Karnataka High Court
Macawber Beekay Pvt Ltd vs Bharath Heavy Electricals Ltd on 27 July, 2023
Bench: Chief Justice, M.G.S. Kamal
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R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF JULY, 2023
PRESENT
THE HON'BLE MR.PRASANNA B.VARALE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE M.G.S. KAMAL
WRIT APPEAL NO.1169 OF 2022 (GM-TEN)
BETWEEN:
MACAWBER BEEKAY PVT LTD.,
A COMPANY REGISTERED UNDER
THE PROVISIONS OF THE
COMPANIES ACT, 1956,
HAVING ITS REGISTERED
OFFICE AT:
BEEKAY HOUSE, C450-451
SECTOR 10, NOIDA
GUATAM BUDHA NAGAR
UTTAR PRADESH - 201 301
REPD. BY ITS EXECUTIVE
DIRECTOR (CONTRACTS).
... APPELLANT
(BY SRI. DAMA SHESHADRI NAIDU, SR. ADVOCATE A/W
MR. SANDEEP GROVER, MR. ADITYA NAYYAR
MR. TARANG AGARWAL, MR. ABHISHEK ARORA &
MR. PARASHURAM A.L., ADVOCATES)
AND:
1. BHARAT HEAVY ELECTRICALS LTD.,
A COMPANY REGISTERED
UNDER THE PROVISIONS OF THE
COMPANIES ACT, 1956, HAVING
ITS CORPORATE OFFICE AT:
2
BHEL HOUSE, SIRI FORT
NEW DELHI - 110 049
REPD. BY ITS CHAIRMAN AND
MANAGING DIRECTOR.
2. BHARAT HEAVY ELECTRICALS LTD.,
INDUSTRIAL SYSTEMS GROUP
HAVING OFFICE AT: OPPOSITE
INDIAN INSTITUTE OF SCIENCE
PROF. CNR RAO CIRCLE
MALLESWARAM
BENGALURU - 560 012.
REP. BY MS. L. BINDU
ADDITIONAL GENERAL MANAGER (MM).
3. BTL EPC LTD.,
A COMPANY REGISTERED UNDER
THE PROVISIONS OF THE
COMPANIES ACT, 1956, HAVING
ITS OFFICE AT: 2, JESSORE ROAD
KOLKATA - 700028
REP. BY ITS DIRECTOR.
4. FUJIAN LONGKING CO. LTD.,
HAVING ITS OFFICE AT: No.81
LINGYUAN ROAD
XINLUO DISTRICT LONGYAN CITY
FUJIAN PROVINCE, PR CHINA.
5. TELANGANA STATE POWER
GENERATION COMPANY LTD.,
A COMPANY REGISTERED UNDER
THE PROVISIONS OF THE
COMPANIES ACT, 1956
HAVING ITS CORPORATE OFFICE AT:
VIDYUT SOUDHA
TSGENCO, KHAIRATABAD
HYDERABAD, TELANGANA - 500 082
REP. BY ITS MANAGING DIRECTOR.
6. TATA CONSULTING ENGINEERS LIMITED
A COMPANY REGISTERED UNDER
3
THE PROVISIONS OF THE
COMPANIES ACT, 1956, HAVING
ITS REGISTERED OFFICE AT:
ELPHINSTONE BUILDING, 10
VEER NARIMAN ROAD
MUMBAI - 400 001
ALSO HAVING A BRANCH
OFFICE AT No. 71
CUNNINGHAM ROAD
VASANTH NAGAR
BENGALURU - 560 052.
7. UNION OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF EXPENDITURE)
REPRESENTED BY THE JOINT SECRETARY
PPD, 3RD FLOOR
JEEVANDEEP BUILDING
SANSAD MARG
NEW DELHI - 110 001
(AMENDED V/O DATED: 07.12.2022)
... RESPONDENTS
(BY SRI. SRINIVASAN RAGHAVAN V., SR. ADVOCATE A/W
MR. P. CHINNAPPA & ABHINAY V., ADVOCATE FOR
R1 & R2;
SRI. M. DHYAN CHINNAPPA SR. ADVOCATE A/W
MR. THAKUR RISHABHA RAJ, MR. SUBHANKAR
CHAKRABORTY & SAPTARISHI BHATTACHARJEE,
ADVOCATE FOR R-3;
R-4 SERVED & UNREPRESENTED;
SRI. D.L.N. RAO, SR. ADVOCATE FOR
SRI. L. SRINIVAS, ADVOCATE FOR R5;
MR. ANIKETH B.S., ADVOCATE FOR
MR. GEORGE JOSEPH, ADVOCATE FOR R6;
SRI. S. SHIVA KUMAR CGC, FOR R7)
---
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THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO
CALL FOR RECORDS IN (a) WRIT PETITION No.20333/2022
(GM-TEN) FILED BY THE APPELLANT BEFORE THE LEARNED
SINGLE JUDGE OF THIS HON'BLE COURT AND (b) NOTICE
INVITING TENDER DATED:24.06.2022 BEARING ENQUIRY
No.77/22/6055/LSY ISSUED BY THE RESPONDENT No.2
ii) SET ASIDE/QUASH THE IMPUGNED ORDER DATED
02.11.2022 PASSED BY THE LEARNED SINGLE JUDGE OF
THIS HON'BLE COURT AND CONSEQUENTLY ALLOW WP
No.20333/2022 FILED BY THE APPELLANT AND ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED,
COMING ON FOR PRONOUNCEMENT OF ORDER, THIS DAY,
CHIEF JUSTICE, DELIVERED THE FOLLOWING:
JUDGMENT
This writ appeal is directed against the order dated 02.11.2022 passed in W.P.No.20333/2022 (GM-TEN) by which the writ petition filed by the appellant questioning award of tender by the respondent No.2 in favour of the respondent No.3 for supply of Ash Handling Package forming part of installation of a Thermal Power Station in the State of Telegana by respondent No.5 has been dismissed.
2. Brief facts of the case of the appellant are as under:
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2.1 That the appellant is a company specialized in providing Turnkey solutions with respect to Ash Handling Plant to various industries such as power, cement, alumina, steel including thermal power station with solution to reduce environmental pollution with conservation of energy.
2.2 That respondent No.5- Telangana State Power Generation Company Ltd., with an object of setting up of a Thermal Power Station of 4,000 MW capacity (5 units of MW each) at Yadadri, Nalagunda District, Telegana awarded a contract in the year 2017 to the respondent No.1 company for design, engineering, supply, erection and commissioning. A portion of which for Ash Handling Plant and Coal Handling Plant is being executed by respondent No.2- Bharath Heavy Electronics Ltd.,. That the entire Plant was to be completed and commissioned by October 2021.
However, the same has not been completed as of date. Respondent No.6- Tata Consulting Engineers Limited has been appointed as a consultant for the aforesaid work.
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2.3 Issue in the present appeal pertains to sub- contract sought to be awarded by respondent No.2 for setting up of Ash Handling Plant in the said Thermal Power Station at Yadadri. Initially, respondent No.2 had issued Notice Inviting Tender dated 22.08.2018 in which appellant and three others had participated. However, the said tender was cancelled. Thereafter, respondent No.2 had issued another Notice Inviting Tender on 05.03.2020 wherein appellant and one M/s.Indure Private Limited had participated. Though in the said process the contract was awarded to M/s.Indure Private Limited since the said company did not perform the contract, the same was terminated. As such, the respondent No.2 issued yet another Notice Inviting Tender dated 06.01.2022. The appellant company along with one M/s.DC Industrial Plant Service Pvt. Ltd., had participated. Though, appellant company was found capable and suitable to carry out the project work the contract was not awarded and the tender was recalled and cancelled. Subsequent to cancellation as above, respondent No.2 7 issued present Notice Inviting Tender dated 24.06.2022 (hereinafter referred to as NIT for reference) produced at Annexure-C. Respondent No.2 had also issued Pre-Qualification Requirement (PQR) for bidders along with the said NIT. The General conditions and Special conditions of the contract are also produced as Annexures-D, E and F respectively.
2.4. In furtherance to the Notice Inviting Tender two participants namely, appellant-company and a consortium of Respondent No.3 and Respondent No.4 submitted their technical and price bids which were opened on 27.07.2022 and 26.08.2022 respectively and were evaluated thereafter.
2.5. That since respondent No.3 did not possess required technical qualification, it entered into a Consortium Agreement with respondent No.4. Thus, the consortium of respondent Nos. 3 and 4 is a partnership of an Indian company namely, M/s.BTL EPC Ltd., and a Chinese company namely, M/s.Fujian Longking Company Ltd., formed specifically for the 8 purpose of participating in the project. Copy of the Consortium Agreement is produced at Annexure-G. 2.6. It is the case of the appellant that the respondent No.2, with an intention of victimizing the appellant by denying the award of contract to the appellant, is hastily seeking to award the contract to the consortium of respondent Nos. 3 and 4 though they did not technically qualify and had not complied with the essential conditions of the Tender documents. It is alleged that the respondent No.2 has violated various provisions of Pre Qualification Requirement (PQR) (Annexure-D) General conditions of contract (Annexure-E) and Special Conditions of Contract (Annexure-F) and the Office orders issued by the Government.
2.7. It is further alleged by the appellant that the award of tender to the consortium of respondent Nos. 3 and 4 is against the fundamental policy of the Indian law, in that, the Ministry of Finance, Department of Expenditure, Public Procurement 9 Division in its Office Order dated 23.07.2020 has imposed certain restrictions on a bidder from a country which shares a land border with India. That the said Office Order also provides for a detailed procedure for its registration specifying therein its purpose with competent authority namely, Registration Committee constituted by Department of Promotions of Industries on internal trade. The copy of the Office Order dated 23.07.2020 issued by the Ministry of Finance, Department of Expenditure, Public Procurement Division is produced at Annexure-H. It is alleged by the appellant that the respondent No.4 as well as the consortium of the respondent Nos. 3 and 4 have failed to get registered in compliance of Office Order dated 23.07.2020. In this regard appellant- company by letters dated 12.07.2022, 04.09.2022, 12.09.2022 and 30.09.2022 produced as Annexure-J, J1, J2 and J3 respectively had made representations to the respondent No.2 of various short comings and violations of the tender conditions in the technical bid submitted by the consortium of the respondent Nos. 3 10 and 4. It is also contended by the appellant that respondent No.6 had declared consortium of respondent Nos.3 and 4 as technically non-qualified bidder and that though the appellant had sought for information in this regard under Right to Information Act, there has been no response in that regard. Thus, being aggrieved, the appellant approached this Court by filing writ petition on various grounds enumerated thereunder seeking following reliefs;
1. Call for records pertaining to notice inviting tender dated:24.06.2022 bearing Enquiry No.77/22/6055/LSY (Annexure -C) issued by the 2nd Respondent;
2. Declare that the bid submitted by the consortium of Respondent Nos.3 and 4 as non- compliant and an invalid bid.
3. Declare that the issuance of letter of intent on 29.09.2022 by the 2nd Respondent to the consortium of the 3rd and 4th Respondents is non- est in the eyes of the law and wholly illegal;
4. Quash the issuance of letter of intent on 29.09.2022 by the 2nd Respondent to the consortium of the 3rd and 4th Respondents.
5. Declare the petitioner as the only valid bidder;
6. Direct the 2nd Respondent to award the contract to the appellant in pursuance of the notice inviting tender dated:24.06.2022 bearing Enquiry No.77/22/6055/LSY (Annexure -C);
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7. Grant such other reliefs that this Hon'ble Court deems fit in the facts and circumstances of the case; and
8. Grant costs of these proceedings. Case of respondent Nos. 1 and 2:
3. Respondent Nos. 1 and 2 filed statement of objections denying the writ petition averments and contending inter alia;
3.1 That a judicial review of a decision to accept or reject a bid for a tender is extremely narrow and the Courts ordinarily ought not to interfere for mere asking or merely because a different view is possible.
3.2 That the appellant has failed to show that the decision of the respondent No.2 is contrary to public interest. It is also contended that the employer of the project being the author of the tender documents is the best person to understand and appreciate its requirement and interpret the same and that the Courts are encouraged to defer to this understanding and appreciation of the tender documents unless there is malafide or perversity in the understanding or 12 appreciation or in the application of the terms of tender conditions by the tender authorities. That in the instant case respondent No.2 has inspected and found respondent No.3 having adequate manufacturing facility in accordance with PQR and that it has found the bid submitted by respondent No.3 to be in compliance with all tender conditions. As such, appellant cannot seek to call in question the decision of respondent No.2 to award tender to the respondent No.3 by substituting its own view.
3.3 That both the appellant and respondent No.3 fulfilled technical qualifications while the price bids of respondent No.3 was lower than the price quoted by the appellant. As such, respondent No.2 proceeded to issue letter of intent dated 29.09.2022 in favour of respondent No.3 for supply of Ash Handling package. That the respondent No.2 has applied its mind acted fairly, reasonably and impartially and in public interest and only thereafter awarded the tender to respondent No.3.13
3.4 That as per PQR though the respondent No.3 did not fulfill the requirements under clause 01.01.01 on their own they were still permitted to participate in the tender process if they fulfilled the conditions stipulated under clause 01.01.02 and they collaborate/associate with parties who meet the requirements under clause 01.01.01.
