Madras High Court
M/S.Rnp Ravi Transport vs The Managing Director on 13 September, 2010
Author: V.Dhanapalan
Bench: V.Dhanapalan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :: 13-09-2010 CORAM THE HONOURABLE MR.JUSTICE V.DHANAPALAN W.P.Nos.16326 & 16327 OF 2010 M/s.RNP Ravi Transport, rep.by its Priprietor Mr.R.Ravichandran, No.333, Alagesan Road East, Mettupalayam Road, Coimbatore. ... Petitioner in both W.Ps. -vs- 1.The Managing Director, Tamil Nadu Civil Supplies Corporation, No.12, Tambu Swamy Road, Kilpauk, Chennai-10. 2.The Sr.Regional Manager, Tamil Nadu Civil Supplies Corporation, Coimbatore Region, Goundampalayam, Coimbatore. 3.M/s.Ramya Transport, rep.by its Partner Panneerselvam, No.103/1, Mahadevapuram Main Road, Mettupalayam, Coimbatore District. ... Respondents in W.P.No.16326/2010 1.The Managing Director, Tamil Nadu Civil Supplies Corporation, No.12, Tambu Swamy Road, Kilpauk, Chennai-10. 2.The Senior Regional Manager, Tamil Nadu Civil Supplies Corporation, Tirupur Region, Tirupur. 3.M/s.Ramya Transport, rep.by its Partner Panneerselvam, No.103/1, Mahadevapuram Main Road, Mettupalayam, Coimbatore District. ... Respondents in W.P.No.16327/2010 Petitions under Article 226 of the Constitution of India. For petitioner : Mr.R.Muthukumarasami, Senior Counsel, for Mr.A.Jeenasenan. For respondents 1 and 2 : Mr.P.Wilson, Addl.Advocate General, for Mr.V.Selvanayagam. COMMON ORDER
These Writ Petitions have been filed, praying for issuance of a mandamus, directing the 1st and 2nd respondents to reject the tender submitted by the 3rd respondent in pursuance to the notice inviting tender for transport of the essential commodities in the 2nd respondent region for the period from 01.07.2010 to 30.06.2011 and to consequently direct the 1st and 2nd respondents to award the contract in favour of the petitioner who is the lowest tenderer among the eligible tenderers in pursuance of the notice inviting tender for transport of essential commodities for the period from 01.07.2010 till 30.06.2011 to the 2nd respondent regions.
2. The facts that are necessary for disposal of these Writ Petitions are as follows :
2.1. The petitioner firm is involved in the business of transport, transporting food grains and various other products. One of the activities involved by the petitioner firm is transporting the food grains to first and second respondents by participating in the tender process and currently the petitioner is the sole transport contractor for the respondent corporation in the second respondent region for the year commencing from July 2009 to July 2010.
2.2. The respondent Corporation invited tender for transportation of essential commodities from the Food Corporation of India depot to various storage points belonging to the Corporation. The notice of inviting tender is for the period from 01.07.2010 to 30.06.2010 for which the respondent invited tenders during the first week of May,2010 and last date for obtaining the tender form was till 04.00 p.m. on 18.05.2010.
2.3. The tender process consists of two parts viz., Part-I Qualification Bid and Part-II Price Bid. The last date for submission of tender forms was 19.05.2010. The procedure which is being followed by the Corporation is, the tenderers who are found to be qualified in the technical bid by the tender committee are eligible for the price bid.
2.4. Apart from the petitioner, two other persons had also participated in the tender process, including the third respondent. Part-I technical bid was opened on 19.05.2010 relating to all the three tenderers. Every tenderer has to file the documents and furnish the particulars relating to Part-I qualification bid. As per Part-I (IV), the xerox copy of the valid Pan Number with the income tax authority of the firm/company/individual as applicable should be furnished. Therefore, the third respondent had to file xerox copy of the valid Pan Number, but the third respondent has filed a xerox copy of a Pan Number relating to one Panneerselvam, who is one of the partners of the third respondent firm and the requirement of furnishing the Pan Number by the firm has not been complied with.
2.5. As per the requirement contained in Part-I (VII), every tenderer must have an average turnover of rupees one crore for the preceding three years in goods transportation business duly certified by the Chartered Accountant and produce xerox copy of the Income Tax Returns with Income Tax Department Seal, Profit and Loss Statement, Balance Sheet, Saral Form and all these particulars have to be furnished as mentioned in the Annexure-III to the tender form which should be signed by the Auditor as well as the tenderer. The tenderer being a partnership firm, the said requirement had not been complied with. Under those circumstances, the petitioner was under the bona fide impression that the tender of the third respondent would be rejected for non-compliance of the requirement. Since the respondents had not taken any decision, the petitioner wrote a letter informing the respondents about the non-compliance of the conditions by the third respondent and requested the authorities not to consider the tender submitted by the third respondent.
2.6. The petitioner was informed by the respondents that opening of the Part-II tender was fixed on 12.07.2010. Immediately, after receipt of the information, again the petitioner wrote a letter to the official respondents not to open the price bid of the third respondent without considering the request of the petitioner about the disqualification of the third respondent. The respondents opened the price bid of all the three tenderers including the that of the third respondent. There are discrepancies in the rates quoted by the third respondent with regard to various slabs. Even though the technical bid was opened on 19.05.2010 and the price bid was opened on 12.07.2010, the respondents have not considered the request of the petitioner for rejection of the claim of the third respondent. Hence, this Writ Petition.
3. Respondents 1 and 2 have filed a counter stating as follows :
3.1. For appointment of Transport Contractor for Food Corporation of India and Non Food Corporation of India movement for the year 2010-2011 (01.07.2010 to 30.06.2011) in respect of 33 regions, Tender Notification was published in The Hindu and Daily Thanthi, inviting sealed tenders for transportation of essential commodities. Part-I (Qualification Bid) cover for Food Corporation of India movement for 2010-2011 in respect of Coimbatore Region was opened by the Tender Scrutiny Committee in the presence of the tenders on 18.05.2010. The first respondent, after verifying the Part-I Cover, has noticed the following :
(i)M/s.P.Ramya Transport, Mettupalayam, who registered their partnership deed on 07.05.2010, have submitted the bid signed as Thiru R.Panneerselvam, Managing Partner.
