Bombay High Court
Punj Lloyd Ltd vs Oil And Natural Gas Corporation Limited ... on 19 October, 2011
Author: D.Y. Chandrachud
Bench: D.Y. Chandrachud, A.A. Sayed
VBC 1 WP644.11-19.10
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O.C. J.
WRIT PETITION NO.644 OF 2011
Punj Lloyd Ltd. ...Petitioner.
Versus
Oil and Natural Gas Corporation Limited & Ors. ...Respondents.
.......
Mr.Iqbal Chagla, Senior Advocate with Mr.Janak Dwarkadas, Senior
Advocate, Mr.Sanjay Jain, Mr.Nimesh Bhatt, Ms.Jinal Gogri and
Ms.Nivedita Kundaji i/b.Mr.Nivit Srivastava for the Petitioner.
Mr.Goolam Vahanvati, Attorney General of India with Mr.Nishit
Dhruva, Mr.Prakash Shinde and Ms.Swati Bodhanwala i/b. MDP &
Partners for Respondent No.1.
Mr.R.A.Dada, Senior Advocate with Mr.M.P.Rao, Senior Advocate,
Mr.H.K.Sudhakara and Ms.Misba Dada i/b. Khaitan & Co. for
Respondent No.3.
......
CORAM : DR. D.Y. CHANDRACHUD &
A.A. SAYED, JJ.
October 19, 2011.
ORAL JUDGMENT (PER DR. D.Y. CHANDRACHUD, J.):
The Petitioner in these proceedings under Article 226 of the Constitution seeks to challenge the award of a contract by the Oil ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 2 WP644.11-19.10 and Natural Gas Corporation Limited (ONGC) - the First Respondent
- to the Third Respondent, a Company incorporated under the laws of Singapore. The Petitioner claims a price preference on the ground that it is a domestic bidder. According to ONGC, the Petitioner has failed to establish its claim to a price preference. The Bid Evaluation Criteria required inter alia, the submission of a certificate in original of the statutory auditor of the bidder indicating through various details that no more than fifty percent of the work measured in terms of value has been subcontracted to foreign bideders. Moreover, the certificate had to be submitted with the unpriced bid. According to ONGC and the Third Respondent (to whom, a decision has been taken to award the contract), the certificate issued by the statutory auditor of the Petitioner did not fulfill the conditions laid down in the Bid Evaluation Criteria. Moreover, the certificate was not furnished with the unpriced bid.
2. The First Respondent issued a notice on 28 May 2010 inviting tenders for a Sub-Sea Pipeline Project, described as being for ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 3 WP644.11-19.10 "B-193 Field Development". The Bid Evaluation Criteria were contained in Appendix A-6 of the bid document. Bids were required to be submitted under a two Bid System as per Clauses (10) and (11) of Part-I of Volume-I of the bid documents. Clause 25 of the Bid Evaluation Criteria stipulated as follows:
"The tender documents are available for viewing and downloading from the e-procurement website of ONGC.
Please note that all tender forms and supporting documents are to be submitted through ONGC's e-Procurement site only. The bid along with all appendices and copies of documents (including scanned copies of the documents required in original) should invariably be submitted in the 'document area in C-folder' through ONGC's e-bidding portal, before the scheduled date and time for the tender closing. All the documents uploaded shall be digitally signed by the authorized signatory of the bidder. However, the following documents should be submitted in physical form also, in a sealed envelope superscribed as "Physical documents against e-procurement Tender Number ........., opened on ..........", so as to reach to the purchaser's office (as indicated in "Invitation to Bid") within 5 working days from foreign bidders and 3 working days from Indian bidders, after opening of bids (submitted through the e- bidding portal):
i) The original bid security.
ii) The power of attorney or authorization, or any other document consisting of adequate proof of the ability of the signatory to bind the bidder, in original.::: Downloaded on - 09/06/2013 17:52:00 :::
VBC 4 WP644.11-19.10
iii) 'Integrity Pact' duly signed.
iv) Documents required for claiming price preference as per BEC clause C-5) a, if applicable in separately sealed envelope super scribed with Tender No and "Documents for Price Preference".
The lumpsum prices shall be quoted by the bidder as per Appendix A-2 and the breakup of the same shall be submitted as per Appendix A-3 as provided in tender documents. Scanned copy of signed priced bid i.e. Appendix A-2 and Appendix A-3, may be loaded as attachment to price bid under "RFx information" tab of e- procurement engine price bid. The prices quoted in the online format of ONGC's e-procurement engine under any line item shall not be given any cognizance.
The price bids submitted in physical form against e- procurement tenders shall not be given any cognizance.
Offers with techno-commercial bid indicating/disclosing prices at any stage before opening of price-bid shall be rejected outright."