3.5 That clause 01.01.02 of PQR stipulates that the bidder who do not meet the requirements of clause 01.01.01 (a)(b)(c) and/or (d) in part or full can participate provided they meet requirements of clause 01.01.02 and collaborate/associate with parties who met that 01.01.01 which the bidder itself is not able to meet. That as respondent No.3 did not meet the requirement under 01.01.01 but met the requirement under clause 01.01.02, respondent No.3 has collaborated with respondent No.4 to meet the requirement of clause 01.01.01 (a)(b)(c) and with M/s.Weir Minerals Netherlands B.V. to meet the requirement under clause 01.01.01 (d) which it could not do itself.14
3.6 That to meet the requirement as above respondent No.3 has entered into an agreement styled as "Consortium Agreement" with respondent No.4 as per Annexure-G. On bare perusal of the said agreement it can be seen that the nature of the agreement is a "collaboration agreement" which is in the nature of service contract where each party has a demarcated their separate role. While the agreement bears the nomenclature of a "Consortium Agreement", it is not one in the traditional sense of the term and the nature of association between respondent No.3 and respondent No.4 is not the same as consortium described in clause 7.2 of PQR.
3.7 That the agreement clearly sets out that the respondent No.3 is the bidder while respondent No.4 is only an 'associate'. Respondent No.3 is to undertake complete work as detailed in NIT which includes detailed engineering, manufacturing, supply, erection, testing, commissioning, trial run, demonstration of TG test and handing over for complete ash handling plant.
On the other hand respondent No.4 will be engaged 15 only in basic design, vetting of details, support in manufacturing and supervision in erection and commissioning.
3.8 The bid submitted by respondent No.3 was not in the nature of consortium bidding but was submitted by respondent No.3 alone. That the Letter of Intent was executed only in favour of respondent No.3 who alone is accountable and responsible to respondent No.2 to ensure performance of the contract in its entirety. All manufacturing and capital expenditure are to be undertaken by respondent No.3 alone.
Pleading as above, dismissal of the petition was sought.
Case of Respondent No.3:
4. Respondent No.3 in its statement of objections, broadly reiterating the stand taken by the respondent Nos. 1 and 2 in their statement of objections, has specifically contended that the writ 16 petition suffers for the reasons supprio veri and suggestio falsi, as on the one hand appellant relied upon the Office Order dated 23.07.2020 bearing No.OM F.6/18/2019-PPD passed by Department of Expenditure, Ministry of Finance, Government of India which places restriction on sub-contracting of work to a contractors from a country which shares a land border with India and mandates such contractors to register with competent authority, while on the other hand, the appellant, has suppressed the Official Memorandum dated 08.02.2021 bearing No.F18/37/2020 PPD issued by Department of Expenditure, Ministry of Finance, Government of India which relaxed the requirement of registration with competent authority of a contractor sharing land border with India for procurement of goods and services etc. Hence, sought for dismissal of the petition.
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5. On hearing learned counsel for the parties and on perusal of records, learned Single Judge framed the following point for its consideration;
"Whether the impugned tender process is shrouded with such illegality that it would become voilative of Article 14 of the Constitution of India and would thus be amenable to scrutiny under Article 226 of the Constitution of India"?.
6. Learned Single Judge on examining the General Conditions contained in the Tender document, prequalification criterias and also contents of Consortium Agreement, Official Memorandum etc., came to the conclusion that the petition lack merits and accordingly dismissed the same by the impugned order dated 02.11.2022. Being aggrieved by the same, appellant is before this Court by way of present appeal.
Submission on behalf of the Appellant:
7. Sri. Dama Sheshadri Naidu, learned Senior counsel appearing for the appellant reiterating the grounds urged in the memorandum of appeal and extensively referring to the contents of NIT, PQR, 18 Consortium Agreement, Official Memorandum, Office Order and the clarification issued by the Government of India submitted that;
7.1. The decision of respondent No.2 to accept bid of the consortium of respondent Nos.3 and 4, apart from being contrary to the terms and conditions of the tender has also flagrantly violated the mandatory requirement of registration required in terms of Office Order dated 23.07.2020 issued by the Government of India, Ministry of Finance, Department of Expenditure.
7.2 He insisted that the respondent No.3 admittedly not having the required qualification as prescribed under 01.01.01 of PQR had entered into the Consortium Agreement with respondent No.4 which is a Chinese entity warranting mandatory registration with the competent authority. Thus, he submitted non- compliance of this mandatory condition makes respondent Nos.3 and 4 ineligible to participate in the tender.
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7.3 Referring to Clause 01.01.02 of PQR he submitted that though the said clause enables an entity not having required experience of ash handling as stipulated under Clause 01.01.01 (a)(b)(c), but which supplies bulk material handling system, to participate in the tender process by collaborating/ associating itself with another entity, which satisfies requirement of Clause 01.01.01 (a)(b)(c). It can be done only by entering into an Consortium Agreement as provided in Annexure-A to the PQR. That in the instant case respondent No.3 who did not possess the eligibility criteria contained in Clause 01.01.01(a)(b)(c) has admittedly entered into Consortium Agreement with respondent No.4 only to qualify and meet the technical criteria mandated in the PQR. It is for this purpose entering into Consortium Agreement was an indispensable factor to meet the requirement of Clause 01.01.01 (a)(b)(c) of the PQR which are considered to be critical requirement. He also referred to Clause 01.01.01 (d) which provides for "Agreement of support" which is of a non- critical nature and pursuant 20 to which respondent No.3 has entered into an agreement with a Netherlands Entity. Referring to the contents of the Consortium Agreement entered into between respondent No.3 and 4, he submitted that there is specific mandatory requirement of clauses pertaining to joint and several liabilities. This is to meet the critical requirement of Clause 01.01.01
(a)(b)(c) which has to be carried out only by a bidder and not through any external agency as emphasized in Clause 01.01.03. While in the case of non critical requirement provided under Clause 01.01.01 (d) which is an activity of design and engineering could be carried out by the bidder or through any external agency like Netherlands entity with whom respondent No.3 has entered into an Agreement of support. Thus, he submitted that Consortium Agreement entered into between respondent No.3 and 4 is an essential and indispensable requirement of the terms of PQR.
7.4 Referring to contents of Consortium Agreement and Annexure provided thereto learned Senior counsel submitted that the respondent Nos.3 21 and 4 constituted themselves into consortium not just for the purpose of participation in the process of bidding but also to carry out the works being conscious of their joint and several liability to the extent of works to be carried out by them. Referring to the Indemnity document executed by respondent Nos.3 and 4 he submitted that such document indemnifying jointly and severally for any loss to be suffered by respondent No.2 is an essential feature of the consortium.
7.5 Drawing attention to the Office Memorandum and the Office Order dated 23.07.2020 issued by Ministry of Finance, Government of India learned Senior counsel submitted that the object of passing of the Office Order which was issued under Rule 144(xi) of the General Financial Rules, 2017 empowering the department of Expenditure is to impose restrictions including prior registration and/or screening on procurement from bidders from foreign country or countries on the ground of defense of India or matters directly or indirectly related thereto 22 including national security. That there cannot be any procurement in violation of such restrictions.
7.6. That pursuant to the insertion of Rule 144
(xi) in GFRS, the Office Order came to be passed imposing restriction of prior registration on any "Bidder" and /or "Bidder from a country which shares a land border with India" to be eligible to bid in any tender process. Thus, he submitted respondent No.4 which is a Chinese entity has been allowed to participate in the tender process by respondent Nos. 1 and 2 as a part of consortium with respondent No.3 without complying requirement of registration from competent authority as mandatorily required under the Office Order dated 23.07.2020. As the said mandatory requirement of the registration goes to the root of the matter. The same amounts to flouting of mandatory directives issued by the Government of India and thereby compromising national interest and security of the nation. That the said restrictions are required to be followed by every Public Sector Undertaking in every procurement process in letter and spirit. Thus, by 23 overlooking compliance of mandatory directives issued by the Government of India, respondent No.2 has favoured the consortium of respondent Nos. 3 and 4, who are ineligible to bid the tender and has thereby violated the tender conditions and the Officer Order.
7.7. Referring to the reasons assigned in the impugned order, more particularly, paragraphs 4,18,19 and 25 of the impugned order learned Senior counsel submitted that though learned Single Judge has accepted the fact of respondent Nos. 3 and 4 had entered into a Consortium Agreement for the purpose of bidding and participated jointly in the tender process, has however did not consider requirement of compliance with the mandatory condition of prior registration with the competent authority.
7.8. Learned Senior Counsel further submitted that the interpretation placed by learned Single Judge to the contents of Office Memorandum dated 08.02.2021 to hold that prohibition contained in the said Office Memorandum is applicable only in respect 24 of supply of finished products and not for procuring raw material is incorrect. He also submitted that the further reliance placed on the clarification to paragraph 11 of the Office Order relating to "Sub-Contracting" in work contracts by the learned Single Judge is incorrect as the same is not applicable to the instant case, inasmuch as the said clarification relates to 'sub-contract' which comes into force only after execution of contract. Thus, he submitted the clarification cannot be made applicable as the respondent Nos. 3 and 4 who had jointly participated in the tender process.
7.9. That respondent No.4 submitted the Consortium agreement dated 12.07.2022 entered into between respondent Nos. 3 and 4 with an intention to undertake the work pertaining to NIT. That in terms of Consortium Agreement respondent No.4 is required to provide certain vital support and service to respondent No.3 including support in manufacturing, supervision of erection, vetting of detailed engineering etc., Therefore, the terms "Bidder" and "Bidder from the 25 country which shares a land border with India" as defined in the Office Order would include respondent No.4 warranting registration with the competent authority to be eligible to bid with the tender process.
7.10. That the Office Order had been issued by Government of India taking into consideration national security and interest and as such accountability of the statutory bodies to scrutinize and screen the eligibility of the participants in the tender process is much higher which is absent in the instant case and also raises question about the decision making process adopted by respondent No.2.
7.11. That non compliance of techno commercial requirement by respondent Nos.3 and 4 and complete overlooking of this eligibility stipulations envisaged under the terms of the contract by respondent No.2 and also overlooking the Office Memorandum issued by the Government of India with regard to eligibility of the bidders in the bidding process would only lead to the conclusion of bias and favoritism on the part of 26 respondent No.2 in awarding the contract to respondent Nos.3 and 4 over the appellant. As such, the entire decision making process adopted by respondent No.2 is questionable requires to be interfered with as it is in clear violation of its own tender documents.
7.12. Learned Senior counsel also referred to two separate copies of Consortium Agreement produced by respondent Nos.3 and 4 found at page Nos.700 to 703 and at page Nos.838 to 840 of the writ appeal submitted that though the said two documents bear even date and same stamp paper, the text and signature are different and that the respondents had not placed any explanation for such difference. Taking through the said variation in the documents including the style and size of the letters and seals found affixed on the documents, learned Senior counsel submitted that a inference could be drawn that a fraud has been played by respondent No.3 and 4 in collusion with respondent No.2 which had allowed them to change portion of Consortium Agreement requiring taking of 27 cognizance of clandestine arrangement between respondent No.2, 3 and 4 to somehow award the contract to respondent No.3 and to avoid the appellant.
7.13. Learned Senior Counsel vehemently emphasized that appellant possesses technical qualification as prescribed under PQR and that mere fact that financial bid of the respondent No.3 is lesser than that of the financial bid of the appellant cannot be the criteria for awarding contract to respondent No.3 who admittedly did not possess critical technical criteria.
7.14. In support of his submissions, learned Senior counsel relied upon the following decisions;
1. Haji T.M. Hassan Rawther V. Kerala Financial Corporation- [1988] 1 SCR 1079
2. Meerut Development Authority v. Association of Management Studies & Anr., (2009) 6 SCC 171
3. New Horizons Ltd., v. Union of India (1995)1 SCC 478
4. DSPC Engineering Pvt. Ltd., V. MECON LTD., 2021 SCC online Del 1320.
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5. Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation, (2016) 16 SCC 818
6. Tata Cellular v. Union of India, (1994) 6 SCC 651
7. New Horizons Ltd., v. Union of India (1995) 1 SCC 478
8. Royal Power Turnkey Implements Pvt., Ltd., v. Maharashtra Industrial Development Corporation at 2014 (5) Mh.L.J 399
9. Gajanana Engineers v. The Principal Secretary to Government Energy Department and ors., ILR 2005 KARNATAKA 3973.
Hence, seeks for allowing of the appeal. Submission on behalf of Respondent Nos.1 & 2:
8. Sri. Srinivasa Raghavan, learned Senior counsel appearing for the respondent Nos. 1 and 2 refuting the contentions of the appellant submitted;
8.1. That the present petition is filed by the Appellant/Appellant who is an unsuccessful bidder on misconceived facts and misunderstanding of the terms of tender document with ulterior intentions.