(ii)Turnover Statements for 2006-2007, 2007-2008 and 2008-2009 were furnished in the name of Thiru R.Panneerselvam.
(iii)Income Tax Return was filed in the name of R.Panneerselvam.
(iv)Pan Card was produced in the name of Thiru R.Panneerselvam.
3.2. Third respondent filed a case in W.P.No.12049 of 2010 and M.P.No.1 of 2010 in this Court praying to direct the first respondent to open the third respondent's part II Price bid cover and award transport contract to the lower rate quoted tender, whereupon this Court on 14.06.2010 ordered that as the petitioner had already applied, it was always open for him to participate in the tender. Since the rates quoted by third respondent were not aggregated with certain slabs, the other tenderers, who participated in the Food Corporation of India movement for Coimbatore region, raised an objection to disqualify the tender of M/s.P.Ramya Transport, Mettupalayam. Though the slab rates quoted by the third respondent i.e., M/s.P.Ramya Transport are not aggregated in certain slabs, the rate quoted by them is lesser when compared to the rate quoted by the other tenderers. The details are hereunder :
M/s.P.Ramya Transport, Mettupalayam : Rs.2,64,76,109.93 (L1) M/s.RNP Ravi Transport, Coimbatore : Rs.3,25,00,572.82 (L2) M/s.Muthukumar Transport,Coimbatore:Rs.3,38,37,581.17 (L3) 3.3. The Transport Tender Scrutiny Committee has suggested to consider the offer given by the third respondent which is lesser than the rate quoted by other tenderers in that movement. Accordingly, the third respondent is eligible for award of the contract., 3.4. The third respondent has registered the deed of partnership on 13.02.2010 with the following partners :
Mr.R.Panneerselvam, the Party of the First Part and Managing Partner;
Mr.A.Elango, the Party of the Second Part and Partner;
Mrs.P.Kamala, the Party of the Third Part and Partner.
Mr.A.Elango and Mrs.P.Kamala have authorised and empowered Mr.R.Panneerselvam as Managing Partner to represent before the Managing Director, TNCSC, for filing statements, documents and signing all tender documents and receive necessary reply or other subject in connection with transport tender. His statement is binding on them and their partnership firm P.Ramya Transport. Since the two partners of M/s.P.Ramya Transport, Mettupalayam, have authorised Mr.R.Panneerselvam, Managing Partner, to file statements, documents and signing all tender documents, the Pan Card, Annual Turnovers for the years 2006-2007, 2007-2008 and 2008-2009 and Income Tax Returns filed in the name of Mr.R.Panneerselvam, Managing Partner, have been accepted by the Transport Tender Scrutiny Committee and they are in order. Before opening the Part-II Price Bid cover, all the aspects noticed against the eligibility criteria have been examined in detail and only thereafter it was decided to open the Part-II Price Bid cover. As there is no specific clause mentioned in the tender condition to disqualify the tender documents for the reason that the slab rates are not aggregated, the Tender Scrutiny Committee has decided to accept the rate quoted by M/s.P.Ramya Transport, Mettupalayam, and the representation of the petitioner for rejecting the tender of the third respondent was turned down. The second respondent and the Tender Scrutiny Committee have identified M/s.P.Ramya Transport, Mettupalayam, as qualified tenderer on the ground that they produced required documents as per the tender condition duly signed by the Chartered Accountant and the rate quoted by them is lesser than the rate quoted by the other two tenderers. As per tender condition 5, TNCSC reserves the right to accept or reject any tender in whole or in part or all tenders on reasonable cause. The first respondent also reserves himself the right to waive, amend and relax any other tender condition in the interest of the Corporation. The writ petitioner, having quoted higher rate as compared to the rate offered by the third respondent, has no moral or legal right to claim the contract in his favour. Therefore, this Writ Petition is liable to be dismissed.
4. Third respondent has filed a counter, stating that they are having good experience in transport operations in various departments like, BSNL, Indco Serve, Coonnoor (Tamil Nadu Government), Tamil Nadu Cements Corporation and Tamil Nadu Civil Supplies Corporation; when the first and second respondents called for tenders for operation of the transport, transporting food grains and essential articles, they participated in the said tender and produced the entire relevant records; he is the Managing Partner of the company; since the firm is recently registered and not able to get PAN number in the name of the firm, being the Managing Partner of the firm, he produced xerox copy; the respondents 1 and 2 have the right to dispense with the production of the said copy; he is the lowest bidder and therefore he has been declared as the successful bidder; he correctly quoted the slab rates and their rate alone is the lowest when compared to others, whereby the Corporation saves several lakhs of rupees and that the petitioner cannot seek award of contract in his favour, as they quoted higher rate.
5. Learned Senior Counsel appearing for the petitioner would submit that as per the requirement relating to furnishing of the documents in respect of Part-I Technical Bid, every tenderer is expected to file a xerox copy of the valid Pan Number with the income Tax authority of the firm/company/individual as applicable and the third respondent being a partnership firm is expected to file the above document for the partnership firm, but, on the contrary, the xerox copy of the Pan Number of one of the partners alone is filed, which is a breach of conditions mentioned in Part-I Clause IV of the Tender Form. The next limb of his argument is that there is a clear violation of the condition contained in Part-I Clause VII, which stipulates that every tenderer is expected to file a certified copy of the Income Tax returns with the Income Tax Department seal, showing the profit and loss statement of the tenderer for the previous three years so as to prove the tenderer's average annual turnover of rupees One Crore; the firm was registered only on 07.05.2010 and the turnover of only one of the partners has been shown and therefore it cannot be construed as the turnover of the tenderer namely the partnership firm. The learned Senior Counsel, in support of his case, has relied on the following :
(i) a decision of the Supreme Court reported in (1996) 10 SCC 760 in the case of Shapers Construction (P) Ltd. v. Airport Authority of India :
"6. The learned counsel placed strong reliance on the judgment of this Court in New Horizons Ltd. v. Union of India1, in particular, paras 21 and 22 in support thereof. This case relates to previous experience and the question therein was whether the previous experience would be considered after submitting the tenders or before submitting the tenders? This Court had held that the question would arise only after the submission of the tender. In support of consideration of the tender thereof, the previous experience would play an important role for awarding the contract. In that case, this Court considered and held that at the inception, the tender forms cannot be refused on the ground that he had not proved the previous experience. That question has no relevance to the facts in these petitions. Under these circumstances, as stated earlier, the completion of the work of at least two runway/National highway works is a precondition for submitting the application. On their own admission, since the petitioners had not completed the works in hand, we cannot find any illegality in respondents not giving the tender forms nor in non-consideration of their cases pursuant to the interim direction given by the High Court."