Section-C of the Bid Evaluation Criteria laid down the criteria for price evaluation of bids and, in so far as is material, provided for price preference to domestic bidders to the extent of ten percent over the lowest acceptable foreign bid. The Price Preference clause is as follows:
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"C-5) Price Preference/Purchase Preference
a. Price Preference
Domestic Bidders would be entitled to a price preference of ten percent (10%) over the lowest acceptable (quoted) foreign bid subject to domestic bidders providing all evidence necessary to prove that they meet the following criteria:
(i) is registered within India,
(ii) have majority ownership by nationals of India and
(iii) not subcontract more than 50% of the Works measured in terms of value to foreign contractors.
For (iii) above, an original certificate from practicing Statutory Auditor engaged by the company (bidder) for auditing their annual accounts indicating therein various details, which could establish that no more than 50% of the works measured in terms of value has been sub-contracted to foreign contractors must be furnished along with unpriced bid. It must be noted that above information so furnished, if at any stage, found wrong, incorrect or misleading, will attract action as per rules/law."
Clause D-3 of the Bid Evaluation Criteria stipulated that in the event of there being a contradiction between the Bid Evaluation Criteria and a clause appearing elsewhere in the Bidding Documents, the provisions of the former shall supersede all such clauses. The unpriced ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 6 WP644.11-19.10 techno commercial bids were required to be submitted in the prescribed bid proforma. Both the invitation for bid documents as well as the Bid Evaluation Criteria stipulated that offers in which the techno commercial bid indicated or disclosed prices at any stage before the opening of the price bid shall be rejected outright. The techno commercial bid was required to be submitted in C-Folder while the priced commercial bid was required to be submitted in the RFx Folder. The techno commercial bid was inter alia required to contain a disclosure of the facility of the bidder which he proposed to deploy in the execution of the work and if any part of the work was proposed to be sub-contracted, the proposed sub-contractors together with the scope of the work and their role and responsibility were to be indicated in the bid. Appendix B-6 was the proforma detailing the division of the scope of the work and location of the work centre.
3. The Petitioner submitted a bid in response to the notice inviting tenders. The First Respondent proposed to award the contract on the basis of international competitive bidding. The unpriced bids ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 7 WP644.11-19.10 were opened by the First Respondent on 18 August 2010. The bid submitted by the Petitioner was found to be technically and commercially acceptable. Price bids were opened by the First Respondent on 25 October 2010. According to the Petitioner, the price which it had quoted was in the amount of US$ 131.32 million and was 5.22% higher than the bid of the Third Respondent which was in the amount of US$ 124.80 million. The Third Respondent was the lowest bidder. The Petitioner, however, claimed that it was entitled to the award of the contract on the basis of a price preference of ten percent that was available to domestic bidders.
4. The initial process of evaluation was carried out by the Tender Committee which was convened on 20 November 2010 to consider the award of the contract. The Tender Committee in the course of its evaluation, noted that the Petitioner had met the condition that a domestic bidder must be registered within India and have a majority ownership of nationals of India. The third condition required that the bidder should not sub-contract more than 50% of ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 8 WP644.11-19.10 the work measured in terms of value to foreign contractors. The observations of the Tender Committee in that regard were that "the certificate submitted by the statutory auditors M/s.S.R. Batliboi does not clearly bring out about the sub-contracting" and that the certificate made a reference only to the foreign cost component. The Tender Committee was in that context, referring to a certificate that was furnished by the Petitioner of their statutory auditors, S.R. Batliboi & Co. on 16 August 2010. The auditors' certificate was to the following effect:
"We have received from the Company a working of the budgeted cost of the proposed Project that bifurcates the cost between its local and foreign components. In terms of the said working of cost, and using exchange rate of Rs. 46.50 for USD, the foreign cost component is less than 50% as verified based on the attached Annexure."
The Tender Committee noted that there was a difference in the language of the certificate submitted by the Petitioner for the present tender and for the previous tender and that it was prudent to examine the sub-contracting arrangement indicated by the Petitioner in the bid amongst their Indian or, as the case may be, foreign vendors and ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 9 WP644.11-19.10 sub-contractors together with the price bid and the certificate furnished by the auditors to ascertain whether the Petitioner fulfilled the criteria of sub-contracting not more than 50% of the work measured in terms of value to foreign contractors. In that regard, the Committee upon reviewing the agency and activities approved for the execution of the work inferred that the minimum and the maximum extent of sub-contracting had been worked out considering the activities which were most likely to be sub-contracted to foreign agencies. The Committee observed as follows:
"3.2.3 TC reviewed the activities and the agencies approved to execute the scope of work, from this it can only be inferred that the maximum and minimum sub-
contracting which is possible is worked out considering that activities which are most likely to be sub-contracted due to the agencies indicated are foreign and also the bidder M/s.PLL is likely to import procurement activities. In the case of maximum sub-contracting certain activities at 10 & 11 is indicated by M/s.PLL and foreign agency. Since there is lot of uncertainty whether it will be performed by himself or by other, therefore, it is considered under sub-contracting based on that the table indicating the status." (emphasis supplied).
