Andhra Pradesh High Court - Amravati
Rappid Geo Services Pvt Ltd, vs The Union Of India, on 26 February, 2020
Author: Kongara Vijaya Lakshmi
Bench: Kongara Vijaya Lakshmi
IN THE HIGH COURT OF ANDHRA PRADESH : AT AMARAVATI
****
Writ Petition No.19737 of 2019
Between
Rappid Geo Services Pvt. Ltd., rep. by its
Managing Director S.V. Suresh Babu.
.... Petitioner
And
The Union of India, rep. by its
Secretary, Department of Petroleum,
New Delhi and others
.... Respondents
JUDGMENT PRONOUNCED ON : 26.02.2020
THE HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI :
1. Whether Reporters of Local newspapers : NO
may be allowed to see the Judgments?
2. Whether the copies of judgment may be : YES
Marked to Law Reporters/Journals?
3. Whether Their Ladyship/Lordship wish to : YES
see the fair copy of the Judgment?
2
* THE HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI
+ Writ Petition No. 19737 of 2019
% 26.02.2020
# Rappid Geo Services Pvt. Ltd., rep. by its
Managing Director S.V. Suresh Babu.
...Petitioner
Vs.
$ The Union of India, rep. by its
Secretary, Department of Petroleum,
New Delhi and others
... Respondents
! Counsel for Petitioner : Sri Ugra Narasimha
^ Counsel for Respondent No.1 : Sri B. Krishna Mohan
Asst. Solicitor General of India
Counsel for Respondents 2 to 6 : Sri Avinash Desai
<Gist :
>Head Note :
? Cases referred:
1. (1994) 6 SCC 651
2. (1999) 1 SCC 492
3. (2006) 10 SCC 1
4. (2007) 14 SCC 517
5. (2012) 8 SCC 216
6. 2018 (4) ALT 36
3
THE HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI
Writ Petition No.19737 of 2019
Order:
This Writ Petition is filed to declare the action of respondent Nos.4
to 6 in deleting Clause 1.5 in part-2 of the Bid Evaluation Criteria (BEC) by
amendment No.1, dated 25.10.2019, in the tender notice
No.CEG2303P20, thereby denying the preference to MSMES as illegal and
arbitrary and contrary to the provisions of Micro, Small and Medium
Enterprises Development Act, 2006 (for short 'MSMED Act').
The case of the petitioner Company is that it is engaged in the
business of Geologic and Seismic Surveying and Geodetic Surveying
Activities etc.; the respondent Corporation conducts exploration of Oil and
Natural Gas based on the Data that is obtained by conducting a Seismic
Survey; in this connection, the respondent Corporation had issued a
tender notification, which is open for both National and International
bidding; it is also specified in the tender notification that a pre-bid
conference will be held on 19.09.2019; Clauses 5.5 and 5.6 of the tender
notification deal with purchase preference to Micro and Small Enterprises
as defined under the Act; the Department of Public Enterprises had
formulated a public procurement policy through Micro and Small
Enterprises Order, 2012, dated 08.12.2012, stipulating that at least 25%
of their total procurement of goods and services by the Government
Departments/Central Public Sector Enterprises shall be through MSME;
pursuant to the said policy, the respondent Corporation incorporated
purchase preference in Clause 1.5 in part-2 Bid Evaluation Criteria;
petitioner is a duly registered Micro and Small Enterprise as defined under
the Act and the petitioner Company is in collaboration with a foreign origin
4
company which fits into the technical, financial and experience criteria
specified in Clause 1.0; in the pre-bid conference seven (7) parties have
participated and party No.1 has taken an objection and requested to
remove the MSME clause from the tender document claiming it to be
contradictory to QCBS criteria, pursuant to which respondent Corporation
has amended the tender notification by completely removing Clause 1.5
purchase preference clause in Part-2, Bid Evaluation Criteria and the said
deletion will take away the preference given to MSE companies;
challenging the said deletion, the present Writ Petition is filed.
This Court, on 06.12.2019, while directing to list the matter on
11.12.2019, granted an interim order directing that the bids shall not be
finalized till then. The said interim order is being extended from time to
time.