(ii) a decision of the Supreme Court reported in (2005) 3 SCC 157 in the case of Laxmi Sales Corpn. v. Bolangir Trading Co. :
"12. We have heard the arguments of the learned counsel for the parties and perused the record. In our opinion, the High Court was not justified in coming to the conclusion that production of the documents mentioned hereinabove along with the tender form was not mandatory and the High Court was also not justified in coming to the conclusion that neither the rules and conditions governing the tender nor the advertisement calling for tender made it mandatory for an intending tenderer to produce those documents and specially proof of turnover for the relevant year 2001-02. We have already noticed from the various conditions in the tender form and annexures annexed thereto that production of supporting documents wherever applicable in Annexures I and J was one of the requirements of the tender and Annexure J specifically required at Sl. No. 7 the proof of turnover of the firm over the last two relevant years with supporting documents. The same annexure also required the tenderer to produce proof of work experience for the last two years with full details and supporting documents and the checklist had specifically mentioned that the production of proof of turnover with latest profit and loss account duly certified by a Chartered Accountant was a mandatory requirement.
13. In this background we are unable to accept the finding of the High Court that there was no mandatory requirement of the production of the above documents. As a matter of fact the High Court erred in coming to the conclusion in para 6 of its judgment in the writ petition that the advertisement in Annexure I to the writ petition only states that for Bolangir-Bhawanipatna, a tenderer must have a turnover of Rs.25 lakhs, but it does not anywhere state that audited profit and loss account has to be submitted by a tenderer showing a turnover of Rs.25 lakhs.
This finding of fact as noticed by us hereinabove is contrary to records and is an error apparent on face of the record.
14. Learned counsel for the respondent submitted that he along with the writ petition produced sufficient material to establish his turnover, which the High Court correctly accepted, but the learned counsel for the appellant, in our opinion rightly, contended that these turnovers really did not reflect the turnover of the relevant year. It is also relevant to note the fact that the allegation, that certification by a Chartered Accountant is not genuine, has not been rebutted by the respondent concerned."
(iii) a decision of this court delivered in W.P.No.47659 of 2006 dated 01.02.2007 in the case of S.Girija vs. General Manager, Food Corporation of India :
"8. There are two bids viz., technical bids and price bids. The technical bids as per clause 7(g) shall be opened first. The price bid of these tenderers would be opened if the technical bid is accepted. Therefore, unless the tenderers' technical bids are satisfactory, the request for opening the price bids cannot be considered. The respondent required the petitioner to prove her financial status for which several documents have to be submitted by her, including (i) letter from the bank and credit limits enjoyed; (ii) bank statement for the last six months from the bankers; (iii) latest solvency certificates from the Tahsildar and bank; (iv) latest income tax clearance certificate; (v) duly audited profit and loss account for the preceding 3 years; and (vi) duly audited balance sheet for the preceding 3 years. It is no doubt true that the petitioner was asked to produce the names of the banks, which can certify the financial status of the petitioner. But, the Bank certificates are not the only documents upon which the respondent would decide the financial health of the tenderers. The other documents mentioned above are also relevant.
9. The tenderers shall also submit statements as to whether the tenderer is a Hindu joint Family Business, Proprietary concern, Registered partnership firm or a Limited Company. In the event that the tenderer is a Proprietary concern or a firm or a limited company or a Hindu Joint Family, the date of birth of the Proprietor, partner, Director or the Kartha as the case may be, should be given. There should also be a certification that there are no undisclosed partners. Therefore, it is clear that the tenderers were required to be totally transparent with regard to their status.
11. It must be remembered that it is the case of the petitioner that it is the individual that had applied for the tender and not the firm. For the assessment year 2004-05, the individual, whose PAN is AAYPS8528 H, has declared an income from her business or profession of Rs.6356/-; for the assessment year 2005-06, the income from the business or profession is shown as Rs.11,211/-; and for the assessment year 2006-07, the individual has sustained a loss of Rs.4,18,895/-. Now, as regards the firm, whose PAN is AADFD-0334-P, for the assessment year 2005-06, the income from the business is shown as Rs.3,621/- and for the assessment year 2006-07, the income from the business or profession is shown as Rs.5,126/-. Now, according to the petitioner, it is only the individual who has applied for the tender. But the PAN number mentioned in the tender schedule is the firm's PAN number. The respondent's allegation that it is not clear whether the individual has applied or the firm, cannot be rejected.
12. If the committee which scrutinise the technical bids came to the conclusion from these materials that the petitioner did not have the financial status required for the grant of the tender, it does not appear to be unreasonable. In matters like this, the scope of interference of Court is very limited. Unless the decision is arbitrary or shocking or perverse and if it cannot pass the test of reasonableness, the courts will not interfere with the right of the respondent Corporation to decide which technical bids should be accepted.
13(6). ... 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. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at it 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.