8.2. Taking through the conditions stipulated under clause 01.01.01, 01.01.02, 01.01.03 and 01.01.07 of the PQR, learned Senior counsel submitted 29 that there is no prohibition for respondent No.3 to participate in the tender process by entering into an arrangement in the nature of a "Tie-up" or "An Association" with any entity which satisfies the qualification criteria required under 01.01.01. Clause 01.01.02 of the PQR itself provide for entering into arrangement such as 'collaboration' or 'association'.
8.3. That though respondent Nos. 3 and 4 have submitted a document styled as "Consortium Agreement" it is not a consortium in its strict sense. It is merely an agreement of "Collaboration" or a "Tie-
Up". Taking through the contents of Consortium Agreement dated 12.07.2022, learned Senior counsel submitted that nomenclature of the document is not the determinative factor in interpreting the relationship of the parties. He submitted that the agreement clearly specifies the respective roles of respondent Nos. 3 and 4 by separately identifying their work and responsibility. That in terms of Annexure-1 to the agreement, respondent No.3 is required to undertake complete work which includes detailed engineering, 30 manufacturing, supply, erection, testing and commissioning, trial run, demonstration of PG test and handing over for complete Ash handing plant, while respondent No.4 is required to provide only basic design, vetting of details, support in manufacturing and supervision in erection and commissioning.
8.4. Referring to clause 7 of the PQR, learned Senior counsel submitted that the 'bidding consortium' has to be understood in the manner set out in these clauses. He submitted that as per clause 7.2 of the PQR a member of a consortium should hold atleast 51% of equity/ownership stakes to be nominated as a 'Lead member' and as per clause 7.3 of the PQR a consortium member whose financial capacity to be evaluated for the purpose of award of the project shall hold atleast 26% stake in consortium. Thus, referring to these two clauses learned senior counsel submitted that no such arrangement is existing between the respondent Nos. 3 and 4 to term them as consortium bidders. That in the absence of such essential requirements, he submitted that the relationship 31 between the respondent Nos. 3 and 4 is merely that of an 'association'.
8.5. Learned Senior counsel referring to a definition of "Bidder" as provided in Office Memorandum submitted that the reading of the same means "any person or firm or company, including any member of a consortium or joint venture that is an association or several persons or firm or companies". Emphasizing the terms "That Is And Association Of Several Persons" as provided therein learned Senior counsel submitted that even the said definition of `bidder' includes and provides clarification regarding "Association of Several Persons" which do not necessarily mean a "Consortium" in its traditional sense.
8.6. That the Office Order has to be read with contents of clause 7.2 and 7.3 of the PQR. Read as such, he submitted that the arrangement between respondents 3 and 4 is only that of a 'mere 32 collaboration' or a 'tie-up' or an association and not a 'consortium'.
8.7. He further submitted that in the instant case, respondent No. 3 is the sole bidder. Letter of intent and purchase order was issued only in favour of respondent No.3 and not to the consortium of respondent Nos.3 and 4.
8.8. Learned Senior counsel referring to an affidavit dated 29.05.2023 filed by the authorized representative of respondent Nos. 1 and 2 submitted that substantial portion of works have already been completed. As on date, 99% of engineering work for Wet Ash System has been completed by respondent No.3 and respondent Nos. 1, 2 and 5 have approved 155 engineering documents of the 162 mechanical documents submitted by respondent No.3. Several items have already been procured and orders for several orders have been placed by respondent Nos. 1 and 2 based on specification and drawings of respondent No.3. That the civil construction works by 33 respondent Nos. 1 and 2 is on going and about 50% of the main structure of the Power Station is already on place and that reinitiating fresh tender process at a stage Wet Substantial Work are completed would be contrary to the public interest as it would cause immense delay and financial burden on the public exchequer. He submitted that judicial review of tender process should not be to protect interest at the cost of public interest and larger public interest ought to be looked at while deciding whether intervention in tender process is required.
8.9 In support of his submissions learned Senior counsel relied upon following decisions:
(1) Tata Cellular vs. Union of India (1994) 6 SCC 651, (2) Michigan Rubber (India) Ltd., vs. State of Karnataka and others (2012) 8 SCC 216, (3) Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited and another (2016) 16 SCC 818, (4) Silppi Constructions Contractors Vs. Union of India and another (2020) 16 SCC 489 (5) N.G. Projects Ltd. Vs Vinod Kumar Jain and others -(2022) 6 SCC 127 34 (6) State of Orissa Vs. Titaghur Paper Mills Co.
Ltd and Anr. (1985) (Supp) SCC 280.
(7) Yellapu Uma Maheswari and Anr.
V. Buddha Jagadheeswararao and others (2015) 16 SCC 787.
(1976) 2 SCC 5 (9) C.C., C.E. & S.T., Bangalore (Adjudication) and others vs. Northern Operating Systems Pvt. Ltd. AIR 2022 SC 2450.
(10) Korukonda Chalapathi Rao and Another v.
Korukonda Annapurna Sampath Kumar 2021 SCC online 847.
(11) New Horizons Ltd. And Anr. V. Union Of India and others. (1995) 1 SCC 478. (12) Linde AG v. Deputy Director of Income Tax 2014 SCC online Del 1558.
(13) Rajasthan Roller Flour Mills Association and Anr. V. State of Rajasthan and others.. 1994 Supp (1) SCC 413.
(14) State of Karnataka and others Vs. Balaji Computers and others (2007) 2 SCC 743 (15) Tata Motors Ltd. V. Brihan Mumbai Electric Supply and Transport Undertaking and others., 2023 SCC online SC 671.
Hence, sought for dismissal of Appeal. Submission on behalf of Respondent No.3:
9. Sri.Dhyan Chinnappa, learned Senior counsel appearing for respondent No.3 broadly agreeing and adopting the submission of learned 35 counsel Srinivasa Raghavan learned Senior counsel for respondent Nos. 1 and 2, submitted that;
9.1. That respondent No.3 is a sole bidder and there is no joint bidding by respondent Nos. 3 and 4 as contended by the petitioner.
9.2. That in terms of clause 7.2 of PQR a tenderer can take many forms such as a 'sole bidder', a 'joint venture company' or a 'contractual joint venture' or a 'simple joint bidding'.
9.3. That the Consortium Agreement in the instant case is merely a format provided by respondent No.2 in furtherance to clause 01.01.03(g) which is required when a foreign party submits a bid for the purpose of erection and commissioning and is not in compliance with 7.02 and 7.03 of the PQR to be read as a consortium as there is no 26% stake held by respondent No.4 in the Consortium Agreement. Since, respondent No.4 a foreign entity has joined with respondent No.3 for the purpose of erection and commissioning it cannot be construed as a consortium. 36
9.4. Referring to Letter of Intent and Purchase Order, learned Senior counsel submitted that respondent No.2 recognized respondent No.3 alone as the bidder and has never recognized respondent No.4 as a bidder. As such respondent No. 4 cannot be termed as joint bidder with respondent No.3.
9.5. That the total value of the purchase order placed by respondent No.2 on respondent No.3 is valued at Rs.3,78,64,48,224/- while the value of the contract to be rendered by respondent No.4 is US dollars 95,000/- which is 0.2% of the entire contract value. Therefore, there is no 26% interest or stake in the joint bidding by respondent No.4.
9.6. He further submitted that all that the respondent No.4 is providing is designs and is neither supplying any raw material nor finished products. As such, there is no requirement of registration. That even clause 01.01.02 of the PQR enables a bidder to have a tie-up with any person having technical know- how and mere understanding to avail technology would 37 not render the arrangement to be one of a consortium, more particularly, in the absence of existence of requirement of clause 7.02 and 7.03 of the PQR. As there is no restriction stipulated in the Government Order regarding procurement of goods and services, a transfer of technology by respondent No.4- a Chinese company to respondent No.3-an Indian Company do not require a registration and as such there is no violation of mandatory requirement.
9.7. That respondent No.3 has the capacity to put up bulk handling facility and it has entered into an agreement with respondent No.4 for the purpose of availing services in the nature of design and technical know-how to manufacture at the facility of respondent No.3 plant to be set up by respondent No.2-BHEL. This arrangement is in compliance of clause 01.01.01 and 01.01.02 of the PQR and as such the contentions of the appellant, respondent No.3 has no qualification to participate in the bid cannot be countenanced. 38
9.8. That the respondent No.3 has satisfied both technical and financial PQR and has thus been rightly awarded the contract by respondent No.2 without any violation of the terms of the contract.
9.9. Learned Senior counsel relied upon the following judgment of the Apex Court in the case of MONTECARLO LIMITED VS. NATIONAL THERMAL POWER CORPORATION LIMITED (2016) 15 SCC 272, which reads as under;
25. Recently in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd.a two-Judge Bench eloquently exposited the test which is to the following effect:-
"We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given."
26. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated 39 and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinized by the technical experts and sometimes third party assistance from those unconnected with the owner's organization is taken. This ensures objectivity. Bidder's expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or mala fide or procedure adopted is meant to favour one. The decision making process should clearly show that the said maladies are kept at bay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and 40 projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints.
Hence, seeks for dismissal of the appeal. Submission on behalf of Respondent No.5:
10. Sri. D.L.N.Rao, learned Senior counsel appearing for respondent No.5 submitted that;
10.1. A writ appeal under Section 4 of the High Court Act, 1961 is not an appeal as understood under Section 96 of the Civil Procedure Code and it is confined only to examine if the order impugned is perverse or arbitrary.
10.2. That judicial scrutiny in matters pertaining to tender process is only limited to decision making process of acceptance or rejection of its bids based on the grounds of perversity or arbitrariness or irrationality and the Court must defer to the understanding and appreciation of the tender document as given by the owner or employer of the 41 contract which in the instant case is the respondent No.2. A disagreement in the decision making process or decision of the authority would not give room for judicial review and in the instant case, there is no perversity or arbitrariness or illegality in the tender process and the same has been exercised in most transparent manner.
10.3. That the project was originally conceived by the respondent No.5 in the year 2017 and the entire cost of the project was estimated to be Rs.30,000 Crores. The project was to be completed by October, 2021. That the present litigation by the appellant has cost hindrance to the construction and commissioning of Thermal Power Station. That the delay in setting up the plant has resulted in delay of works pertaining to the Thermal Power Station and its operation.
10.4. That admittedly respondent No.2 has awarded the contract to respondent No.3. That more than 50% of the Thermal Power Station work has been 42 completed by spending over 17,000 crores by generating funds from public exchequers and also from borrowers. That every month Rs.300 Crores being paid to the Banks as the interest amount and any further delay would inflate the cost of the project.
10.5. That there is a daily requirement of energy requirement of Telangana is 270 million units out of which upon completion of the project would meet the demand of 90 million units. That there is power deficit in the State of Telangana and the completion of project would make Telangana a self sufficient State without being dependant on the external sources.
10.6. That bid put forth by the respondent No.3 is lower than the bid submitted by the appellant and is also lower than the engineering estimate for setting up of Ash Handling plant. As such, awarding of contract to respondent No.3 which possess all technical and financial qualified would ensure completion of Ash Handling Plant in cost effective manner and also in the public interest.43
10.7. That the respondent No.2 has complied with all terms and condition of the tender document before issuing Letter of Intent to the respondent No.3 and the respondent No.5 was kept informed by respondent No.2 of all its action which respondent No.5 fully affirms and approves. There is no iota of arbitrariness, illegality, unreasonableness or perversity in decision making.
10.8. That time and cost that would be incurred in redoing the tender process would result in unbudgeted expenditure and inflated cost for the thermal power station as a whole and the people of Telangana would be deprived of infrastructure apart from being saddled with additional cost.
Hence, seeks for dismissal of the appeal. Analysis:
11. We have heard learned counsel for the parties. Perused the records as well as written 44 submissions filed by the parties in furtherance to the above oral submissions.
12. The entire thrust of the case of the appellant is that respondent No.3 not possessing critical qualification as prescribed under Clause 01.01.01 (a)(b)(c) of PQR; that since respondent No.3 did not possess requisite qualification it entered into a "Consortium Agreement" with respondent No.4 which is a Chinese entity thereby both respondent Nos. 3 and 4 jointly participated in the bidding process; that entering into Consortium Agreement between respondent No.3 and 4 falls within the ambit of definition of "Bidder" and "Bidder from a country which shares a land border with India" as defined in the Office order dated 23.07.2020 requiring registration with the competent authority as mandated thereunder;
that respondent No.2 overlooking the aforesaid aspect in awarding the contract to the respondent Nos. 3 and 4 has thereby vitiated the entire process requiring interference under Article 226 of the Constitution of India.
45
13. The response of the respondents to the above contentions of the appellant is that the Clause 01.01.02 of the PQR itself enables respondent No.3 to enter into an arrangement of collaboration/association with respondent No.4 to satisfy the requirement of 01.01.01 (a)(b)(c) of PQR and such an arrangement is not an Agreement of Consortium in its strict sense. As such, there is no requirement of registration with the competent authority more particularly when a clarification in this regard has been issued by the authority. That there is no arbitrariness or bias in awarding the contract. That there shall judicial restraint in the matters of administrative actions with deference to the choice and decisions of the authorities in the matter pertaining to awarding of contracts through tender process.