Counter affidavit along with vacate stay petition has been filed by
the second respondent stating, inter alia, that the second respondent has
issued the Global Notice inviting tenders for hiring of services for 2D and
3D Seismic Data acquisition and processing of 500 LKM and 610 sq. km.
respectively under QCBS (quality and cost based selection); the Writ
Petitioner does not have locus standi to file the present Writ Petition as
the petitioner did not even participate in the tender process; the tender
was for a basin in the State of Odisha and no cause of action has arisen
within the jurisdiction of this Court, hence the Writ Petition is not
maintainable; the pre-bid meeting was held on 19.09.2019 and the
petitioner did not participate in the pre-bid conference and did not submit
any queries prior to pre-bid conference; the prospective bidders drew the
attention of the second respondent to certain clauses of the tender
document and sought certain modifications/deletions thereon citing
5
practices that have previously been followed by the second respondent's
earlier tenders, the latest tenders of ONGC and a similar tender of the
respondent for the project based out of Rajasthan; the objection of the
prospective bidders with respect to purchase preference clause to Micro
and Small Enterprises is that Clause 1.5 of the tender is not only
contradictory to QCBS criteria under the Tender, but also in deviation of
the earlier tenders; after a detailed internal review, the second respondent
learnt that it had in similar tender documents removed the purchase
preference clause, as public sector undertakings like ONGC, IOCL do not
have scope to give purchase preference in QCBS tenders; the ONGC
circular dated 28.05.2018 reads as follows:
"In the QCBS system, as the evaluation of bids shall
be based on combined score (technical parameters and
prices), purchase preference policies (like policy for MSEs
and PPLC etc) shall not be applicable."
The Engineers India Limited, another PSU of the Government of India
compiled a report on the recommendations of Oil PSU's in India titled:
"Enhancing Efficiency and Transparency in Procurement of OIL Public
Sector Undertakings"; after deliberations amongst the oil PSU's certain
modifications and additions were proposed to the report dated July, 2016
and it was decided that "purchase preference policy for MSEs on allowing
the MSE bidder within the price range of within 15% be allowed to match
the prices of L1 non-MSE bidder, should not be followed in QCBS tenders
as otherwise it shall defeat the purpose of QCBS"; the tender in question
is with respect to a project that requires an advanced level of technical
expertise and financial ability and hence it is imperative that the QCBS
criteria must be adopted; the respondent Corporation has acted in public
interest and to keep the bid competitive and not for any ulterior purpose;
6
the interim orders are causing irreparable operational and financial losses
to the second respondent and prayed to dismiss the Writ Petition.
Reply affidavit has been filed to the counter of the second
respondent stating that the removal of purchase preference clause is to
facilitate other than the MSME bidders to participate without competition
from MSME and if the purchase preference clause is restored, the
petitioner will be eligible to participate; as the tender is a global tender,
this Court has got jurisdiction to deal with the issue and that deletion of
the clause on the basis of the query cannot be called as exchange of
view/clarification.
Heard Sri Ugra Narasimha, learned counsel for the petitioner and
Sri Avinash Desai, learned counsel for the respondents.
As seen from the global notice inviting tenders, the pre-bid
conference is not only for exchange of views/clarifications, but also to
explain the requirements of the Company in detail to the interested
prospective bidders and to understand bidders perspective including
exchange of views/clarifications, if any, on the scope of work, bid
rejection/bid evaluation criteria and other terms and conditions of the
tender and as a query has been raised in the pre-bid conference by way
of Amendment No.1 dated 25.10.2019 to the tender, only the purchase
preference to MSEs is deleted and MSEs were not debarred from
participation, but in spite of the same, admittedly the petitioner did not
participate in the tender. Previously also ONGC followed the same policy,
which is not denied by the petitioner. As seen from the recommendations
of the Oil PSUs on the report "Enhancing Efficiency and Transparency in
Procurement of Oil Public Sector Undertakings", it was discussed that
purchase preference policy for MSEs on allowing the MSE bidder within
7
the price range of 15% be allowed to match the prices of L1 non-MSE
bidder, should not be followed in QCBS tenders as otherwise it shall
defeat the purpose of QCBS. The purchase preference clause is
contradictory to QCBS criteria and is admittedly in deviation of the earlier
tenders. Even as per circular of ONGC dated 28.05.2018 in the QCBS
system, purchase preference policies to MSEs are not applicable.
Engineers India Limited also in its report dated July 2016 observed that
purchase preference policy for MSEs should not be followed in QCBS
tenders as otherwise it will defeat the purpose of QCBS. Admittedly, the
tender in question requires technical expertise. As seen from the Udyog
Aadhaar registration certificate filed by the petitioner, the date of
commencement of manufacturing activity is 26.03.2019 and the tenders
were called for in September 2019.
In Tata Cellular v. Union of India1, the Hon'ble Supreme Court
emphasised the need to find a right balance between administrative
discretion to decide the matters on the one hand, and the need to remedy
any unfairness on the other, and observed as follows:
"94. (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. ...
1
(1994) 6 SCC 651
8
(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 pointed out above) 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."
In Raunaq International Limited v. IVR Construction
Limited2, the Hon'ble Supreme Court reiterated the principle governing
the process of judicial review and held that the writ court would not be
justified in interfering with commercial transactions in which the State is
one of the parties except where there is substantial public interest
involved and in cases where the transaction is mala fide.