15. Considering the matter from this perspective, we cannot interfere with the decision of the respondent. The application of the petitioner appears to have been made in her individual capacity, though in the name of Proprietor, and the PAN of the firm alone is given. If the respondent had entertained doubts that the petitioner had represented herself "as a sole proprietary concern for certain purpose and as a partnership firm for certain other purposes", we also cannot have quarrel with the same. "
(iv) a decision of this court reported in 2008 (5) MLJ 665 in the case of Ion Exchange Waterleau Ltd. v. The Commissioner, Madurai Municipal Corporation :
"20. The learned Senior Counsel appearing for the petitioner has placed heavy reliance on the decision of the Supreme Court in the New Horizons case wherein it was categorically held that the validity of the action of the Tender Evaluation Committee in not considering the tender submitted by the tenderer has to be considered in the light of the principle laid down in Tata Cellular case. Here, what is to be considered is, when the condition regarding previous experience in the tender notification was not fulfilled, whether the action of the Tender Accepting Authority in rejecting the petitioner's Technical Bid, can be regarded as arbitrary and unreasonable. In this regard, it is to be noted that the tenderer has been required in Section 2.2 (b) of the Bid Document to substantiate his previous experience with documentary proof and also to furnish credentials in the said field. In New Horizons case, it was held that a tender is not liable to be excluded from consideration on the ground of non-eligibility on account of lack of past experience and that when the tenderer fails to furnish with the tender, the required material by way of credentials of the past experience, the decision of the Tender Evaluation Committee to exclude the tender from the consideration was therefore not warranted by the terms and conditions for submission of the tender as contained in the tender notification. Whereas, in the instant case, admittedly, there is a specific clause, viz., Section 2.2(b) of the Bid Document which requires the tenderers to have the past experience in similar work. In other words, in New Horizons case, though the Superme Court has held so as stated above, it should be seen that there was no specific clause in the tender notification to the effect that the tenderer should have past experience which is not so in the case on hand inasmuch as, there is a specific clause to that effect, as referred to earlier. Thus, while giving anxious consideration to the ruling of the Supreme Court in New Horizons case, I am of the considered view that the facts and circumstances involved in this case are not akin to those in New Horizons case and as such, the said decision can, in no way, be of any help to the petitioner. Similarly, though it is held by the Supreme Court in the Reliance Energy case relied on by the learned Senior Counsel appearing for the petitioner that the doctrine of "Level Playing Field" is entitled to be invoked, it is clarified in the very same judgment that the said doctrine is subject to public interest and in this case as the petitioner has not fulfilled the qualification criteria prescribed in Section 2.2 (a) to (e) of the Bid Document, it is not entitled to claim the benefit of the Doctrine of "Level Playing Field", the reason being that the aspect of public interest is very much involved in the matter. In such view of the matter, this judgment also can be of no avail to the petitioner for the reason that the petitioner has failed to satisfy the requirements prescribed in Section 2.2 (a) to (e) of the Bid Document."
6. On the other hand, the learned Additional Advocate General appearing for respondents 1 and 2 would contend that in a challenge to the public contract, unless there is some element of public interest involved in entertaining a writ petition and the transaction is tained with mala fides, the Court has no power to intervene in the process of tender under Article 226 of the Constitution, as it would ultimately affect public money and the dispute is purely between two tenderers. He would consistently place his arguments, quoting the New Horizon's case to the effect that the new company, though having persons with experience in the field, has no experience in its name while the original company having experience in its name lacks persons with experience. While considering the requirement regarding experience, credentials are to be examined from a commercial point of view, which means, if the contract is to be entered with a company, the background of the company and the persons who are in control of the same and their capacity to execute the work have to be looked into. The learned Additional Advocate General also with persistent arguments submits that it cannot be disputed in law that a company is a legal entity, distinct from its principles. By the process, commonly described as lifting the veil, the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated companies. The learned Additional Advocate General, to substantiate his case, has relied on the following :
(i) a decision of the Supreme Court reported in (1995) 1 SCC 478 in the case of New Horizons Ltd. v. Union of India :
"22. In the said notice the expressions tenderer and successful tenderer have been used. While the expression tenderer has been used in paragraphs 5, 7, 11 and 14, the expression successful tenderer is used in paragraphs 7, 9(a), 10 and 12. Since paragraph 10 provides for execution of the agreement by the successful tenderer, the said expression is intended to mean the tenderer whose tender has been found suitable for acceptance. The use of the expression successful tenderer instead of the expression tenderer in paragraph 12, therefore, indicates that the documentary proof, by way of credentials of past experience, has to be submitted after the tender has been considered and is found suitable for acceptance by the concerned authorities. This would mean that the past experience is a matter which is to be considered after the tender has been examined and evaluated and the tenderer whose tender is found acceptable is required to submit documentary proof regarding his past experience. In other words, a tender is not liable to be excluded from consideration on the ground of non-eligibility on account of lack of past experience. This inference is strengthened by paragraphs 8 and 11 of the notice dated 26-4-1993. In paragraph 8 it is provided that a tender is liable for summary rejection if it is submitted without the Demand Draft of Rs.5,00,000. Similarly in paragraph 11 it is provided that tender is liable to be excluded from consideration if the income tax clearance certificate is not furnished with the tender. There is no similar provision for excluding from consideration a tender on the ground of failure to furnish with the tender the required material by way of credentials of past experience. It means that the matter of past experience has to be considered after the tender has otherwise been found to be suitable for acceptance and a tender is not liable to be rejected at the threshold without consideration on the ground that the tenderer lacks experience. The decision of the Tender Evaluation Committee to exclude the tender of NHL from consideration was, therefore, not warranted by the terms and conditions for submission of tender as contained in the notice for inviting sealed tenders dated 26-4-1993.