14. Law with regard to judicial review in the matters of administrative actions particularly in awarding contract, is well settled. Even as extensively taken note of by learned Single Judge at paragraphs 46 13 to 15 of the impugned order the Apex Court has broadly laid down the law in the cases of (i) TATA CELLULAR VS. UNION OF INDIA (1994) 6 SCC 651, (ii) MICHIGAN RUBBER (INDIA) LTD., VS. STATE OF KARNATAKA AND OTHERS (2012) 8 SCC 216, (iii) AFCONS INFRASTRUCTURE LIMITED VS. NAGPUR METRO RAIL CORPORATION LIMITED AND ANOTHER (2016) 16 SCC 818, (iv) SILPPI CONSTRUCTIONS CONTRACTORS VS. UNION OF INDIA AND ANOTHER (2020) 16 SCC 489 AND (v) N.G. PROJECTS LTD. VS VINOD KUMAR JAIN AND OTHERS (2022) 6 SCC 127 with regard to scope of judicial intervention in the matter of administrative actions wherein it is held;
"that the judicial review in the contractual matter is restricted to decision making process and not the decision itself and in the decision making process, the presence of bias, malafides, arbitrariness and irrationality should be necessarily present and that there shall be judicial restrain in administrative action and the Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made and that the Court would not interfere in the administrative actions involving contractual matters unless a clear case of arbitrariness or malafide or bias or irrationality is made out".47
15. It is equally well settled law that unless the order under challenge suffers from perversity or arbitrariness the Courts shall not interfere. Since the core issue involved in this matter pertains to bidder possessing prescribed qualification criteria, it is necessary to refer to following Judgments of the Apex Court;
16. In the case of BSN JOSHI AND SONS LIMITED VS. NAIR COAL SERVICES LIMITED (2006) 11 SCC 548 and another the Apex Court at paragraphs 65 and 66 has held as under;
65. We are not oblivious of the expansive role of the superior courts in judicial review.
66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarised as under:
(i) if there are essential conditions, the same must be adhered to;
(ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully;
(iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, 48 ordinarily again a power of relaxation may be held to be existing;
(iv) the parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction;
(v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with;
(vi) the contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority;
(vii) where a decision has been taken purely on public interest, the court ordinarily should exercise judicial restraint.
17. In the case of RAUNAQ INTERNATIONAL LIMITED VS. I.V.R. CONSTRUCTION LIMITED (1999) 1 SCC 492 the Apex Court at paragraphs 9, 10 and 11 has held as under;
9. ...... In arriving at a commercial decision considerations which are of paramount 49 importance are commercial considerations. These would be :
(1) The price at which the other side is willing to do the work;
(2) Whether the goods or services offered are of the requisite specifications;
(3) Whether the person tendering has the ability to deliver the goods or services as per specifications.
When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important;
(4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality;
(5) past experience of the tenderer, and whether he has successfully completed similar work earlier; (6) time which will be taken to deliver the goods or services; and often (7) the ability of the tenderer to take follow up action, rectify defects or to give post contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.
10. What are these elements of public interest ? (1) Public money would be expended for the purposes of the contract;
(2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities.
50
(3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in re-doing the entire work - thus involving larger outlays or public money and delaying the availability of services, facilities or goods. e.g. A delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation.
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".
18. It is also pertinent to refer to the judgment of the Apex Court in the case of STERLING 51 COMPUTERS LIMITED VS. M&N PUBLICATION LIMITED (1993) 1 SCC 445 wherein at paragraphs 18 and 19 the Apex Court has held as under;
"18.While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process". In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans [(1982) 3 All ER 141] where it was said that: (p. 144a) "The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court." By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans [(1982) 3 All ER 141] the courts can certainly examine whether "decision- making process" was reasonable, rational, not arbitrary and voilative of Article 14 of the Constitution.
19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the courts cannot ignore such action saying that the authorities 52 concerned must have some latitude or liberty in contractual matters and any interference by court amounts to encroachment on the exclusive right of the executive to take such decision".
POINTS FOR CONSIDERATION:
19. In the light of the aforesaid settled position of law with regard to the scope of judicial review in the administrative actions and at the same time the law with regard to the requirement of compliance with essential prequalification/eligibility by a tenderer, the points that arise for our consideration in the instant case are ;
"1. Whether as contended by the Appellant, respondent No.3 and 4 are ineligible to participate in the tender process for non- compliance with the terms of Pre-qualification Requirement and the Office Order dated 23.07.2020;
or Whether as contended by the Respondents, the Respondent No.3 is the only Bidder and therefore there is no requirement of any registration as mandated under the Office Order dated 23.07.2020 particularly in view of clarification issued under Official Memorandum dated 08.02.2021?
2. Whether in the circumstance of the case awarding of contract by respondent No.2 to respondent No.3 is vitiated by vices of arbitrariness, malafides, bias or irrationality?53
3. Whether on the facts and in the circumstances, the impugned order suffers from any perversity warranting interference"?
REGARDING ESSENTIAL QUALIFICATION PRESCRIBED UNDER PQR:
20. To appreciate the rival contentions, namely, whether respondent No.3 possessed technical criteria prescribed under clause 01.01.01 (a)(b)(c) of PQR and whether the said qualification is critical for performance of the subject contract and whether the Respondent Nos.3 and 4 had indeed entered into Consortium Agreement or it is only an arrangement of "tie-up" or "association", it is imperative to refer to certain clauses of PRQ which are extracted hereunder:
01.00.00- TECHNICAL CRITERIA:
The bid is open for participation to those bidders who satisfy the following technical requirements;
01.01.01. The bidder should have executed atleast one (1) number Ash Handling Plant (AHP) In India/abroad for a thermal power station using sea water/plain water involving design, engineering, manufacture/procurement, supply, erection & commissioning (or supervision of erection & commissioning) comprising the following systems which should be in successful operation for at least (1) year as on date of submission of the bid:54
a. Bottom ash handling system comprising jet pump system in conjunction with water impounded bottom ash hopper designed for minimum 50 TPH (on dry ash basis) capacity or more for pulverized coal fired boilers.
AND b. First stage fly ash handling system for conveying fly ash from ESP hoppers to Intermediate Surge Hopper (ISH) by vacuum conveying system designed for minimum 30 TPH capacity (dry ash basis) per stream.
AND c. Second stage fly ash handling system for conveying fly ash from Intermediate Surge Hopper (ISH) to Fly ash silos by pressure conveying system designed for minimum 20 TPH capacity (dry ash basis) per line for a distance not less than 500 mtrs.
AND d. High Concentration Ash Slurry Disposal (HCSD) System for minimum 40 TPH capacity (dry ash basis) per line.
The above Clauses 01.01.01 (a), (b), (c) and (d) can be in one single plant or in a combination of plants.
01.01.02 Bidder who is a supplier of bulk material handling system but does not meet the requirements under clause 01.01.01 above in part or in full can also participate provided he has executed atleast the following systems design, engineering, manufacture, supply, erection & commissioning (or supervision of erection & commissioning):
a). Fly Ash Handling System for conveying Fly Ash from ESPs in dry form (vacuum conveying or pressure conveying system) or in wet slurry mode.
OR 55
b). Bulk material handling system, comprising of belt conveyors having a minimum design capacity of 800 TPH The systems mentioned at 01.01.02 (a) or (b) above should be in successful operation in atleast two(2) plants for at least two (2) years as on date of submission of bid and should have been installed pulverized coal fired boiler units in India/abroad generating not less than 40 TPH of Ash per boiler units in India/abroad generating not less than 40 TPH OF Ash per boiler.
AND Collaborate(s) Associate(s) with party (ies) who meet(s) either the total requirement under 01.01.01 (a) (b) and (c) above or any of the above requirements under 01.01.01
(a), (b) and (c), which the bidder himself is not able to meet.
In such a case, the Bidder shall be required to furnish consortium agreement jointly executed by the Bidder and the collaborator(s)/ Associate(s) and each executant, shall be jointly and severally liable to employer for successful performance of the relevant system, as per the format (Annexure- A) enclosed along with bid. The collaboration agreement should be submitted along with the bid. In such a case, each Collaborate /Associate shall be required to furnish a bank guarantee at the time of placement of order as follows:
i) INR 10 Lakh (Rupees Ten Lakh) for Collaborator/Associate for jet pumping system.
ii) INR 25 Lakh (Rupees Twenty Five Lakh) for Collaborator/Associate for Vacuum conveying system
ii) INR 25 Lakh (Rupees Twenty Five Lakh) for Collaborator/Associate for Pressure Transportation system AND 56 Collaborate(s)/Associate(s) with party who meets the requirement under 01.01.01 (d) above which the bidder himself is not able to meet. In such a case, the Bidder shall be required to furnish Agreement of Support jointly executed by the Bidder and the collaborator/Associate for successful performance of the HCSD system as per the format (Annexure-B) enclosed along with bid. The Agreement of Support should be submitted along with the bid.
In case bidder collaborates/associates for more than one system with a party, then the Collaborators/Associate shall be required to furnish a bank guarantee for an amount arrived at by adding up the amounts for the relevant systems as above.
01.01.03. The activity of design and engineering under 01.01.01 (a), (b) and (c) should have been carried out by bidder and not through any external design agency/agencies. The activity of design and engineering under 01.01.01 (d) should have been carried out by the bidder or through any external design agency having experience for HCSD system. For design and engineering activity referred under paras 01.01.02 the activity should have been carried out by either the bidder or through design agency/agencies having experience for reference 57 systems. In case of collaborator(s)/associate(s) meeting the balance part of total requirement under clause 01.01.01 (a), (b), (c) and (d) the activity of design and engineering for the reference systems should have been carried out by them. Bidders qualifying under SI No. 01.01.02 and collaborating/associating with party(s) meeting total/balance part of 01.01.01 (a), (b), (c) and (d) shall follow the following for supply and manufacturing of equipment. Bidder shall manufacture from their manufacturing setup based on collaborator(s)/associate(s) drawing for the clause which bidder himself is not meeting the requirement but the collaborator(s)/associate(s) is meeting the requirement, then the collaborator(s) /associate(s) shall approve bidder's manufacturing facilities and manufacturing quality standards. Also after the manufacture of the items, the product shall be inspected by the respective collaborator(s)/associate(s) and furnish certificate of conformance (COC) for the product. Also, BHEL/Customer shall approve manufacturing facilities of the equipment of the vendor's self- manufacturing items in case the items are being manufactured by bidder as per collaborator(s)/associate(s) design and manufacturing drawing.
Bidder shall submit the following documents along with bid for pre-qualification requirement. Non- submission of below mentioned documents along with bid is liable for rejection. Hence all bidder(s) 58 shall adhere to submission of following documents for meeting Pre-qualification requirement.
a) List of experience for the system
described above.
b) Manufacturing facilities, equipment,
manpower details duly signed by bidder
shall be furnished
c) Bidder shall provide documentary
evidence in support of his claim for
having experience in design,
manufacture, testing and supply, E&C,
performance of AHP meeting the
requirements mentioned in
Sl.Nos.01.01.01 or 01.01.02 for Ash
Handling Plants which are in operation
as on date of submission of the bid.
Following documentary evidence (as given below) for supply of items as mentioned in clause no. 01.01.01 or 01.01.02 shall be submitted along with bid:
d) Letter of Award (Purchase order
copies)
e) End customer's address and contact
details (ph.no, emails) to be furnished.
f) Performance Certificate from Customer.
g) If the bidder is a foreign party, he shall
make a collaboration/consortium
agreement with an Indian agency for
erection and commissioning at site. Such 59 bidders shall submit collaboration /consortium agreement as per enclosed Annexure-A enclosed.
B. Pre-Qualification Requirement: (Financial)
1. The bidder shall have Rs 50 crore or more as Average annual financial turnover during any the three consecutive Financial Years (FYs) from the immediately preceding four FYs as of 31st Mar 2021. (Example: FY to be considered shall be 2017-18, 2018-19 & 2019-20 OR 2018-19 & 2019- 20 & 2020-21)
2. The Bidder shall also have annual financial turnover not less than Rs.100 Crore (Rupees One Hundred Crores Only), in any one of the three years in the consecutive three years considered as under clause B-1 stated above.
3. Bidder should submit financial accounts (audited, if applicable comprising of Audit report, Balance Sheet, Profit & Loss A/c Statement for FY 2017-18, 2018-19 & 2019-20 OR 2018-2019,2019- 2020 & 2020-2021. If financial statements are not required to be audited statutorily, then instead of audited financial statements, financial statements are required to be certified by registered Chartered Accountant/Statutory Auditor for Companies.
4. Other Income shall not be considered for arriving at Annual Turnover/Sales. 60
5. Financial pre-qualification of the foreign bidder (other than Indian bidders) may also be evaluated on the basis of the report from a reputed third party business rating agency like Dun & Bradstreet, Credit reform etc. The foreign bidder is to submit the report from reputed third party. All Foreign language documents either shall be translated to English language by a certified agency or translated verification by an authorized agency. Credit rating certificate also shall be furnished for financial credibility of the organization.
6. For PQ evaluation of foreign bidder, exchange rate (TT selling rate of SBI) as on scheduled data of tender opening (Part-1 bid in case of two part bid) shall be considered.