In a table which was appended to the note of the Tender Committee, it was deduced that the minimum and maximum extent of sub-::: Downloaded on - 09/06/2013 17:52:00 :::
VBC 10 WP644.11-19.10 contracting to foreign contractors would be 32.10% and 54.87%.
Based on the assumption of sub-contracting provided by the bidder under different categories of foreign and Indian sub-contractors, the Tender Committee recommended that the contract be awarded to the Petitioner on the basis of a price preference but, subject to the Petitioner matching the lowest bid and providing an explicit conformity certificate of sub-contracting "as deliberated above".
5. The Tender Committee forwarded its recommendations to the Executive Purchase Committee (EPC) of the First Respondent.
The Third Respondent made a complaint to Independent External Monitors (IEM) on 24 November 2010. The IEM was a purely recommendatory mechanism set up by the First Respondent to assist in the evaluation process. The IEM furnished its opinion on 1 December 2010 by which it came to the conclusion that all documents which were required to be furnished along with the unpriced bids were not furnished by the Petitioner. The Petitioner was found not to have submitted a certificate to establish that the value of the work ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 11 WP644.11-19.10 sub-contracted to foreign contractors was not going to be in excess of 50%, together with the unpriced bid. The IEM furnished a supplementary opinion of 2 December 2010 to the effect that requirement for securing a 10% price preference had not been fulfilled by the Petitioner.
6. After submitting representations on 5 and 8 December 2010 to the IEM, the Petitioner challenged in writ proceedings before this Court under Article 226 of the Constitution, the proceedings before the Second Respondent, the IEM, on the ground that it has not been furnished with an adequate opportunity of representing its case. On 7 February 2011, this Court disposed of the Writ Petition in terms of an order passed by consent. The consensual arrangements between the parties contemplated that (i) A copy of the recommendation made by IEM would be given to the Petitioner; (ii) The Petitioner would be at liberty to furnish to the First Respondent further material on the recommendation and on the question as to whether it was entitled to a price preference; (iii) The Executive Purchase Committee ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 12 WP644.11-19.10 (inadvertently referred to as the Tender Purchase Committee) while considering the report of the IEM would have due regard to the additional material which was produced by the Petitioner; and (iv) A copy of the material supplied by the Petitioner would also be forwarded to the Third Respondent.
7. On 19 February 2011, a representation was made by the Third Respondent to the IEM. On 2 March 2011, the IEM recorded its opinion to the following effect :
"10. In the matter before us, the issue was and remains non-furnishing of information in respect of price preference required by Clause 25. While Punj Lloyd have argued that this would have led to disclosure of price, it has been brought to our attention that in an earlier case, the Statutory Auditor of Punj Lloyd, M/s.S.R.Batliboi had furnished a price preference certificate which was filed by Punj Lloyd with ONGC, and which in no way compromised the bid price of Punj Lloyd, This matter was put to the representatives of Punj Lloyd and they explained that the certificate was revised because they now believe that the earlier certificate was incomplete. However, they were unable to provide any reason for reaching this conclusion because no agency and, in particular, ONGC had questioned the earlier certificate issued by S.R.Batliboi, the same Auditor who has issued the price preference certificate in the present case. We believe that there is not much profit in trying to investigate the reasons for this change;::: Downloaded on - 09/06/2013 17:52:00 :::
VBC 13 WP644.11-19.10 unfortunately, the consequence of doing so must lie with the entity making the change. The change was made by Punj Lloyd without any extraneous reasons and, therefore, the responsibility and consequences would seem to remain with them."
Following this process, a comprehensive brief was put up before the Executive Purchase Committee for the award of the Contract together with the observations of the Engineering Services division. A supplementary brief containing the documentary material was placed for the consideration of the Executive Purchase Committee (EPC).
The EPC deliberated upon the matter on 10 March 2011. The deliberations and decision of the EPC were minuted to the following effect:
"15. EPC deliberations/decision:
1. It was brought out that an EPC agenda brief was submitted on 23.11.10 with recommendation to award the work to M/s.PLL subject to matching the price with L1 and providing an explicit conformity certificate of subcontracting to qualify for Price Preference. After submission of agenda brief, one of the bidders M/s.Swiber Offshore Construction Pte.Ltd., Singapore made representation to IEM. Therefore, the case was not taken ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 14 WP644.11-19.10 up by the EPC on 24.11.2010.
Vide opinion dated 02.12.2010, IEMs had concluded that on interpretation of clause 10.3 of ITB and read with clause C-5a of the BEC, the requirement for securing 10% price preference has not been fulfilled by the Consortium of Punj Lloyd Limited and PT-Punj Lloyd, Indonesia.