23. Even if it be assumed that the requirement regarding experience as set out in the advertisement dated 22-4-1993 inviting tenders is a condition about eligibility for consideration of the tender, though we find no basis for the same, the said requirement regarding experience cannot be construed to mean that the said experience should be of the tenderer in his name only. It is possible to visualise a situation where a person having past experience has entered into a partnership and the tender has been submitted in the name of the partnership firm which may not have any past experience in its own name. That does not mean that the earlier experience of one of the partners of the firm cannot be taken into consideration. Similarly, a company incorporated under the Companies Act having past experience may undergo reorganisation as a result of merger or amalgamation with another company which may have no such past experience and the tender is submitted in the name of the reorganised company. It could not be the purport of the requirement about experience that the experience of the company which has merged into the reorganised company cannot be taken into consideration because the tender has not been submitted in its name and has been submitted in the name of the reorganised company which does not have experience in its name. Conversely there may be a split in a company and persons looking after a particular field of the business of the company form a new company after leaving it. The new company, though having persons with experience in the field, has no experience in its name while the original company having experience in its name lacks persons with experience. The requirement regarding experience does not mean that the offer of the original company must be considered because it has experience in its name though it does not have experienced persons with it and ignore the offer of the new company because it does not have experience in its name though it has persons having experience in the field. While considering the requirement regarding experience it has to be borne in mind that the said requirement is contained in a document inviting offers for a commercial transaction. The terms and conditions of such a document have to be construed from the standpoint of a prudent businessman. When a businessman enters into a contract whereunder some work is to be performed he seeks to assure himself about the credentials of the person who is to be entrusted with the performance of the work. Such credentials are to be examined from a commercial point of view which means that if the contract is to be entered with a company he will look into the background of the company and the persons who are in control of the same and their capacity to execute the work. He would go not by the name of the company but by the persons behind the company. While keeping in view the past experience he would also take note of the present state of affairs and the equipment and resources at the disposal of the company. The same has to be the approach of the authorities while considering a tender received in response to the advertisement issued on 22-4-1993. This would require that first the terms of the offer must be examined and if they are found satisfactory the next step would be to consider the credentials of the tenderer and his ability to perform the work to be entrusted. For judging the credentials past experience will have to be considered along with the present state of equipment and resources available with the tenderer. Past experience may not be of much help if the machinery and equipment is outdated. Conversely lack of experience may be made good by improved technology and better equipment. The advertisement dated 22-4-1993 when read with the notice for inviting tenders dated 26-4-1993 does not preclude adoption of this course of action. If the Tender Evaluation Committee had adopted this approach and had examined the tender of NHL in this perspective it would have found that NHL, being a joint venture, has access to the benefit of the resources and strength of its parent/owning companies as well as to the experience in database management, sales and publishing of its parent group companies because after reorganisation of the Company in 1992 60% of the share capital of NHL is owned by Indian group of companies namely, TPI, LMI, WML, etc. and Mr Aroon Purie and 40% of the share capital is owned by IIPL a wholly-owned subsidiary of Singapore Telecom which was established in 1967 and is having long experience in publishing the Singapore telephone directory with yellow pages and other directories. Moreover in the tender it was specifically stated that IIPL will be providing its unique integrated directory management system along with the expertise of its managers and that the managers will be actively involved in the project both out of Singapore and resident in India.
27. The conclusion would not be different even if the matter is approached purely from the legal standpoint. It cannot be disputed that, in law, a company is a legal entity distinct from its members. It was so laid down by the House of Lords in 1897 in the leading case of Salomon v. Salomon & Co. Ever since this decision has been followed by the courts in England as well as in this country. But there have been inroads in the doctrine of corporate personality propounded in the said decision by statutory provisions as well as by judicial pronouncements. By the process, commonly described as lifting the veil, the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated companies. This course is adopted when it is found that the principle of corporate personality is too flagrantly opposed to justice, convenience or the interest of the Revenue. (See : Gowers Principles of Modern Company Law, 4th Edn., p.112.) This concept, which is described as piercing the veil in the United States, has been thus put by Sanborn, J. in US v. Milwaukee Refrigerator Transit Co.9:
When the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.
28. In a number of decisions, departing from the narrow legalistic view, courts have taken note of the realities of the situation."
(ii) a judgment of the Supreme Court reported in AIR 1999 SC 393 in the case of Raunaq International Ltd. v. I.V.R. Construction Ltd. and others :
"11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court should not intervene under Article 226 in disputes between two rival tenderers."
(iii) a decision of the Supreme Court reported in (2003) 1 CTC 496 in the case of N. Khaderwali Saheb (Dead) by Lrs. and another v. N.Gudu Sahib (Dead) and others :
"3. ... A partnership firm is not an independent legal entity, the partners are the real owners of the assets of the partnership firm. Actually, the firm name is only a compendious name given to the partnership for sake of convenience. The assets of the partnership belong to and are owned by the partners of the firm. So long as partnership continues each partner is interested in all the assets of the partnership firm as each partner is owner of the assets to the extent of his share in the partnership. On dissolution of the partnership firm, accounts are settled amongst the partners and the assets of the partnership are distributed amongst the partners as per their respective shares in the partnership firm. Thus, on dissolution of a partnership firm, the allotment of assets to individual partner is not a case of transfer of any assets of the firm. The assets which hereinbefore belonged to each partner, will after dissolution of the firm stand allotted to the partners individually. There is no transfer or assignment of ownership in any of the assets. This is the legal consequence of distribution of assets on dissolution of a partnership firm. The distribution of assets may be done either by way of an arbitration award or by mutual settlement between the partners themselves. The document which records the settlement in this case is an award which does not require registration under Section 17 of the Registration Act since the document does not transfer or assign interest in any asset. This question stands concluded by a decision of this Court in S.V. Chandra Pandian and others v. S.V. Sivalinga Nadar and others, 1993 (1) SCC 589. This was also a case of distribution of assets of a dissolved firm by way of an award. This Court noticed that the award read as a whole made it clear that the arbitrators had confined themselves to the property belonging to the partnership firm and had scrupulously avoided other properties. While distributing the residue assets, the arbitrators allocated the properties to the partners. Section 48 of the Partnership Act was applied and the properties were allocated to the partners as per their share on the distribution of the residue. The award sought to distribute the assets of the partnership firm after settlement of accounts on dissolution. This Court took the view that the property falling to the share of the partner on distribution of the residue would naturally belong to him exclusively "but since in the eye of law it is money and not an immovable property there is no question of registration under Section 17 of the Registration Act". It was further observed "...even if one looks at the award as allocating certain immovable property since there is no transfer, no partition or extinguishment of any right therein there is no question of application of Section 17(1) of the Registration Act". As observed in the above case, in the present case also we are satisfied that the award seeks to distribute the residue after settlement of accounts on dissolution, while distributing their residue the arbitrators allocated the properties to the partners. The award in such circumstances did not require registration under Section 17(1) of the Registration Act. "