7. Bidder may collaborate/tie up in any legal form with other parties. Minimum eligibility criteria for financial capability has to be complied either by a bidding Company or by a lead Consortium one of the member of a bidding Consortium.
7.1. Offers of the JV companies/ Joint Bidders/bidders having collaboration agreement/MOUS shall be evaluated as follows; 7.1a. If bidder happens to be the Joint Venture Company, then the credentials of any/both of JV partners can be also considered for meeting PQR 7.1b. If bidder happens to bid jointly with their partner, then credentials of the partners will be 61 considered for meeting Financial PQR, proportionate to the scope of work / stake in the Partnership.
7.1.c. If bidder happens to be the having valid collaboration agreement/ MOU with some other company, then the credentials of collaborator/ MOU partner can also be considered for meeting PQR proportionate to the scope of work / stake in the consortium. In all such cases, lead bidder as specified in bid documents shall be responsible for overall execution of the contract and all guarantee/ warranty.
7.1.d. If bidder happens to be an Indian subsidiaries of foreign OEM, then the credentials of the foreign OEM can also be considered for meeting PQR.
7.2. The members of bidding Consortium should have entered into a Memorandum of Association ("MOA") between themselves. One of the members of Consortium, holding at least 51% of the equity/ownership stake shall be authorized and nominated as the Lead member (Lead Member) to act and represent an the members of the Consortium for bidding and implementation of the Project.
7.3 Consortium Member whose financial capacity will be evaluated for the purposes of award of the Project shall hold at least 26% (twenty six per cent) stake in consortium.
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7.4 A Bidder or a member of a Consortium can be a member in only one Consortium. If a Bidder/member participates in more than one Bid for the same site / space, all Bids of which it is a part shall be summarily rejected.
7.5 All members of the Consortium shall be jointly and severally liable for the execution of the Project as per NIT terms.
7.6 Replacement of the Lead Member shall not be allowed at any time during the execution of the contract.
7.7. Bidder to note that the arrangement of bidding (joint bid partners/ collaborator/ MOU partner) once offered to BHEL as a part of bidding documents cannot be changed till the execution of the project.
8. Consideration of offer shall be subject to customer's approval of bidders.
21. On a careful reading of the aforementioned clauses of PQR requirement of prequalification set out in clauses 01.01.01, 01.01.02 and 01.01.03 operate distinctly and differently. While, clause 01.01.01 deals with requirement of experience in "Ash Handling System", Clause 01.01.02 deals with requirement of 63 experience in "Bulk Handling System". Clause 01.01.03 lays down the procedure of carrying out the activities and responsibility of Bidder carrying out such activities in the event of there being situation of collaboration/association. Clause 01.01.01 mandates a bidder to satisfy the Technical Qualification and experience in Ash Handling System specifically prescribed in 01.01.01 (a) (b) (c) & (d) which are essential for participation in the bidding process.
22. Reading of clause 01.01.02 which enables entering into arrangement for "collaborate/associate"
makes it clear that a bidder who is not able to meet the requirements of 01.01.01(a), (b) and (c) of PQR is required to furnish agreement of support jointly executed by the bidder and collaborators /associate and each executant shall be jointly and severally liable to the employer for successful performance of the relevant system.64
23. Clause 01.01.03 further clarifies that the activity of design and engineering under clause 01.01.01 (a)(b)and (c) of PQR should have been carried out by the bidder "and not through any external design agency/agencies". REGARDING ELIGIBILITY OF RESPONDENT No.3:
24. It is an admitted fact that the respondent No.3 did not possess the qualification prescribed under clause 01.01.01 (a) (b) & (c) of PQR. The contention of appellant is that respondent No.3 in order to participate in the bid entered in the Consortium Agreement with respondent No.4 is disputed by the respondents. To ascertain if respondent No.3 fulfilled the Qualification prescribed under Clause 01.01.01
(a)(b)(c) of the PQR on its own or only through entering into an Consortium Agreement with respondent No.4 is relevant to refer to contents of document in support of PQR-Technical (produced at page No.709 of the Appeal compilation in tabular form) wherein following has been stated;65
Project: ASH HANDLING PACKAGE FOR 5X800 MW TSGENCO YADADRI TPS Offer Ref: BTL/MHD.601/BHEL-
YADADRI/AHP/22-23 CLIENT: BHEL ISG POR TECHNICAL PQR (TECHNICAL) FOR ASH HANDLING PROJECT 5X800MW YADADRI TPS, NALGONDA Referred Qualification Criteria Requirement Bidder's Response Clause No As per TS 01.00.00 TECHNICAL CRITERIA Pre-qualification Requirements 01.01.01 The bidder should have executed at least We "BTL EPC LTD" have one (1) number Ash Handling Plant (AHP) in entered into a consortium India/abroad for a thermal power station agreement for meeting using sea water / plain water involving the PQ criteria.
design, engineering, manufacture /
procurement, supply, erection &
commissioning (or supervision of erection & commissioning) comprising the following systems which should be in successful operation for at least (1) year as on date of submission of the bid:
a. Bottom ash handling system comprising jet pump system in conjunction with water impounded bottom ash hopper designed for minimum 50 TPH (on dry ash basis) capacity or more for pulverized coal fired boilers.
AND b. First stage fly ash handling system for conveying fly ash from ESP hoppers to Intermediate Surge Hopper (ISH) by vacuum conveying system designed for minimum 30 TPH capacity (dry ash basis) per stream.
AND c. Second stage fly ash handling system for conveying fly ash from Intermediate Surge Hopper (ISH) to Fly ash silos by pressure conveying system designed for minimum 20 TPH capacity (dry ash basis) per line for a distance not less than 500 mtrs.
AND d. High Concentration Ash Slurry Disposal (HCSD) System for minimum 40 TPH capacity (dry ash basis) per line.66
01.01.02 Bidder who is a supplier of bulk material We "BTL EPC LIMITED having handling system but does not meet the the experience of executing requirements under clause 01.01.01 above in numbers of bulk material part or in full can also participate provided he handling system on EPC has executed at least the following systems Basis. Our responsibility design, engineering, manufacture, supply, involves design, engineering, erection & commissioning (or supervision manufacture, supply, commissioning): of erection & erection & commissioning (or commissioning.
supervision of erection
commissioning) on EPC basis
a.Fly Ash Handling System for conveying Fly a. To meet the PQ
Ash from ESPs in dry form (vacuum criteria we have
conveying or pressure conveying system) or entered into a
in wet slurry mode. consortium agreement
with "M/S FUJIAN
Or LONGKING CO. LTD"
who have executed
b. Bulk material system, comprising handling Ash Handling System
of belt (vacuum conveying as
well as pressure
conveying system) for
Power plants on EPC
basis.
Following Document of
"M/S FUJIAN LONGKING
CO. LTD Enclosed vide
Attachment - 1:-
1. Letter of
Award/Purchase order
copy.
ii) End customer address
and contact details.
iii. Performance
Certificate from customer.
conveyors having a minimum design capacity b. We 'BTL EPC Limited' had
of 800 TPH Designed, Supplied and
erected number of integrated
The systems mentioned at 01.01.02 (a) or
(b) above should be in successful operation bulk material handling plant in at least two (2) plants for at least two (2) on EPC basis, details of years as on date of submission of bid and relevant project for fulfilling should have been installed for pulverized coal the Criteria Qualification fired boiler units in India/abroad generating not less than 40 TPH of Ash per boiler enclosed AND Following Document of "BTL EPC LTD" Enclosed vide Collaborate(s)/Associate(s) with party (ies) Attachment-2:-
who meet(s) either the total requirement under 01.01.01 (a), (b) and (c) above or any i. Letter of Award/Purchase of the above requirements under 01.01.01 order copy
(a), (b) and (c), which the bidder himself is not able to meet ii. End customer address and contact details In such a case, the Bidder shall be required to furnish consortium agreement jointly executed by the Bidder and the iii. Performance Certificate collaborator(s) Associate(s) and each from customer.
executant, shall be jointly and severally liable to employer for successful performance of We "BTL EPC LTD" have the relevant system, as per the format entered into a consortium (Annexure- A) enclosed along with bid. The agreement with "M/S collaboration agreement should be submitted FUJIAN LONGKING CO. along with the bid LTD" to meet the criteria.
AND
67
Duly filled in signed and
stamped Consortium
Collaborate(s)/Associate(s) with party who agreement as per
meets the requirement under 01.01.01 (d) Annexure-A enclosed
above which the bidder himself is not able (vide Attachment-3).
to meet.
To meet the qualification
In such a case, the Bidder shall be criteria under clause no
required to furnish Agreement of Support 01.01.01 (d) we have
jointly executed by the Bidder Minerals entered into a Agreement
and the collaborator / Associate for with M/s Weir Minerals
successful performance of the HCSD Netherlands b.v.
system as per the format (Annexure-B) enclosed along with bid. The Agreement of Following Document of "M/s Support should be submitted along with Weir Netherlands b.v the bid Enclosed vide Attachment-4:-
1. Duly filled in, signed and stamped Agreement as per Annexure-B enclosed.
2.Performance Certificate issued by client enclosed 01.01.03. The activity of design and engineering Noted and Confirmed under 01.01.01 (a), (b) and (c) should have been carried out by the bidder and not through any external design agency/agencies.....
For design and engineering activity referred under paras 01.01.02 the activity should have been carried out by either the bidder or through design agency/agencies having experience for reference systems. In case collaborator(s)/ associate(s) meeting the balance part of total requirement of under clause 01.01.01 (a),
(b), and (d) the activity of design and engineering for the reference systems should have been carried out by them. Bidders qualifying under Sl No. 01.01.02 and collaborating/associating with party(s) meeting total/balance part of 01.01.01
(a), (b), (c) and (d) shall follow the following for supply and manufacturing of equipment. Bidder shall manufacture from their manufacturing setup....
Bidder shall submit the following a. Enclosed (Refer
documents along with bid for pre- Attachment-5)
qualification requirement. Non-
submission of below mentioned b. Will furnish the details
documents along with bid is liable for after award of contract (in
rejection. Hence all bidder(s) shall adhere case of successful bidder)
to submission of following documents for meeting Pre- qualification requirement. c. Refer to Attachment-1 and 2 a. List of experience for the system described above. d. Refer to Attachment-1 and 2 b. Manufacturing facilities, equipment, manpower details duly signed by bidder e. Refer to Attachment-1 and shall be furnished. 2 c. Bidder shall provide documentary f. Refer to Attachment-1 and 68 evidence in support of his claim for having 2. experience in design, manufacture, testing and supply, E&C, performance of AHP g. Not Applicable meeting the requirements mentioned in sl. Nos. 01.01.01 or 01.01.02 for Ash Handling Plants which are in operation as on date of submission of the bid. Following documentary evidence (as given below) for supply of items as mentioned in clause no. 01.01.01 or 01.01.02 shall be submitted along with bid:
d. Letter of Award (Purchase order copies).
e End customer's address and contact details (ph.no, emails) to be furnished.
f. Performance Certificate from Customer. If the bidder is a foreign party, he
9. shall make a collaboration/ consortium agreement with an Indian agency for erection and commissioning at site. Such bidders shall submit collaboration/ consortium agreement as enclosed with an Indian agency for erection and commissioning at site. Such bidders shall submit collaboration/consortium agreement as per enclosed Annexure -A enclosed.
25. Also relevant to refer to a letter dated 18.07.2022 issued by respondent No.4 under the caption " TO WHOMSOEVER IT MAY CONCERN", which is an under;
TO WHOM SO EVER IT MAY CONCERN Dated 18-07-2022 We are under consortium agreement with M/s BTL EPC LTD., Kolkata, India and are going to participate the tender of Ash Handling Project of 5X800 MW Thermal Power Project BHEL ISG. After award of the contract M/s BTL EPC LTD. shall manufacture all shop manufactured items under our technical support and guidance for 69 achieving the satisfactory performance of the system.
Regards LONGKING CO. LTD No. 81, Lingyuan Road, Xinkuo District Longyan City.
Fujian Province, PR China.
26. Thus, the aforesaid material on record makes it clear that respondent No.3 who admittedly did not fulfill the prequalification requirement in the Technical Criteria defined under clause 01.01.01(a)(b)and (c) of PQR entered into Consortium Agreement with respondent No.4- a Chinese entity, for the purpose of participating in the bidding process.
27. Learned counsel for the appellant emphatically submitted that the technical qualification contemplated under clause 01.01.01 (a)(b)and (c) of the PQR is essential and critical for the performance of the contract and that only bidder is required to carry out the said activity since respondent No.3 and 4 participated as consortium bidders both are jointly and severally liable for the performance of the activity contemplated in terms of Clause 01.01.03. While it is 70 the case of the respondents that respondent No.3 is the only Bidder and all that respondent No. 4 is offering is design and engineering which is just an intangible component of the entire project and which is even specified in annexure to the Consortium Agreement.