The Hon'ble Supreme Court in Reliance Airport Developers (P)
Ltd., v. Airports Authority of India3, held that while judicial review
cannot be denied in contractual matters or matters in which the
Government exercises its contractual powers, such review is intended to
prevent arbitrariness and must be exercised in larger public interest.
In Jagdish Mandal v. State of Orissa4, the Hon'ble Supreme
Court held that the 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
2
(1999) 1 SCC 492
3
(2006) 10 SCC 1
4
(2007) 14 SCC 517
9
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."
The Hon'ble Supreme Court, while relying on the above decisions,
held in Michigan Rubber (India) Limited v. The State of
Karnataka5, as follows.
"19) From the above decisions, the following principles
emerge:
(a) ...................
(b)..................
(c) In the matter of formulating conditions of a tender
document and awarding a contract, greater latitude is
required to be conceded to the State authorities unless
the action of tendering authority is found to be malicious
and a misuse of its statutory powers, interference by
Courts is not warranted;
(d) 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; and
(e) If the State or its instrumentalities act reasonably,
fairly and in public interest in awarding contract, here
again, interference by Court is very restrictive since no
person can claim fundamental right to carry on business
with the Government."
The Division Bench of this Court in B. Sailesh Saxena v. The
Union of India6, (to which I am a party), observed in paras 19, 28 and
124 as follows.
5
(2012) 8 SCC 216
6
2018 (4) ALT 36
10
"19. In examining the contention, urged on behalf
of the appellants, regarding the validity of the qualification
requirements stipulated in the tender notification, Courts
must remain conscious that the scope of judicial review in
such matters is extremely limited. In economic and
commercial matters, decisions are taken by the
government or its instrumentalities keeping in view several
factors, and it is not possible for the Courts to consider
competing claims and conflicting interests, and conclude
which way the balance tilts. There are no objective,
justiciable or manageable standards to judge these issues
nor can such questions be decided on a priori
considerations. (Dhampur Sugar (Kashipur) Ltd. v. State
of Uttaranchal) (2007) 8 SCC 418)"
28. Before interfering in tenders or contractual
matters, in the exercise of its power of judicial review, the
Court should pose to itself the following questions : (i)
Whether the process adopted or decision made by the
authority is mala fide or is intended to favour someone or
the process adopted or the 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 the relevant law could have reached'; and
(ii) Whether public interest is affected. If the answers are
in the negative, there should be no interference in
proceedings under Article 226 of the Constitution of
India."
"124. Should the tendered work be interdicted at the
behest of a person or a company which, admittedly, does
not have the prescribed experience (as stipulated as the
qualification requirement in the tender notification) to
execute a work of this complexity and magnitude? It must
be borne in mind that the jurisdiction which this Court
exercises is in larger public interest and, even if a
technical flaw is detected, interference would be justified
only if this Court is satisfied that larger public interest
would be served thereby. On a challenge to the award of
a contract, or invitation to tender, by a public authority or
the State, this Court must be satisfied that there is some
element of public interest involved in entertaining such a
petition. The elements of public interest are (1) public
money would be expended for the purposes of the
contract; (2) the goods or services which are being
commissioned are for a public purpose; (3) the public
would be directly interested in the timely fulfilment of the
contract so that the services become available to the
public expeditiously; and (4) the public would also be
interested in the quality of the work undertaken or goods
supplied by the tenderer."
11
The purpose of judicial review is to check whether the choice or
decision is made 'lawfully', and not to check whether the choice or
decision is 'sound' and in the present case, in the light of the discussion in
the previous paras, the decision of the respondent ONGC is found to be
made lawfully. In the facts and circumstances of the case and in the light
of the case law discussed above, it would be wholly inappropriate,
therefore, for this Court to interfere with the action of the respondents in
deleting Clause 1.5 in Para-2 Bid Evaluation Criteria. I see no reason,
therefore, to interdict the tender notification at the behest of the
petitioner who, admittedly, did not even participate in the tender, even
though it is qualified to participate in the tender.
In view of the aforesaid reasons, the Writ Petition fails and is,
accordingly, dismissed. There shall be no order as to costs.
As a sequel thereto, the miscellaneous petitions, if any, pending in
this Writ Petition shall stand closed.
_____________________________
KONGARA VIJAYA LAKSHMI, J.
Date: 26th February 2020 Note:
LR copy to be marked. (B/O) Nsr 12 THE HON'BLE SMT JUSTICE KONGARA VIJAYA LAKSHMI Writ Petition No.19737 of 2019 Date: 26th February 2020 Nsr