(iv) a judgment of the Supreme Court reported in (2003) 2 SCC 349 in the case of Comptroller & Auditor-General v. Kamlesh Vadilal Mehta :
"9. The appellant insists that it is only a smaller group of Chartered Accountant firms that would be eligible for being brought on the panel for audit of public sector undertakings or government concerns. The audit work of public sector undertakings, no doubt, is to be done by the qualified and efficient Chartered Accountants. Once a person is qualified, experienced and efficient, it is difficult to understand how he could be discriminated against only for the reason that he has chosen to act alone in the professional career and has not been able to form a partnership firm. The efficiency, as pointed out by the High Court, springs from the personal experience, proficiency and personal capacities. It is, therefore, not possible to link these characteristics and professional acumen to a person or persons in a firm alone. A single individual as an auditor in a proprietary concern can have such characteristics and professional acumen by himself and also through the assistance of experienced auditor who could be in his services as efficient as any partnership firm. It is often seen in many cases that some of the partners of the partnership firm are sleeping partners with no professional duties to discharge. A partnership concern is not a legal entity like a company; it is a group of individual partners. In a partnership firm, it is the partner who will be assisted in carrying out the work but quite remains the eligible Chartered Accountant. It is the same situation as in a proprietary concern where a Chartered Accountant would be carrying on audit work all-in-one. Merely because some of the Chartered Accountants have formed a partnership firm, it cannot be assumed that they become more efficient for carrying out audit work than the individual Chartered Accountant who forms a proprietary concern. It is, therefore, evident that the appellant himself erroneously assumed that the partnership firms are more efficient than the proprietary concern in the matter of audit of accounts of the public sector undertakings or of the government concerns.
10. A useful analogy may be drawn with the experiences of the legal profession. It could not be justifiably argued that the quality of the legal services rendered by a Senior Advocate is compromised by virtue of the fact that he is the sole and ultimate repository of knowledge and responsibility in a given matter. Nor could it reasonably be said that a client would be put to unnecessary risk by being compelled to sink or swim with the solitary lawyer. Personal experience and integrity are the essential attributes of every successful professional, and they are the virtues that win the day for the client, whether it is a corporation seeking an audit of its accounts or an individual seeking a remedy in court. A clear line of command is also known to prevent a diffusion of responsibility. As such, a Chartered Accountant cannot be discriminated against merely because he elected to invest his professional expertise in a proprietary concern, rather than to express it in the form of a partnership firm.
11. In any event it would not follow as a categorical imperative that a partnership is better placed for auditing government concerns simply because two minds are better than one. There could be several instances when a partnership firm, which is ostensibly an association of contributing individuals, is in actual fact found to consist of a solitary working partner who may for the purpose of securing tax benefits, or for other reasons, choose to form an alliance with sundry uninterested persons, or sleeping partners. In such a scenario it would be fallacious to attribute a greater capacity to partnership firms than to proprietary concerns simply on account of the nomenclature or numbers involved."
(v) a decision of the Madhya Pradesh High Court reported in AIR 2005 MADHYA PRADESH 96 in the case of M/s. C.K. Asati v. Union of India and 2 others :
"7. After having heard learned counsel for the parties at length, in the considered opinion of this Court, there is a force in the submission of Shri Dalal. The partnership firm which is duly registered has no personality of its own. It is compendium of partners. Thus, a firm is an association of individuals and the firm name is only a collective name of those individuals who constituted the firm. It is a compendium which has to carry on business through its constituents. The position of the experience of partnership firm has been recognised by the Supreme Court in New Horizons Ltd. (1995 AIR SCW 275) supra). The decision of the Supreme Court has been followed by the Andhra Pradesh High Court in M/s.Avula Constructions Pvt. Ltd. (Andh Pra 318) . In view of the aforesaid legal position, I have no hesitation to hold that the rejection of application for issuance of tender documents was bad in law. The past experience of Smt. C.K.Asati, while she was running a proprietary concern can be counted towards the experience of the firm and thus, their partnership firm was eligible to obtain the tender documents. The impugned communication issued by the respondent No.3 is, therefore, set. Since the respondents have already supplied the tender documents in W.P.Nos.1433/2004, 1558/2004 and 1559/2004 and petitioner has already submitted the bids, the respondents are directed to proceed ahead and finalize the bid in accordance with law. So far as W.P.No.1432/2004 is concerned, learned counsel for respondents submitted that in the said case, the bids pursuant to the NIT has already been opened by the respondents on 23.11.2004, but they have not been finalized so far, because the matter was pending in the court. Since, it has been found that the rejection of application for issuance of tender documents was had in law, therefore, not only the impugned communication, but also the NIT (Press Note No.30/EE/ICD-1/04-05) are hereby quashed. The respondents are directed to issue a fresh NIT on the same terms and conditions. After issuance of the fresh NIT, the respondents shall finalise the bids in accordance with law."
(vi) another decision of the Supreme Court reported in (2009) 5 SCC 608 in the case of V.Subramaniam v. Rajesh Raghuvandra Rao :
"11. It may be mentioned that a partnership firm, unlike a company registered under the Companies Act, is not a distinct legal entity, and is only a compendium of its partners. Even the registration of a firm does not mean that it becomes a distinct legal entity like a company. Hence the partners of a firm are co-owners of the property of the firm, unlike shareholders in a company who are not co-owners of the property of the company."
7. Learned counsel for the third respondent would submit that the third respondent company is recently registered and since the firm is not able to get PAN number in its name, the Managing Partner of the firm produced xerox copy; the respondents 1 and 2 have every right to dispense with the production of the said copy and moreover the third respondent has produced all relevant documents. According to him, even assuming that the Managing Partner has produced his PAN number, it is curable and whenever the Income-tax authority gives PAN number to the firm, the same will be produced before the respondents immediately.