28. It is necessary in this regard to note that as per the terms of Clause 01.01.02 of the PQR in the case of bidder entering into collaboration/association to meet the technical requirement of Clause 01.01.01.(a)(b)and (c) there is a mandatory requirement of furnishing of Consortium Agreement as contemplated under Clause 01.01.02 in the format as per Annexure -A. This in addition to executing bank guarantee. Since respondent No.3 and 4 entered into a Consortium Agreement to satisfy the essential qualification criteria as already noted above, Clause 01.01.03 insists that the activity of design and engineering as envisaged under Clause 01.01.01
(a)(b)and (c) should have been carried out by the 71 bidder "and not through any external design agency/agencies". Therefore the joint and several responsibility contemplated under clause 01.01.02 of the PQR comes into picture.
29. The respondents on the other hand are contending that respondent No.4 has no significant role to play except providing designs and engineering and that respondent No.3 is solely liable and responsible for performance of the contract. REGARDING NATURE OF CONSORTIUM AGREEMENT BETWEEN RESPONDENT No.3 AND 4:
30. Learned Senior counsel for the respondents referring to the Clauses 01.01.02, 01.01.03 and clause 7 of the PQR and also referring the definition of "Bidder" as provided under Office Order dated 23.07.2020 emphatically submitted that agreement though termed as Consortium Agreement it is not so in its strict but merely a 'tie-up' or an 'association' only for the limited purpose of availing the services in the nature of design and engineering. Extensive and 72 elaborative submission are made by learned counsel for respondent Nos. 1 and 2 with regard to nature of agreement/arrangement entered into between respondent Nos.3 and 4. In support of his submission, learned Senior counsel for the respondent Nos. 1 and 2 relied upon the following judgment in the case of New Horizons Limited vs. Union of India (1995) 1 SCC 478, wherein at paragraphs 24 and 39 it has been held as under;
24. The expression "joint venture" is more frequently used in the United States. It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. It requires a community of interest in the performance of the subject-matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and losses. (Black's Law Dictionary, 6th Edn., p.
839) According to Words and Phrases, Permanent Edn., a joint venture is an association of two or more persons to carry out a single business enterprise for profit (p. 117, Vol. 23). A joint venture can take the form of a corporation wherein two or more persons or companies may join together. A joint venture corporation has been defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking commonly found in oil, chemicals, electronic, atomic fields. (Black's Law Dictionary, 6th Edn., p. 342) Joint venture companies are now being increasingly formed in relation to projects requiring inflow of foreign capital or technical expertise in the fast developing countries in East Asia, viz., Japan, South Korea, Taiwan, China, etc. [See Jacques 73 Buhart : Joint Ventures in East Asia Legal Issues (1991).] There has been similar growth of joint ventures in our country wherein foreign companies join with Indian counterparts and contribute towards capital and technical know-how for the success of the venture. The High Court has taken note of this connotation of the expression "joint venture". But the High Court has held that NHL is not a joint venture and that there is only a certain amount of equity participation by a foreign company in it. We are unable to agree with the said view of the High Court.
39. On behalf of the respondents reliance has been placed on the decision of the Delhi High Court in Paharpur Cooling Towers Ltd., v. Banbaigon Refinery and Petrochemicals Ltd. wherein it has been held that the expression "tenderer should possess such experience" would mean the experience of the tenderer itself and not that of its collaborator. It has been pointed out that SLP (C) No. 1484 of 1994 filed against the said judgment has been dismissed by this Court by order dated 28-1-1994. It has been urged that on the same logic the experience of a shareholder would not be included within the expression "experience of the tenderer". We fail to appreciate the relevance of this judgment. There can be no comparison between a collaborator who has no stake in the business of the company and a constituent of a company, such as NHL, constituted as a joint venture, wherein the constituents in the joint venture have a substantial stake in the success of the venture.
31. To justify the contention that respondent Nos.3 and 4 are separate entities and are not a consortium, learned Senior counsel relied upon LINDE AG, LINDE ENGINEEERING DIVISION AND ANOTHER VS. DEPUTY DIRECTOR OF INCOME TAX reported in 2014 SCC Online Delhi 1558, 74 wherein while referring to the memorandum of understanding subject matter of the said case the Apex Court at paragraphs 38,39 40,47,48 and 51 has held as under:
38. The intention of the members of the Consortium is discernable from the various clauses of the MOU which are quoted above. Clause 4.8 of the MOU expressly provided that "the CONSORTIUM shall constitute an unincorporated arrangement established for the limited purpose of representations and dealing with ONGC/OPAL with independent and separate scope of work as set forth" in the MOU. Clause 3.1 of the MOU clearly specifies that each consortium member would be responsible for performance of its responsibilities and services as stipulated in the MOU. Clause 3.4 of the MOU further specified that each consortium member would be responsible for its share of work and would also provide the information, data and material required for performance of work by the other member.
39. Insofar as the execution of the contract is concerned, the responsibilities of each member were separate and independent. Neither of the members had any role to play with respect to the scope of work which was allocated to the other member. The equipment/material to be supplied and the works to be executed by each member under the MOU as well as under the Contract entered into with OPAL was well defined and the members were to act separately and in accordance with the respective work allocated to them. The opening recitals as recorded in the MOU indicate that the Linde was required to perform Basic Engineering, supply Selected Key Equipment and the related Detail Engineering. Detail Engineering and Procurement of Cracking Furnaces, parts of Technical Supervision Services, Commissioning, Testing, Conducting Performance Tests and Post-
Commissioning Services of the Project. Samsung was required to perform Detailed Engineering of DFCU Recovery Section and AU, supply of 75 Equipment, Construction, Erection and Pre- Commissioning of DFCU and AU and parts of Technical Supervision Services of the Project.
40. The allocation of the work was done in such a manner that each member was required to perform work which was within its field of expertise and could not be performed by the other party. The work to be performed by both the members was separate, definite and divisible. Therefore, as far as execution of the project was concerned, each party had to work independent of the other. The only area of cooperation and management envisaged under the MOU was in respect of sharing of information and material, to enable the other member to perform its work. In terms of the MOU, each member was obliged to provide the necessary information to the other which was necessary for the other member to perform its work. This level of cooperation is necessary for execution of any project where multiple agencies are involved. Even in cases where the agencies involved in execution of a project are not related, it would be necessary that they cooperate with each other in providing Information so that each agency can work in a coordinated manner. The said MOU formed an integral part of the Contract entered into between Linde, Samsung and OPAL and was appended as Annexure J to the said Contract. And, to that extent OPAL also recognized the relationship between Linde and Samsung.
47. It is material to note that even, as per the terms of the Contract, the scope of work to be executed by Linde and Samsung was separate and was accordingly specified in the annexures to the Contract. The payments to be made for separate items of work were also specified. The currency in which the payments were to be made was also separately indicated. Thus, insofar as execution of the work was concerned, even OPAL recognised that different items constituting the Contract would be performed independently by Linde and Samsung. The consideration for the work performed was to be made directly to the concerned member of the Consortium in accordance with the work performed by him. Annexure C of the Contract specified the payment schedule i.e. the amount to be paid for the supply of goods and services rendered by both the 76 members of consortium. Linde and Samsung were to be paid on the basis of the separate invoices raised by them respectively. There was no arrangement for sharing of profits and losses between Linde and Samsung. And, each of them would make profits or incur losses based on the price as agreed by them and the costs incurred by them for performance of the contract falling within their independent scope of work.
48. It follows from the above, that Linde and Samsung had joined together to (a) bid for the contract; (b) present a façade of a consortium to OPAL for execution of the contract and accept joint and several liability towards OPAL for due performance of the contract and completion of the project; and (c) put in place a management structure for inter se coordination and execution of the project. However, in all other respects, both Linde and Samsung were independent of each other and were responsible for their own deliverables under the Contract, without reference to each other.
51. A plain reading of the said Contract clearly indicates that insofar as OPAL is concerned, the consortium members were treated as a single party for due performance of the Contract. However, the annexures to the contract provided for the split of the Contract between the consortium members and amounts payable to each of the consortium members is detailed separately. The scope of work of each of the members was also separately listed. The Contract specified that an organisation structure would be set up which would facilitate OPAL in dealing with the consortium members collectively and not separately. The only conclusion one can draw is that while OPAL treated the consortium members as a single entity for imposing liability for due performance of the Contract, OPAL also recognized that each consortium member would perform the items of work falling within their respective scope of work, independently.
32. Drawing attention of this court to the terms "That is to say" as found in the definition of term 77 "Bidder" learned Senior counsel relied upon the judgment of the Apex Court in the case of RAJASTHAN ROLLER FLOUR MILLS ASSOCIATION AND ANOTHER VS. STATE OF RAJASTHAN AND OTHERS -(1994) Supp. (1) SCC 413, reads as under;
16. The learned counsel for the States also appear to be justified in emphasizing the meaning and significance of the phrase "that is to say"
occurring in clause (i) of Section 14. The clause reads: "(i) cereals, that is to say, -(i) paddy (ii)rice
(iii) wheat...". The meaning and purport of the words "that is to say" is explained by a four-Judge Bench of this Court in State of T.N. v. Pyare Lal Malhotra. Beg, J., speaking for the Bench first quoted the meaning of the words "that is to say"
assigned in Stroud's Judicial Dictionary (Fourth Edn,) Vol. 5 at page 2753 to the following effect:
"That is to say.- (1) 'That is to say' is the commencement of an ancillary clause which explains the meaning of the principal clause. It has the following properties: (1) it must not be contrary to the principal clause; (2) it must neither increase nor diminish it; (3) but where the principal clause is general in terms it may restrict it: see this explained with many examples, Stukeley v. Butler, (1614) Hob, 171:80 ER 316".
33. To appreciate the submission made on behalf of the Respondents it is necessary to note the Definition of 'Bidder' as provided under Office Order dated 23.07.2020 reads as under;
78
"Bidder" (including the term 'tenderer', 'consultant' or 'service provider' in certain contexts) means any person or firm or company, including any member of a consortium or joint venture (that is an association of several persons, or firms or companies), every artificial juridical person not falling in any of the descriptions of bidders stated hereinbefore, including any agency branch or office controlled by such person, participating in a procurement process".
34. It is also relevant to refer to the terms of Consortium Agreement entered into between Respondent Nos.3 and 4, which is extracted hereunder;
CONSORTIUM AGREEMENT THIS AGREEMENT is made and executed on this 12th day of July 2022 by and between (1) M/s BTL EPC LTD., (The First Party. I.e, the Bidder) a company incorporated under the Company's Act 1956, having its registered office at 2 Jessore Road, Kolkata-700028 (herein after called the "Bidder", which expression shall include its' successors, administrators, executors and permitted assigns) and (2) M/s FUJIAN LONGKING CO. LTD.(The Second Party, ie, the associates), a company incorporated under the Company's Act 1956, having its registered office at No. 81, Lingyuan Road, Xinluo District, Longyan City, Fujian Province PR China a company incorporated under Business License No. 13500007053171557 (herein after called the " Associates", which expression shall include its' successors, administrators, executors and permitted assigns).
WHEAEAS the Purchaser, Bharat Heavy Electricals Ltd, a Government of India 79 Undertaking, proposes to issue / issued an NIT (herein after referred to as the said NIT) inviting bids from the individual Bidders for undertaking the work of Design, Engineering, Manufacturing, Supply, E&C & PG Test of Ash Handling Plant (AHP) Package at Yadradri, Nalgonda Dist. Telangana State herein after referred to as the said works).
WHEREAS the said NIT enables submission of a bid by a Consortium subject to fulfilment of the stipulations specified in the said NIT.
AND WHEREAS M/s BTL EPC Ltd., Kolkata (The First Party, ie, the Bidder) will submit its proposal in response to the aforesaid invitation to "Design, Engineering, Manufacturing, Supply, E&C & PG Test of Ash Handling Plant (AHP) Package at Yadradri, Nalgonda Dist. Telangana State" bid by the Purchaser Bharat Heavy Electricals Ltd. for 5x800 MW Yadadri Thermal Power Station as detailed in the Bid doc. no. TENDER REF 77/22/6055/LSY dated 24-06-2022.
AND WHEREAS M/s BTL EPC LTD. (The First Party, i.e., the Bidder) itself is meeting all the qualifying requirements except the qualifying requirements of 01.01.01 a. Bottom ash handling system comprising jet pump system in conjunction with water impounded bottom ash hopper designed for minimum 50 TPH (on dry ash basis) capacity or more for pulverized coal fired boilers., 1.01.01 b. First stage fly ash handling system for conveying fly ash from ESP hoppers to Intermediate Surge Hopper (ISH) by vacuum conveying system designed for minimum 30 TPH capacity (dry ash basis) per stream and 1.01.01 c. Second stage fly ash handling system for conveying fly ash from Intermediate Surge Hopper (ISH) to Fly ash silos by pressure conveying system designed for minimum 20 TPH capacity (dry ash basis) perline for a distance not less than 500 mtrs. as detailed in the NIT) and in order to fully meet the 80 qualifying requirements of NIT, this tie- up agreement is being entered into with M/s FUJIAN LONGKING CO. LTD (The Second Party, the Associates), who fully meet the balance part of the said works. WHEREAS the First Party and the Second Party are contractors engaged in the business of carrying out various items of works. WHEREAS the two parties have agreed to constitute themselves into a consortium for the purpose of carrying out the said works, and that the consortium will be continued till the completion of the works in all respects. WHEREAS the parties have agreed to certain terms and conditions in this regard:
NOW THEREFORE THIS AGREEMENT WITNESSE AS FOLLOWS: 1. First and second parties hereby
constitute themselves into a Consortium for the purpose of bidding and undertaking the said works pursuant to the said NIT as hereinafter stated.