A Writ Petition was filed by M/s.Punj Lloyd Limited in the High Court. As per the court verdict, the subject Petition is disposed of by a direction to the effect that the Petitioner would be at liberty to furnish to the First Respondent such further material that may have a bearing on the recommendation of the IEM and on the question as to whether the Petitioner is entitled to a price preference under the tender condition. The Tender Purchase Committee while considering the report of the IEM would be at liberty to have due regard to the additional material which may be produced by the Petitioner.
Based on the court verdict, representations received from both the bidders and discussions held with ONGC and both the bidders, IEMs have given their opinion dated 02.03.2011 that in not furnishing the price preference document in electronic format in the C-folder as required vide Clause 25, the offer of Punj Lloyd was non- compliant with the conditions stipulated for eligibility for price preference.
In view of above, ES opined that the documents submitted by Consortium of Punj Lloyd Limited and PT-Punj Lloyd Indonesia do not qualify for Price Preference."
::: Downloaded on - 09/06/2013 17:52:00 :::VBC 15 WP644.11-19.10 The EPC accordingly approved the recommendation for the award of the contract to the First Respondent, the lowest bidder, in the amount of US$ 124.80 million. Following this, the contract has been awarded to the Third Respondent on 10 March 2011.
8. These proceedings were instituted on 11 March 2011 to challenge the award of the contract to the Third Respondent. The Petition was allowed by a Division Bench of this Court on 6 April 2011. The Division Bench held that a certificate of the statutory auditors to the effect that not more than 50% of the work measured in terms of the value would be sub-contracted to foreign contractors was not an essential condition of the tender document. The Petitioner submitted a certificate in the RFx folder on the same day as the information in C-Folder and they were held not to have gained any unfair advantage. Nor, according to the Division Bench, had ONGC suffered any prejudice. The Division Bench held that the Petitioner had committed a technical breach of the conditions of the tender ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 16 WP644.11-19.10 which had not resulted in any prejudice to the interest of the First or the Third Respondents. Moreover, the Division Bench was of the view that it was not possible for the Petitioner to submit a certificate of the statutory auditors with the unpriced bid, because that would have resulted in a disclosure of the price quoted by the Petitioner in breach of the tender condition that a bidder cannot disclose his price before the price bid is opened. Before the Division Bench, it was sought to be urged that the certificate of the statutory auditor submitted by the Petitioner was not in compliance with the tender conditions. The Division Bench held that the Third Respondent was not entitled to raise this point not having raised it before the IEM in its representation dated 19 February 2011. Similarly, the Division Bench held that the Third Respondent was not entitled to question before the Court the sufficiency of the certificate of the statutory auditor furnished by the Petitioner. For these reasons, the Division Bench came to the conclusion that the reasons furnished by the First Respondent for rejecting the offer of the Petitioner and for denying the Petitioner the benefit of the price preference was arbitrary. The ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 17 WP644.11-19.10 award of the contract to the Third Respondent was accordingly set aside and rule was made absolute.
9. The judgment of the Division Bench was carried in appeal before the Supreme Court both on behalf of the First Respondent and the Third Respondent. By a judgment dated 27 July 2011, the Supreme Court held that the Division Bench was not right in coming to the conclusion that the First and Third Respondents were precluded from questioning the validity of the certificate and the sufficiency of the documents appended by the Petitioner.
Accordingly, the Supreme Court was of the view and Counsel appearing for the parties agreed that it would be appropriate if the matter is remitted back to the High Court "for deciding the issue regarding the validity of the certificate and sufficiency of the documents appended thereto". The judgment of the Division Bench was accordingly set aside. The Supreme Court observed that all contentions of the parties were kept open on the issue in question and on the issue already decided and that nothing contained in the order ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 18 WP644.11-19.10 shall be construed as an expression of any opinion on the merits of the dispute. Upon remand, these proceedings have accordingly been listed for final arguments.
10. On behalf of the Petitioner Learned Senior Counsel submitted that (i) The sufficiency of the certificate of the statutory auditor was concluded by the Tender Committee and by the IEM and was not challenged either by the First or Third Respondents; (ii) The Petitioner was ousted from the award of the contract only on the ground that the certificate had not been submitted in the C-Folder;
(iii) The auditors' certificate could not have been submitted in C-
Folder for the reason that submission of the certificate with the unpriced bid would have resulted in a disclosure of the price bid and would have led to an invalidation of the bid; (iv) The instructions to bidders which provided that the certificate should be submitted with the price bid were contrary to the Bid Evaluation Criteria and as a matter of fact, the Petitioner had furnished the certificate in the RFx Folder at the same time as the submission of the C-Folder.