8. I have heard the learned counsel on either side, analysed the material documents and also gone through the various decisions relied upon.
9. In this case, it is seen that the petitioner is a firm involved in the business of transporting food grains and various other products and it claims that they are the sole transporters for the respondent Corporation in Tirpur region, commencing from July,2009 to June 2010. A tender was called for, for transport of essential commodities from Food Corporation of India, hereinafter referred to as 'FCI', Depot to various storage points belonging to the respondent Corporation for the period from 01.07.2010 to 30.06.2010. The tender was invited in the first week of May,2010, and the last date for obtaining the tender form was 18.05.2010 at 04.00 p.m.
10. The tender process consists of two parts viz., Part-I Qualified Bid and Part-II Price Bid. The last date for submission of tenders was 19.05.2010. As per the procedure to be followed by the Corporation, the tenderers who are qualified in the technical bid are eligible for price bid. The petitioner along with two other persons have participated in the tender process and the technical bid was opened on 19.05.2010. The documents were filed to the satisfaction of the particulars relating to Part-I Qualification Bid. In that Part, Clause IV provides that xerox copy of the valid Pan Number with the Income-Tax authorities of the firm/company/individual as applicable should be furnished, which requirement the tenderers have to satisfy. Similarly, Clause VII of Part-I provides that the tenderer must have an average turnover of rupees One Crore for the preceding three years in goods transportation business and produce xerox copy of the Income-Tax Return with Income-Tax Department Seal, profit and loss statement, balance sheet, Saral Form. All these particulars have to be furnished as mentioned in Annexure-III to the tender form, which should be signed by the auditor as well as the tenderer.
11. On a perusal of the documents, it is known that the petitioner was informed by the respondents that opening of Part-II tender was fixed on 12.07.2010. Though the petitioner requested not to open the price bid because of certain disqualifications in respect of third respondent, the respondents opened the price bid of all the three tenderers, including the third respondent. There are discrepancies in the rates quoted by the third respondent with regard to various slabs. Even though technical bid was opened on 19.05.2010 and the price bid on 12.07.2010, the petitioner requested the respondents not to consider the claim of third respondent.
12. The Tender Scrutiny Committee, in the presence of the tenderers, opened the bid on 19.05.2010, wherein the first respondent, after verifying the Part-I Cover, noticed that M/s.P.Ramya Transport, Mettupalayam, who registered their partnership deed on 07.05.2010, have submitted the bid signed as Thiru R.Panneerselvam, Managing Partner; Turnover Statements for 2006-2007, 2007-2008 and 2008-2009 were furnished in the name of Thiru R.Panneerselvam; Income Tax Return was filed in the name of R.Panneerselvam and Pan Card was produced in the name of Thiru R.Panneerselvam. It appears, though the slab rates quoted by the third respondent i.e., M/s.P.Ramya Transport are not aggregated in certain slabs, the rate quoted by them is lesser when compared to the rates quoted by the other tenderers. The rates quoted are as under :
M/s.P.Ramya Transport, Mettupalayam : Rs.2,64,76,109.93 (L1) M/s.RNP Ravi Transport, Coimbatore : Rs.3,25,00,572.82 (L2) M/s.Muthukumar Transport,Coimbatore:Rs.3,38,37,581.17 (L3) Therefore, the Tender Scrutiny Committee has suggested to consider the offer given by the third respondent which is lesser than the rate quoted by other tenderers. Accordingly, the third respondent has been selected for award of the contract.
13. In the light of the submissions made by the learned counsel and after going through the documents, the question that arises for consideration is, whether the third respondent has got a legal right to become eligible for award of the contract, in view of Clauses IV and VII of Part-I of the tender notification ?
14. A circumspection of the facts would reveal that the third respondent has registered the deed of partnership on 13.02.2010 with three of the partners, namely, Mr.R.Panneerselvam, the Party of the First Part and Managing Partner; Mr.A.Elango, the Party of the Second Part and Partner; and Mrs.P.Kamala, the Party of the Third Part and Partner. The other partners, namely, A.Elango and P.Kamala have authorised and empowered R.Panneerselvam as Managing Partner to represent before the Managing Director, TNCSC, for filing statements, documents and signing all tender documents and receive necessary reply or other subject in connection with transport tender and his statement is binding on them and their partnership firm.
15. It is pertinent to state that when the Tender Scrutiny Committee opened the bid on 19.05.2010, the first respondent, after verifying the Part-I Cover, noticed that the third respondent company, which registered their partnership deed on 07.05.2010, have submitted the bid signed as Thiru R.Panneerselvam, Managing Partner, and furnished the documents of turnover; income-tax returns and also Pan Number in his own name i.e., Thiru R.Panneerselvam. Therefore, it is crystal clear that the third respondent firm was registered just after the notification of tender during the first week of May,2010.
16. With regard to the question as to whether the partnership firm has satisfied the requirements in Clauses IV and VII, it is to be stated that xerox copy of valid Pan Number of the firm/company/individual with Income-tax authorities; the turnover statements; the Income-tax Returns, Profit and Loss Statement, Balance Sheet and Saral Form all stand only in the name of R.Panneerselvam.
17. The learned Additional Advocate General would take advantage of the legal dictum laid down by the Supreme Court in New Horizon's case, stating that though the company is a newly started one, the past experience of the individual partners should be taken into consideration. He would also submit that the past experience is a matter which is to be considered after the tender has been examined and evaluated and the tenderer whose tender is found acceptable is required to submit documentary proof regarding his past experience. In other words, a tender is not liable to be excluded from consideration on the ground of non-eligibility on account of lack of past experience. Therefore, the matter of past experience has to be considered after the tender has otherwise been found to be suitable for acceptance and a tender is not liable to be rejected at the threshold without consideration on the ground that the tenderer lacks experience. As such, the learned Additional Advocate General raised a point that similar inference and logical reasoning can be given consideration to the economic part also i.e., the income-tax returns and turnover statements of preceding three years of the Managing Partner of the partnership firm has to be given credence to.