2. The First Party will be the leader (Lead Partner) and will be responsible for the entire works.
3. The First Party shall undertake the following part(s) of work detailed in the NIT as detailed in Annexure -1which forms part of this Consortium Agreement.
4. The Second Party shall undertake the following part(s) of work detailed in the said NIT as detailed in Annexure -1 which forms part of this Consortium Agreement.
5. The parties hereby declare and confirm that each of them will fulfil the required minimum qualifying requirements as prescribed in the said NIT for the works agreed to be undertaken by them as stated here-in-above.
81
6. It is also agreed between the parties hereto that all of them shall be individually and severally responsible for the completion of the said works as per the schedule. Further, if the Employer/Purchaser sustains any loss or damage on account of any breach of the Contracts, we the, Consortium partners individually and severally undertake to promptly indemnify and pay such losses /damages caused to the Employer/Purchaser on its written demand without any demur, reservation, contest or protest in any manner whatsoever.
7. The parties hereby agree and undertake that they shall provide adequate finances, suitable Tools, Plants, Tractors, Trailers, other transportation equipment, other Tools & Plants, Measuring & Monitoring Equipments (MMES), Men and Machinery etc. for the proper and effective execution of the works to be undertaken by them as specified here-in-above.
8. It is agreed interse between the parties hereto that all the consequences liabilities etc., arising out of any default in the due execution of the said works shall be borne by the party in default, that is by party in whose area of works default has occurred, provided however, so far as M/s Bharat Heavy Electricals Limited is concerned, all the parties shall be liable jointly and severally.
IN WITNESS HEREOF the parties above named have signed this agreement on the day month and year first above written at China (Place).
WITNESS: (FIRST PARTY)
NAME: P.K. CHAKRABORTY
ADDRESS :2, JESSORE ROAD, DUM DUM
KOLKATA - 700 028.
AMITAVA GUIN
EXECUTIVE DIRECTOR
82
2, JESSORE ROAD,
DUM DUM
KOLKATA - 700 028.
For FUJIAN LONGKING CO. LTD.,
WITNESS:
NAME: JAX CHEN
ADDRESS : No.81, Lingyuan road
Xinluo District, Longyan City
Fujian Province, P.R. China.
DR.REHNU RAN
No.81, Lingyuan Road
Xinluo District, Longyan City
Fujian Province, P.R. China.
Annexure -1
1. The first party (M/s BTL EPC Ltd., Kolkata) Shall undertake complete works as detailed in NIT which includes detailed design & engineering manufacturing, supply, erection, testing, commissioning, trial run, demonstration of PG test and handing over for complete ash handling plant.
2. The second Party (M/s Fujian Longking China) Shall undertake basic design, vetting of detail engineering, Support in Manufacturing, Support/Supervision of erection, commissioning & PG test for complete AHP (excluding HCSD system)".
35. On a careful, holistic reading the terms and conditions of Prequalification Requirement, definition of 'Bidder' and the contents of 'Consortium Agreement' in the context of requirement of its submission as required under Clause 01.01.02 and the obligation of carrying out the activity as stated in Clause 01.01.03 83 of PQR it is difficult to accept the contentions of the respondents that it is not a Consortium Agreement in its strict sense. In the decisions relied upon by the learned Senior counsel for the respondents there has been no requirement of entering into a Consortium Agreement in the context and as mandatorily required under the terms of PQR to be eligible to participate in the bidding process by a party who does not fulfill the requirement of Clause 01.01.01(a)(b) and (c) of PQR, as in the instant case. Requirement of entering to a Consortium Agreement is not just for the commercial terms of the parties to the contract but as an undertaking to the Tendering Authority assuring due performance of the contract, which factor is overwhelmingly present throughout the tender documents in the present case. This in our opinion is a distinguishable feature in this case and critical and essential for due performance of the contract.
36. Further Clause 7 of the PQR requiring lead member holding 51% equity or 26% stake in the project operates in a Prequalification Requirement 84 relating to 'financial capacity' of a bidder. In other words a bidder who though fulfills the technical qualification and lacks financial qualification may enter into a joint venture or may make joint bidding having collaboration agreement. It is in this context a lead bidder as specified in the bid document is held to be responsible for the over all execution of contract. This in any case cannot be read into to obliterate the requirement of being jointly and severally responsible for employer for successful performance of relevant system contemplated under the circumstances set out under Clause 01.01.02.
37. It is also necessary to note that learned Single Judge at paragraphs 17, 18, 19 and 20 of the impugned order while taking note of requirement of pre-qualification of the tender as provided under the heading 'Technical Criteria' and 'Prequalification Requirement: (Financial)' and also taking note of contents of Office Order and Official Memorandum, particularly clarification and also taking note of contents of Consortium Agreement and the jobs and 85 responsibilities of the parties found at Annexure to the Consortium Agreement has held that the respondent Nos. 3 and 4 have indeed entered into a Consortium Agreement dated 12.07.2022 and had submitted their respective bids and that the entire process of submission of bid is inconsonance with the tender notification. Learned Single Judge has thus in a way negated the contention of the respondents that there is no "Consortium Agreement" in its strict sense and that it was only an arrangement or a loose tie-up between respondent Nos.3 and 4 requiring no registration as mandated under the Office Order. This finding of the learned Single Judge has not been questioned by the respondents.
38. Further the learned Single Judge at paragraph 20 of the impugned order takes note of respondent Nos.3 and 4 participating in the tender process by uploading all documents including Consortium Agreement.
86
39. For the aforesaid reasons and analysis we are of the considered view that respondent No.3 who admittedly did not possess requisite technical qualification prescribed under Clause 01.01.01
(a)(b)(c) indeed entered into the Consortium Agreement referred to hereinabove. Conversely if respondent No.3 had not entered into the Consortium Agreement with respondent No.4 it would not have been eligible to participate in the bidding process in the first instance. Therefore the contentions of the respondents to the contrary cannot be countenanced. Regarding mandatory requirement of registration with competent authority.
40. There is no dispute about the fact that respondent No.4 -a Chinese entity and the country of its origin shares land border with India. There is also no dispute about requirement of registration of a bidder sharing land border with India. The question is how this requirement is understood in the context of the dispute between the parties.
87
41. It is necessary at this juncture to refer to Office Order dated 23.07.2020 which reads as under;
F.No.6/18/2019-PPD Ministry of Finance Department of Expenditure Public Procurement Division 161, North Block, New Delhi 23rd July, 2020 Office Memorandum Subject: Insertion of Rule 144 (xi) in the General Financial Rules (GFRs), 2017 Rule 144 of the General Financial Rules 2017 entitled 'Fundamental principles of public buying', has been amended by inserting sub- rule (xi) as under:
Notwithstanding anything contained in these Rules, Department of Expenditure may, by order in writing, impose restrictions, including prior registration and/or screening, on procurement from bidders from a country or countries, or a class of countries, on grounds of defence of India, or matters directly or indirectly related thereto including national security; no procurement shall be made in violation of such restrictions.
Sd/-
(Sanjay Prasad) Joint Secretary (PPD) Email: [email protected] Tel.: 011-23093882
42. The enclosure to the aforesaid Office Memorandum at paragraph 1 under the heading REQUIREMENT OF REGISTRATION, at paragraph 11 88 under the heading SUB-CONTRACTING IN WORKS CONTRACTS and at paragraph 12 under the heading CERTIFICATE REGARDING COMPLIANCE of Office Order provides as under;
Requirement of registration:
1. Any bidder from a country which a shares a land border with India will be eligible to bid in any procurement whether goods, services (including consultancy services) or works (including turnkey projects) only if the bidder is registered with a competent authority, specified in Annexure-
I. "Sub-Contracting in works contracts "11. In works contracts, including turnkey contracts, contractors shall not be allowed to sub- contract works to any contractor from a country which shares a land border with India unless such contractor is registered with the Competent Authority. The definition of "contractor from a country which shares a land border with India"
shall be as in paragraph 8 above. This shall not apply to sub-contracts - already awarded on or before the date of this Order.
Certificate regarding compliance
12. A certificate shall be taken from bidders in the tender documents regarding their compliance with this Order. If such certificate given by a bidder whose bid is accepted is found to be false, this 89 would be a ground for immediate termination and further legal action in accordance with law"
43. Clarification in the nature of Office Memorandum dated 08.02.2021 issued to the aforesaid Office Order is also relevant, which reads as under ;
No. F. 18/37/2020-PPD Government of India Ministry of Finance Department of Expenditure Procurement Policy Division 512, Lok Nayak Bhawan, New Delhi.
Dated the 8th February 2021 OFFICE MEMORANDUM Subject: Restrictions under Rule 144 (xi) of the General Financial Rules (GFRs), 2017.
Attention is invited to this Department's Order (Public Procurement No.1) issued vide OM F.No.6/18/2019- PPD dated 23.07.2020, As per para 11 of the Order, in case of Works contracts, including turnkey contracts, contractors shall not be allowed to sub-contract works to any contractor from a country which shares a land border with India unless such contractor is registered with the Competent Authority. However, no such restriction is stipulated in the Order regarding other procurements i.e., procurement of Goods, Services, etc.
2. This office is in receipt of representations seeking clarification whether it is permitted for the bidders to procure raw material or components/ sub-assemblies or the finished goods etc. from the vendors from the countries sharing land borders with India.90
3. In this context following is hereby clarified:
i) A bidder is permitted to procure raw material, components, sub-
assemblies etc. from the vendors from countries which shares a land border with India. Such vendors will not be required to be registered with the Competent Authority, as it is not regarded as "sub-contracting".
ii) However, in case a bidder has proposed to supply finished goods procured directly/indirectly from the vendors from the countries sharing land border with India, such vendor will be required to be registered with the Competent Authority.
4. This is issued with the approval of Secretary (Expenditure).
Sd/-
Kotturu Narayana Reddy Deputy Secretary to the Govt. of India Tel.: 24621305 Email: [email protected]
44. A careful reading of the Office Order dated 23.07.2020 and Office Memorandum Dated 08.02.2021 makes a mark difference of the terms "Bidder", "contractor" and "Vendors from the countries sharing land border with India" used therein. 91
45. Thus, what is clarified is with regard to 'bidder' being permitted to procure raw material, components, sub-assemblies etc., from "Vendors from countries which shares a land border with India"
without being required to be registered with the competent authority and in the case of supply of finished goods, vendors from the countries sharing land border with India being required to be registered with the competent authority. This is only in respect of " Sub-Contracts". There is no clarification, modification or relaxation either in Office Order dated 23.07.2020 as regards requirement of eligibility criteria in the context of Clauses 01.01.01 (a)(b) and (c), clause 01.01.02, 01.01.03 of PQR or of the requirement of bidder sharing land border with India to be registered with the competent authority.
46. The clarification is in respect of paragraph 11 of the Office Order under the heading "Sub- Contracting in Works Contracts". The language used therein is that contractors shall not be allowed to sub- contract works to any contractor from a country which 92 shares land border with India unless such contractor is registered with competent authority. The said clause further refers to definition of contractor from the country which shares a land border with India as provided in paragraph 8 of the Office Order which includes a Consortium or Joint Venture where any Member of Consortium or Joint Venture falls under any one of description provided in paragraph 8(a) to 8(f) of the Order. As rightly pointed out by learned Senior Counsel for the appellant sub-contractor would come into effect after the award of contract and clarification of procurement whether raw material or finished product, has to be read and seen in that view.
47. It is necessary to note that the respondents do not dispute the requirement of registration if there is a participation in the bidding process by a bidder from the country sharing land border with India. All that the respondents are contending is that in the instant case there is no joint bidding and that there is no Consortium Agreement in its strict sense. 93 Therefore, there is no requirement of registration as mandated in Office Order dated 23.07.2020 and as such there is no violation of terms of tender documents. As already noted in view of the aforesaid provisions of the bid documents and the mandatory requirement of registration in Office Order dated 23.07.2020 it cannot be accepted that there is no violation of terms of the office order or tender document.
48. Learned Single Judge though has referred to the aforesaid bidding documents of the PQR has however not adverted to essential and intrinsic feature of Clauses 01.01.01, 01.01.02 and 01.01.03 of PQR in the context of performance of the relevant system by respondent Nos. 3 and 4. Learned Single Judge at paragraphs 18 to 22 of the impugned order has merely referred to the clarification provided in Office Order dated 08.02.2021 to the paragraph 11 of the Office Order dated 23.07.2020 and came to the conclusion that the clarification issued in the Official Memorandum makes it clear that even raw material can be procured 94 from the bordering countries and what is prohibited is finished products and since there is no agreement between respondent Nos. 3 and 4 in the nature of procuring raw materials and there is no requirement of registration. This in our opinion incorrect as the said reasoning of the learned Single Judge has missed out the essentials of entering into a 'Consortium Agreement'.