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Consequently, no advantage was gained; (v) The relevance of the
certificate of the statutory auditor would come into being only after price bids were opened; (vi) In a judgment of a Division Bench of this Court in Pipavav Shipyard Limited vs. Oil and Natural Gas Corporation Limited,1 this Court had held that the statutory auditor's certificate must contain necessary details to establish that not more than 50% of the work of the contract was being sub-contracted to foreign contractors. The disclosure of those details in the price bid would have resulted in a disclosure of the price quoted by the Petitioner and would have resulted in an invalidation of the bid.
11. The Learned Attorney General of India appearing on behalf of the First Respondent submitted that (i) Ex-facie the certificate that was submitted by the statutory auditors of the Petitioner was based on a bifurcation of the cost between its local and foreign components and was clearly not in terms of Clause C-5 of the Bid Evaluation Criteria which required a certificate to establish that not more than 50% of the work measured in terms of value has been sub-contracted 1 Writ Petition (Lodging) No.2843 of 2010 decided on 22 December 2010 ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 20 WP644.11-19.10 to foreign contractors; (ii) The Tender Committee, in its initial recommendations, as well as the Engineering Services division had opined that there was a considerable amount of uncertainty as to whether the activities under the contract would be performed by the Petitioner or by other contractors as a result of which the Committee had proceeded to estimate that between 32.10% to 54.87% of the work under contract would be performed by foreign contractors; (iii) The Tender Committee while recommending the award of the contract to the Petitioner had, however, required an explicit conformity certificate of sub-contracting thereby recognizing that the certificate which had been submitted by the Petitioner was not in conformity with the tender conditions; (iv) The Executive Procurement Committee was fully apprised of all the facts and circumstances which is evident from the detailed brief and supplementary brief that was presented before the decision was taken; (v) On 24 March 2011, a detailed award note was prepared under which the earlier view was rectified and a decision was taken to award the contract to the Third Respondent. The proceedings which ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 21 WP644.11-19.10 took place on 27 November 2010 were before the Purchase Committee met to take a conscious decision in the matter; (vi) There was, therefore, no flaw in the decision making process. The initial view of the Tender Committee to recommend the award of the contract to the Petitioner, despite the uncertainty in the bid submitted by the Petitioner, was rectified. In conclusion, the Learned Attorney General of India submitted that (a) Ex-facie, the certificate issued by the statutory auditors on behalf of the Petitioner did not disclose an application of mind by the auditors to the tender conditions; (b) There was no examination of the relevant record; (c) The auditors adopted mechanically a working furnished by the Petitioner which was based on cost and on the foreign and domestic components and, was therefore, not in accordance with the terms of the tender. As a matter of fact, the Petitioner had itself furnished earlier on 12 December 2009, a proper certificate in relation to another contract which belies the submission that the submission of a certificate as required was not possible; (d) The record shows that the Tender Committee had initially on the basis of inadequate and insufficient ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 22 WP644.11-19.10 material produced a working which showed the element of sub-
contracting varying between 32 to 54% despite having found that the bid itself was uncertain; (e) If the Petitioner had any doubt about whether the submission of a statutory auditors' certificate together with the unpriced bid would result in a violation of the bid criteria, it could have well raised an issue in the pre-bid meeting. At no stage was it submitted by the Petitioner that the requirement of Clause C-5 of the Bid Evaluation Criteria was contradictory or unacceptable.
12. Learned Senior Counsel appearing on behalf of the Third Respondent supported the submissions which were urged on behalf of the First Respondent and urged that (i) The issuance of a certificate of the statutory auditors as required in Section C-5 of the Bid Evaluation Criteria is a crucial requirement which forms the basis of a claim of price preference by a domestic bidder; (ii) Clause 11.1 of the Invitation to bid contains provisions in regard to the techno commercial bid and required a disclosure of all sub-contracts; (iii) The provisions of clause 25 of the Bid Evaluation Criteria as well as ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 23 WP644.11-19.10 Clause C-5 leave no manner of doubt that the documents required for claiming a price preference were to be submitted with the unpriced bid. The Petitioner having failed to do so, its bid was not compliant;
and (iv) The certificate of the statutory auditor submitted by the Petitioner contained a bifurcation of cost between foreign and local components and was not in compliance with the tender conditions.
13. The rival submissions now fall for determination.
14. The First Respondent had invited bids for the award of a contract for its Sub-sea Pipeline Project on the basis of international competitive bidding. Bids were required to be submitted in two folders. The unpriced techno commercial bid had to be submitted in the C-Folder through the e-bidding portal, while the priced bid was required to be submitted in the RFx Folder. The Bid Evaluation Criteria in Appendix A-6 contained categoric provisions in clause D-3 that in the event of any contradiction between the Bid Evaluation Criteria and clauses appearing elsewhere in the bid document, the ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 24 WP644.11-19.10 former would supersede all such clauses. Clause 25 of the Bid Evaluation Criteria stipulated that the bid along with all appendices and copies of documents including scanned copies of the documents required in original, should invariably be submitted in the C-Folder;
all documents uploaded were required to be digitally signed by the authorized signatory of the bidder. However, certain documents were also required to be submitted in the physical form. Among them were documents required for claiming a price preference under clause C-5, if applicable, which had to be submitted in a separate sealed envelop.