18. It is true, the dictum laid down by the Supreme Court in New Horizon's case is that the matter of past experience has to be considered after the tender has otherwise been found to be suitable for acceptance and a tender is not liable to be rejected at the threshold without consideration on the ground that the tenderer lacks experience. But, the very same Supreme Court, in Khaderwali Saheb's case, cited supra, has held in categorical terms that a partnership firm is not an independent legal entity and the partners are the real owners of the assets of the partnership firm. Actually, the firm name is only a compendious name given for the sake of convenience. The assets of the partnership firm belong to and are owned by the partners of the firm. So long as partnership continues, each partner is interested in all the assets of the partnership firm as each partner is owner of the assets to the extent of his share in the partnership. On dissolution of the partnership firm, accounts are settled amongst the partners and the assets of the partnership are distributed amongst the partners as per their respective shares in the partnership firm. In the said ruling, after quoting the earlier decision of the Supreme Court in S.V. Chandra Pandian and others v. S.V. Sivalinga Nadar and others, 1993 (1) SCC 589, which was also a case of distribution of assets of a dissolved firm by way of an award, the Court noticed that the award read as a whole made it clear that the arbitrators had confined themselves to the property belonging to the partnership firm and had scrupulously avoided other properties. While distributing the residue assets, the arbitrators allocated the properties to the partners. Section 48 of the Partnership Act was applied and the properties were allocated to the partners as per their share on the distribution of the residue. The award sought to distribute the assets of the partnership firm after settlement of accounts on dissolution. The Court took the view that the property falling to the share of the partner on distribution of the residue would naturally belong to him exclusively and since in the eye of law it is money and not an immovable property, the question of registration does not arise.
19. From the two of the rulings of the Supreme Court, it could be seen that past experience has to be considered after the tender has otherwise been found to be suitable for acceptance and a tender is not liable to be rejected at the threshold. But, the economic consideration particularly money of one partner can be taken into account of the firm as a whole if other partners have not contributed anything. In case if one partner leaves, what would be the implication on the execution of the contract and this factor is on a material consideration of the circumstances. Clauses IV and VII of Part-I specifically stipulate that tenderer must satisfy two of the conditions. In the case on hand, the third respondent is a firm, who has just registered and applied for tender, not having an average turnover of rupees One Crore for the preceding three years in goods transportation business, Income-Tax Return with Income-Tax Department Seal, profit and loss statement, balance sheet, Saral Form etc. The question as to one partner satisfying the requirements of the tender conditions and relaxation thereof to a partnership firm has not been decided so far. On the other hand, the Supreme Court in the case of Laxmi Sales Corporation, ruled that production of supporting documents wherever applicable in Annexures I and J was one of the requirements of the tender and Annexure J specifically required at Sl.No.7 the proof of turnover of the firm over the last two relevant years with supporting documents. The same Annexure also required the tenderer to produce proof of work experience for the last two years with full details and supporting documents and the checklist had specifically mentioned that the production of proof of turnover with latest profit and loss account duly certified by a Chartered Accountant was a mandatory requirement.
20. This Court, in a decision reported in S.Girija v. General Manager, Food Corporation of India, referred to above, in paragraph 11, held that according to the petitioner, it is only the individual who has applied for the tender. But the PAN number mentioned in the tender schedule is the firm's PAN number. The respondent's allegation that it is not clear whether the individual has applied or the firm cannot be rejected. 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. 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 claim a fundamental right to carry on business with the Government. In the said case, the application of the petitioner was made in her individual capacity but the PAN of the firm was given. It was under the said circumstances the Court did not interfere with the decision of the respondent.
21. In matters involving public interest, normally, the power of this Court in a challenge to the award of contract is limited. The Court must be satisfied whether there is some element of public interest involved in the tender. The stake involved in this case is heavy and the individual cannot take advantage of the award of contract, but this Court has only the power of judicial review of the decision making process. In the instant case, it is evident that the documents furnished individually by R.Panneerselvam shall not satisfy the requirements under Clauses IV and VII of Part-I of the Tender Notification and, therefore, the tender process requires reconsideration. Though this is the matter to be determined by the decision making authority and the power of judicial review is very limited, the law laid down by the Supreme Court is clear in Tata Cellular v. Union of India, 1994 (6) SCC 651, that the power of judicial review is available to the Court in case the decision made by the authority is arbitrary or not in conformity with the terms and conditions. The Supreme Court, in Tata Cellular case, has held that it was obliged to interfere on the ground of arbitrariness and violation of principles of natural justice, confining itself to the doctrine of judicial restraint, however, by the application of permissible parameters to set right the decision-making process.
22. In the instant case, admittedly, the third respondent firm is recently registered and not able to get PAN number in the name of the firm, but only the Managing Partner of the firm has produced the xerox copy on the premise that respondents 1 and 2 have the right to dispense with the production of the said copy. It is not materially proved that the third respondent firm has satisfied the condition of furnishing PAN number in the name of the firm. The authorities have not applied their mind to the material documents in making a decision for rejecting the tender of the petitioner. Any reasons assigned by the authorities should be on the material verification and supported by reasoning. In the absence of such reasons, the decision making of the authorities to award the contract to third respondent is arbitrary and with non-application of mind.
23. In such view of the matter, this Court directs the respondents 1 and 2 to reprocess the tender applications submitted by the tenderers and determine the issue after taking note of the legal entity of every tenderer and on satisfaction of the conditions of contract, after following due process of law within a period of four weeks from the date of receipt of a copy of this order.
24. Writ Petitions are disposed of accordingly. No costs. Consequently, the connected M.P.Nos.1 and 2 of 2010 are closed.
dixit To
1.The Managing Director, Tamil Nadu Civil Supplies Corporation, No.12, Tambu Swamy Road, Kilpauk, Chennai-10.
2.The Sr.Regional Manager, Tamil Nadu Civil Supplies Corporation, Coimbatore Region, Goundampalayam, Coimbatore.
2.The Senior Regional Manager, Tamil Nadu Civil Supplies Corporation, Tirupur Region, Tirupur