bidder".
16. On behalf of the respondents reliance was placed
upon a judgment of the Supreme Court in the case of Air India Limited
Vs. Cochin International Airport Ltd & Ors, (2000) 2 SCC 617 to
highlight the law laid down in paragraph-7 to the effect that in the matter
of award of contract by the State or its instrumentalities the decision is
not amenable to judicial review but the Court can examine the decision
making process and it may interfere if the decision making process is
found to be vitiated by mala fides, unreasonableness and arbitrariness. It
was further observed thus :
" Even when some defect is found in the decision
making process the Court must exercise its discretionary
power under Article 226 with great caution and should
exercise it only in furtherance of public interest and not
merely on the making out of a legal point. The Court should
always keep the larger public interest in mind in order to
decide whether its intervention is called for or not. Only
when it comes to a conclusion that overwhelming public
interest requires interference, the Court should intervene".
17. In view of discussions made earlier the issue no.1 is
decided in favour of respondent no.4 because its decision making process
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is found to suffer neither from mala fides nor arbitrariness. So far as issue
no.2 is concerned, the facts disclose that the request for extension of last
date for submission of bids was made by the appellant-company itself. A
legal point is sought to be made out only because the authorities took time
in acting upon the request and the extension was granted perhaps three
hours after the expiry of the time. We find this part of the decision making
process also to be without any mala fides or arbitrariness.
18. Materials have come on record that the project at
hand was already delayed by cancellation of earlier notice inviting tenders
and now after the award of the work to respondent no.5 substantial work
has already been done towards providing the schools with IT
infrastructure. Hence, overwhelming public interest also does not require
interference in the matter.
19. Several case-laws were cited on behalf of respondents
to support the proposition of law that lifting or piercing the Corporate veil
can be resorted to only in special circumstances and that too only by the
Courts. This issue need not be gone into in view of findings on the two
main issues already given in favour of the respondents. In fact, this issue
is not relevant because the real issue in this case is dependent upon terms
and conditions mentioned in the notice inviting tender/offer which have
been already considered.
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20. For the reasons indicated earlier, the appeal fails and
is dismissed accordingly. There shall be no order as to costs.
Sd/-
(Shiva Kirti Singh, J.)
I agree
R.M. Doshit, C.J.
Sd/-
(R.M. Doshit, C.J. )
Patna High Court
Dated the 18th August 2010
Md.Perwez Alam/AFR