15. A price preference for domestic bidders was provided in Clause C-5 of the Bid Evaluation Criteria. The price preference postulates that a domestic bidder, who is otherwise qualified and eligible, would be entitled to the award of a contract even if his bid is higher than that of a qualified foreign bidder, so long as the variation in the bid is within a margin of 10%. It is in that sense that a price preference of 10% is made available to a domestic bidder over a lower acceptable foreign bid. The grant of a price preference was, however, ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 25 WP644.11-19.10 conditional on the fulfillment of three conditions. Firstly, the bidder must be registered within India; secondly, the bidder must have a majority of ownership of nationals of India; and thirdly, the bidder should not sub-contract more than 50% of the work measured in terms of value to foreign contractors. The grant of a price preference is a concession or an incentive which is made available to domestic bidders. Hence, it is but natural that both in fact and in law a bidder who seeks a price preference must strictly comply with the conditions on which such a preference is made available. The requirement that a domestic bidder should not sub-contract more than 50% of the work measured in terms of value to foreign contractors is designed to ensure that the benefit of a price preference is made available only to a genuine domestic bidder. In other words, a price preference cannot enure to the benefit of a bidder where over a half of the work measured in terms of value is going to be sub-
contracted to foreign contractors. In order to establish the fulfillment of this condition, Clause C-5 requires an original certificate from a practicing statutory auditor engaged by the bidder for auditing its ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 26 WP644.11-19.10 annual accounts indicating various details which would establish that not more than 50% of the work measured in terms of value has been sub-contracted to foreign contractors. Clause C-5 contains a specific requirement that such a certificate had to be furnished along with the unpriced bid. The conditions on which a price preference was made available to domestic bidders were essential conditions of the tender.
The object and purpose of the conditions was to ensure that a price preference should be availed of by a bidder who can be regarded as a genuine domestic bidder. The manner in which that condition was required to be established was through the submission of a certificate of a statutory auditor. The requirement that the certificate of the statutory auditor should be submitted together with the unpriced bid was not an unessential or ancillary condition, but was a condition which lay at the heart and foundation of the price preference clause.
The Petitioner cannot be heard to urge that the instructions to bidder initially contained a condition to the effect that the report of the statutory auditor be furnished with the priced bid, or that the clause which was introduced in the Bid Evolution Criteria was a mistake.
::: Downloaded on - 09/06/2013 17:52:00 :::VBC 27 WP644.11-19.10 The Bid Evaluation Criteria would prevail over and supersede any other clause to the contrary and hence, Clause C-5 was to have overriding effect. Significantly, the tender document contained various provisions enabling bidders to seek a clarification of the First Respondent if there was any doubt. Among them, was clause 7 of the Invitation to bid which made provision for prospective bidders to seek a clarification in regard to bidding documents. A similar provision was contained in Appendix A-9 in the following terms:
"In case bidders wish to seek any clarification to the bid package, they shall submit a hard and soft copy of same in a proper format giving reference to bid volume number, section number, clause number, page no. & description of bid clause & clarification sought in Microsoft Word file.
Company shall provide clarifications to their queries either through addendum or during Pre-Bid Conference prior to the dead line of submission of bids."
Clause 32 of the bid document contained a provision that the First Respondent expected bidders to raise doubts with regard to terms and conditions of the bidding document for discussion or clarification during the pre-bid conference. A pre-bid conference was as a matter of fact held. The Petitioner submitted a certificate confirming that all ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 28 WP644.11-19.10 the technical and commercial doubts or clarifications with regard to the terms and conditions of the bid document had been discussed and settled in the pre-bid conference. The Petitioner certified that a techno commercial compliant bid had been submitted with no exception or deviation whatsoever and that in the event that the First Respondent found that there was a deviation or exception in the bid document, the bid would be rejected outright. A check list of documents was provided in Appendix A-5 which required bidders to disclose whether they have duly filled in all appendices of the bidding documents and whether all the terms and conditions of the bidding document have been accepted. The Petitioner did not raise any doubt nor did it seek any clarification in the course of the pre-bid meeting.
The only possible conclusion, therefore, was that the entitlement claimed by the Petitioner to the benefit of a price preference under Clause C-5 was required to be evaluated strictly on the touch stone of whether they had complied with the provisions of Clause C-5.
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16. Plainly, in our view, the Petitioner failed to do so for two reasons. Firstly, the Petitioner did not submit a report of the statutory auditor indicating that not more than 50% of the work measured in terms of value would be sub-contracted to foreign contractors along with the unpriced bid. Counsel appearing on behalf of the Petitioner, however, submitted that the failure to do so would not result in the invalidation of the bid in view of Clause 27 of the Bid Evaluation Criteria. Now, Clause 27 stipulates that offers of a certain kind would be rejected and among them in sub-clause (b) are offers which are not submitted in an e-form through the e-procurement engine, except documents mentioned in Clause 25 of the Bid Evaluation Criteria.
The argument, however, fails to take notice of the position that a failure to establish the condition required to avail of a price preference does not result in the invalidation of the bid or the rejection of the bid. A contractor who claims a price preference on the ground that he is a domestic bidder, but fails to comply with the requirements of clause C-5 is still entitled to participate in the bidding process though without a price preference. In other words, ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 30 WP644.11-19.10 disentitlement to a price preference does not invalidate the bid per se but results in a situation where the price bid of the contractor is considered together with the price bids of other bidders on a footing of equality. The price preference represented by a margin of ten percent is in such cases not attracted. That as a matter of fact is what happened in the facts of the present case.
17. The second, and to our mind, an equally important reason why the claim to price preference submitted by the Petitioner was liable to be rejected is the next aspect which this Court is bound to consider in view of the judgment of the Supreme Court dated 27 July 2011. While setting aside the order of the Division Bench dated 6 April 2011, the Supreme Court specifically directed this Court to decide "the issue regarding the validity of certificate and sufficiency of the documents appended thereto". Now, in this regard, it merits emphasis that what the Bid Evaluation Criteria required in Clause C-5 was that the report of the statutory auditor must indicate "various details" which could establish that more than 50% of the works ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 31 WP644.11-19.10 measured in terms of value has not been sub-contracted to foreign contractors. The Petitioner submitted a certificate of M/s.S.R.Batliboi & Co. in which it was stated that the auditors have received from the Petitioner a working of the budgeted cost of the proposed project with a bifurcated cost between its local and foreign components. Plainly, this did not constitute a disclosure with reference to the tender document. The tender document requires an application of mind by the statutory auditors to the extent to which the work measured in terms of value was to be sub-contracted to foreign contractors. This ex-facie does not emerge from the certificate of the statutory auditors.
The annexure to the certificate contains a bifurcation between material and services in Indian rupees and against the imported component in US dollars. The Tender Committee noticed in the course of its initial recommendation dated 23 November 2010 that the certificate submitted by the Petitioner did not clearly bring out the extent of sub-contracting and that it mentioned only a foreign cost component. Despite this the Tender Committee proceeded to make its own assessment noting that there was a lot of uncertainty on ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 32 WP644.11-19.10 whether certain activities would be performed by the Petitioner or by others. The Tender Committee, when it recommended the award of the contract to the Petitioner, nonetheless required the Petitioner to match the price of the lowest bidder and to provide "an explicit conformity certificate of sub-contracting as deliberated earlier". This itself is an indication of the fact that the Tender Committee was conscious of the fact that the certificate which was submitted by the Petitioner was not compliant.
18. Clause 11.1 of the Invitation to bid adverted to the contents of the unpriced techno commercial bid. Sub-clause (g) thereof requires a disclosure in relation to sub-contracting as follows:
"g) A description of the Bidder's facilities which he proposes to deploy for execution of works in sufficient details and clarity to enable the Company to make an evaluation and comparison of the tender. If any part of the Works is proposed to be sub-contracted or any back up consultant is proposed to be deployed, then the proposed sub-contractor(s)/back up consultant(s) along with their scope of work/extent of role/responsibility shall be indicated in the bid. The facilities to be provided/deployed by the sub-contractor/backup consultant shall be described.
Bidder to furnish complete details of his plan for fabrication of each component along with yard capacity and ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 33 WP644.11-19.10 present/expected yard loading."
Item 15 of Appendix A-9 similarly requires the bidder to furnish details of the experience of the executing agencies/sub-contractors for their respective scope of work. Bidders were required also to furnish the division of work among various agencies and details of work experience. The form in Appendix B-6 which deals with the division of the scope of work and location of the work centre requires the bidder to indicate the agency which will carry out each activity and if any activity was proposed to be carried out by a back-up consultant or agency, the bidder was required to indicate his role. The expression "works" was defined in clause 1.1.37 of the bid document to mean "all things or tasks, which the Contractor is, or may be, required to do to comply with its Contractual obligations" and to include "everything required to provide and complete full functioning facilities".
19. Now, it is in this background that a specific certification was required from the statutory auditors to establish that more than 50% ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 34 WP644.11-19.10 of the work measured in terms of value has not been sub-contracted to foreign contractors. The certificate which was furnished by the Petitioner was clearly deficient. The certificate did not contain any reference whatsoever to the extent to which the work under the contract would be sub-contracted to foreign or, for that matter, domestic sub-contractors. This deficiency, in our view, is highlighted even more significantly in the context of an earlier certificate which S.R.Batliboi & Co. (the same statutory auditors) had furnished to the Petitioner in the context of an earlier contract on 12 December 2009.
That certificate, which is referred to as an illustration, in contrast to the certificate granted in the present case, provided as follows:
"This report is issued for the limited use by the Company for submission to Oil and Natural Gas Corporation Limited (ONGC) for execution of laying of Sub-Sea Pipeline and platform modifications for MHN Re-Development plan, phase-II project. The procedures were performed solely to examine the below mentioned information based on the documents and records maintained by the Company and are summarized as follows:
1) Obtained the management's proposed plan to sub contract the work to contractors for execution of laying of Sub-Sea pipeline and platform modifications for MHN Re-
Development plan phase-II project.
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2) Obtained the management's proposed plan to sub contract the work to foreign contractors for execution of laying of Sub-Sea pipeline and platform modifications for MHN Re-Development plan, phase-II project.
3. Verified the arithmetical accuracy of percentage of the work proposed to be sub contracted to foreign contractors in comparison to total value of work to contractors.
Based on above procedures, we report that the value of works proposed to be subcontracted to foreign contractors does not exceed 50% of the total value of the work."
The certificate dated 12 December 2009 contains a clear reference to the proposed plan to sub-contract work to contractors for the execution of the work; the extent to which the work was to be sub-
contracted to foreign contractors and a verification of the arithmetical accuracy of the percentage of work proposed to be sub-contracted to foreign contractors in comparison to the total value of the work to contractors. This is in stark contrast to the certificate which was issued by S.R.Batliboi & Co. on 16 August 2010 in relation to the present contract which was, in the following terms:
"We have received from the Company a working of the budgeted cost of the proposed Project that bifurcates the cost between its local and foreign components. In terms of ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 36 WP644.11-19.10 the said working of cost, and using exchange rate of Rs. 46.50 for USD, the foreign cost component is less than 50% as verified based on the attached Annexure."
There was undoubtedly a failure on the part of the statutory auditors and the Petitioner to comply with the tender conditions. The certificate was plainly not compliant.
20. The submission which has been urged on behalf of the Petitioner is that if it was required to submit a report of the statutory auditors in compliance with condition C-5, that would have resulted in a disclosure of the price bid and, therefore, a violation of the tender conditions. The Petitioners rely upon the conditions contained in the Bid Evaluation Criteria which stipulated that a techno commercial bid indicating or disclosing price at any stage before the opening of the price bid shall be rejected outright. It is impossible to accept the contention of the Petitioner that a report of the statutory auditors in compliance with the requirement of Clause C-5 would result in the disclosure of the price bid and consequently, an invalidation of the bid. If the Petitioner had any such apprehension, it ought to have ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 37 WP644.11-19.10 submitted a request or clarification in the pre-bid meeting. The bid document provided sufficient recourse if a bidder had any doubt which was required to be clarified. The Petitioner did not take recourse to that remedy. As a bidder who claimed to be a domestic bidder and sought a price preference on that basis, the Petitioner was duty bound and obligated to submit a certificate of the statutory auditors in terms mandated by clause C-5. The Petitioner did not raise any doubt whatsoever before it submitted the bid, to the effect that the report of the statutory auditors as required would result in disclosure of the price bid. The submission which is urged before the Court, therefore, is completely hypothetical and does not warrant acceptance.
21. For these reasons, we are of the view that the Petitioner has failed to make out a case for interference of this Court under Article 226 of the Constitution. In a matter involving the award of a contract by a public authority or a body subject to writ jurisdiction, the Court has to consider as to whether the decision making process suffers ::: Downloaded on - 09/06/2013 17:52:00 ::: VBC 38 WP644.11-19.10 from an illegality, irrationality or procedural impropriety. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made in Tata Cellular v. Union of India.2 These principles were reiterated by a Bench of three Learned Judge of the Supreme Court in Siemons Public Communication Pvt.Ltd. vs. Union of India,3 where the Supreme Court held as follows:
"When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna."
22. On the touch stone of the law laid down by the Supreme Court, it is not possible for this Court to come to the conclusion that the decision making process was arbitrary or that the decision to award the contract to the Third Respondent suffers from any illegality.
2 (1994) 6 SCC 651
3 AIR 2009 SC 1204
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23. For these reasons, we dismiss the Petition. In the
circumstances of the case, there shall be no order as to costs.
( Dr.D.Y.Chandrachud, J.) ( A. A. Sayed, J.) ::: Downloaded on - 09/06/2013 17:52:00 :::