49. Learned Single Judge declining to accept the contention of the appellant made by placing reliance upon the judgment of the Delhi high Court in the case of DSPC Engineering Private Limited (supra), held that factually the issue involved in the said case is of a supporting company which was 100% subsidiary of Indian Company registered in China and housed in China and as such the same was not applicable to the facts at hand and that in the instant case prequalification condition itself permitted entering into consortium agreement.
95Regarding decision making process of respondent No.2:
50. In the light of our conclusion of Respondent No.3 not being eligible and qualified to participate in the bidding process without the active participation of the respondent No.4 by entering into a Consortium Agreement and in the absence of compliance with prior registration contained in clause 1 of the office order 2020 being mandatory requirement and the impugned order not taking note of this aspect the matter, the point that now requires to be considered is whether the Decision making process by the respondent No.2 in awarding the contract to respondent No.3 is arbitrary and unreasonable. In this regard it is necessary to refer the law laid down by the Apex court and this court which are as under.
51. This Court in the case of GAJANANA ENGINEERS VS. THE PRINCIPAL SECRETARY TO GOVERNMENT reported in ILR 2005 KAR. 3973 at paragraphs 26,27 and 31 has held as under; 96
26. The other defence raised by the BESCOM authorities to support their action despite violation of qualifying conditions by the contesting respondents is that the price offered by them is less than the price offered by the appellant- petitioner and therefore, the BESCOM would be beneficial financially. That defence raised by BESCOM. authorities and accepted by the learned single Judge, in our considered opinion, is not well- founded. It is well -settled that price need not always be the sole criterion for awarding a contract. It is so held by the Apex Court in Air India Limited v. Cochin Int. Airport Ltd and Ors. (supra) and several other judgments to follow. The mere difference in the prices offered by the two tenderers may not be decisive in deciding whether any public interest is involve or ensured. If all things are equal in terms of law and procedure, public interest may be served well in awarding a contract to a tenderer who has offered lesser rate for the service and that principle has no application where a tenderer though offers lesser rate for service has not complied with or satisfied the essential qualifying conditions of tenders. In its pleading, the appellant-petitioner has stated that the prices offered by the contesting respondents are unworkable and, in fact, efficient work cannot be done at the prices quoted by the contesting respondents. It is further alleged that the contesting respondents have failed to carry out the work awarded to them. It is said about respondent No. 2 that it has entrusted the work and got 4000 Distribution Transformers repaired through other agencies giving the rate more than what was quoted by the appellant in respect of repairs of 25 KVA, 63 KVA and 100 KVA Distribution Transformers.
27. The action of the BESCOM authorities in opening the second cover containing the Price Bids of the contesting respondents 4 to 6 cannot be sustained in law, because, we have found them disqualified in the Technical and Commercial Bids. In concluding thus, we may derive support from the judgment of the Supreme Court in the case of West Bengal Electricity Board v. Patel Engineering Co. Ltd. . In that case, the West Bengal State Electricity Board (Employer) raised a global tender for a project worth over three thousand crores. tenders were invited only from bidders who have satisfied the pre-qualifications. 97 The instruction to the bidders (ITB) issued by the employer required the bidder to fill in rates and prices for all items of the works described in the Bill of Quantities both in figures and words. With regard to the currencies of the bid, the ITB directed that unit rates and prices shall be quoted by the bidder in Indian Rupee (INR) and either in U.S. Dollar or Japanese Yen. In regard to modification and withdrawal of bids the mandate of the ITB was that no bid shall be modified by the bidder after the deadline for submission of bids. The ITB enabled the employer or its authorised representative ask any or all bidders for clarification of his/their bids, including breakdowns of unit rates, technical information, documents, and materials after opening of the bid. The said clause however prohibited seeking, offering or permitting any change in the price or substance of the bid after opening of the price bid. The exception provided to that mandate is correction of arithmetic errors discovered by the employer's authorised representative in the evaluation of the bids. The clause in ITB which provided for correction of errors in the bid stipulated that in case of a discrepancy between the unit rate and the line item total resulting from multiplying the unit rate by the quantity, the unit rate as quoted wil1 govern; and in case of a discrepancy between figures and in words of any unit rate, the unit rate as quoted in words will govern. The respondent tenderer who was the lowest tenderer when the bids were opened informed the employer that in his bid there was 'a repetitive systematic computer typographical transmission failure' and requested that it be corrected. The nature of the error sought to be corrected was that the unit price filled in by the bidder was that the unit price filled in by the bidder in the first line against an item is repeated in two lines-in the second line of the same item and in the first line of next item. The second line, in an entry should contain unit rate in U.S. Dollar which is rupee equivalent of the unit rate mentioned in the first line. This was sought to be corrected. The respondent sought correction of the entries in the third line also which is the first line against next work item. It was plain against that work item the entries in the first line were quite different. The quantity column were blank. In that line also the entries in the first line were repeated. There the correction sought was that the figure column 98 should read as 84.21 both in figure and words. It was stated that in the second line the unit rate 1.92 both in figures and words, represented U.S. Dollar equivalent of 84.21 Indian Rupee which was sought to be inserted. The respondents also claimed that the quantities stated in the quantity column of serial item No. 3 on each and every page of the bid has been erased. The employer evaluated the bid and informed the respondent that during checking a good number of arthematic errors were discovered. Copies of the duly corrected documents were also sent by the employer to respondent for their response in writing. All this was done without seeking clarification from respondents.
31. Having regard to the facts of this case and the law on the point, we hold that the Tender Inviting Authority had no authority and/or discretion to open the Financial Bid covers of the contesting respondents 4 to 6 as they had not been qualified when their Technical Bid covers were opened on 16.02.2004. The Tender Inviting Authority, notwithstanding the above position, on 20th March 2004 opened Financial Bid covers of all tenderers and this procedure is ex facie illegal contrary to the condition, of Tender Notification as well as the statutory provisions of the Act and the Rules. The BESCOM authorities are not justified in rejecting the tender of the appellant which was in order and accepting the tenders of the contesting respondents 4 to 6 which were not in order as pointed out supra and awarding contract to them.
52. The Apex Court in the case of HAJI T.M. HASSAN RAWTHER VS KERALA FINANCIAL CORPORATION, reported in (1988) 1 SCR 1079 at paragraph 14 has held as under;
"14. The public property owned by the State or by any instrumentality of the State should be generally sold by public auction or by inviting tenders. This Court has been insisting upon 99 that rule, not only to get the highest price for the property but also to ensure fairness in the activities of the State and public authorities. They should undoubtedly act fairly. Their actions should be legitimate. Their dealings should be above board. Their transactions should be without aversion or affection. Nothing should be suggestive of discrimination. Nothing should be done by them which gives an impression of bias, favouritism or nepotism. Ordinarily these factors would be absent if the matter is brought to public auction or sale by tenders. That is why the Court repeatedly stated and reiterated that the State owned properties are required to be disposed of publicly. But that is not the only rule. As O.Chinnappa Reddy, J. Observed "that though that is the ordinary rule, it is not an invariable rule." There may be situations necessitating departure from the rule, but then such instances must be justified by compulsions and not by compromise. It must be justified by compelling reasons and not by just convenience.
53. The Apex Court in the case of MEERUT DEVELOPMENT AUTHORITY VS ASSOCIATION OF MANAGEMENT STUDIES AND ANOTHER reported in (2009) 6 SCC 171 at paragraphs 26,27 and 28 has held as under;
26. There cannot be any disagreement that unjustified discriminations violate the Constitution and unreasonable decisions are susceptible to be interfered with and corrected in judicial review proceedings. But general propositions do not decide concrete cases as has been famously put by Justice Oliver Wendell Holmes in Lochner Vs. New York.17 It remains to be decided which acts of discrimination are justified and which are not. It is for the court to decide in the given facts and circumstances whether [198 U.S. 45,76 (1995)]. the action complained of is unreasonable? How to do that is always a complex and complicated one. It would be unnecessary to burden this judgment 100 of ours with various precedents and super- precedents cited at the bar in support of the general propositions that the authority's action must be free from arbitrariness. It always depends upon the contextual facts. In law, context is everything. We shall bear these parameters in mind and proceed to determine the question whether the decision of the Authority is vitiated by any abuse of power.
27. It was submitted on behalf of AMS that the decision of MDA dated 15.3.2002 undoing its earlier decision dated 7.7.2002 and changing land use of the disputed plot from `educational' to `housing' is unreasonable, unprincipled and capricious and violative of Article 14 of the Constitution. This was done for making higher financial gain and profit and that too, at the instance of an alleged unverified extraneous person overlooking the demands of public interest as well as law and order problems that may arise on account of peculiar location of the plot in the midst of existing higher education campuses belonging to AMS. We find no merit in this submission. The claim of AMS, in our considered opinion came to an end on 17.9.2001 when it had intimated the MDA to delete its offer in respect of the disputed plot on the ground that the cost of that land as stipulated is not a viable one. This was followed by its letter dated 3.1.2002, once again stating that it was injustice to fix Rs. 690/- per sq. meter for the disputed land while adjoining plots were allotted for Rs. 500/- per sq. meter and Rs. 560/- per sq. meter respectively. There were no further negotiations and any response from MDA to the said letter dated 3.1.2002. The letter dated 4.3.2002 from AMS to MDA indicating the acceptance of Rs. 690/- per sq. meter only after one Harpal Singh Chowdhary on behalf of the Officer's Class Housing Society had mentioned a higher price of Rs. 775/- per sq. meter in his representation. There is nothing on record to suggest that impugned decision has been taken only for making higher financial gain and profit. But what is wrong even if any such effort was made by MDA to augment its financial resources. We are, however, of the opinion that the effort, if any, made by MDA to augment its financial resources and revenue itself cannot be said to be unreasonable decision. It is well said that the struggle to get for the State the full value of its 101 resources is particularly pronounced in the sale of State owned natural assets to the private sector. Whenever the Government or the authorities get less than the full value of the asset, the country is being cheated; there is a simple transfer of wealth from the citizens as a whole to whoever gets the assets `at a discount'. Most of the times the wealth of a State goes to the individuals within the country rather than to multi- national corporations; still, wealth slips away that ought to belong to the nation as a whole. Society's repeated representations are of no consequence and the MDA was not under any legal obligation to reopen the tender process which otherwise stood terminated. The MDA, in its meeting dated 15.3.2002 considered the request of the Society as well as the alternative offer but neither of them was accepted. The MDA after careful deliberation decided to dispose of the land through fresh tender-cum-auction for residential use after giving wide publicity.
28. The learned senior counsel relied upon the decision in Bangalore Medical Trust Vs. B.S. Muddappa18 in which this Court observed:
"Financial gain by a local authority at the cost of public welfare has never been considered as legitimate purpose even if the objective is laudable. Sadly the law was thrown to winds for a private purpose." The observations were made in the context where this Court found the entire proceedings before the State Government [(1991) 4 SCC 54] suffered from absence of jurisdiction. Even the exercise of powers was vitiated and ultra vires. The orders of the Government to convert the site reserved for public park to civic amenity and to allot it for private nursing home was null, void and without jurisdiction and when the same was sought to be justified on the ground of financial gain; the court made the observations in that context. The impugned action of the authority in the present case did not suffer from absence of jurisdiction nor was vitiated and ultra vires. Financial gain was not at the cost of any social welfare.102
54. The Apex Court in the case of New Horizons Ltd vs Union Of India reported in 1995 SCC (1) 478 at paragraph 17 has held as under;
17.At the outset, we may indicate that in the matter of entering into a contract, the State does not stand on the same footing as a private person who is free to enter into a contract with any person he likes. The State, in exercise of its various functions, is governed by the mandate of Article 14 of the Constitution which excludes arbitrariness in State action and requires the State to act fairly and reasonably. The action of the State in the matter of award of a contract has to satisfy this criterion. Moreover a contract would either involve expenditure from the State exchequer or augmentation of public revenue and consequently the discretion in the matter of selection of the person for award of the contract has to be exercised keeping in view the public interest involved in such selection. The decisions of this Court, therefore, insist that while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. It is, however, recognised that certain measure of "free play in the joints" is necessary for an administrative body functioning in an administrative sphere [See : Ramana Dayaram Shetty v. International Airport Authority of India2 (SCR p. 1034 : SCC pp. 505-06, para 12); Kasturi Lal Lakshmi Reddy v. State of J & K3 (SCR p. 1355 : SCC pp. 11- 2 (1979) 3 SCC 489: (1979) 3 SCR 1014 3 (1980) 4 SCC 1 :(1980) 3 SCR 1338 12, para 11); Fasih Chaudhary v. Director General, Doordarshan4 (SCR p. 286 : SCC p. 92,); Sterling Computers Ltd. v. M & N Publications Ltd.1; Union of India v. Hindustan Development Corpn.5 (at p. 513)].103
55. The High Court of Bombay in the case of ROYAL POWER TURNKEY IMPLEMENTS PVT. LTD.
VS MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION reported in 2014 (4) ABR 799, 2014 (5) MAH.LJ. 399 at paragraphs 10 and 14 has held as under;
10. What is sought by the petitioner is judicial review of the decision taken by the respondent Corporation in cancelling the earlier tender process initiated vide tender Notice No. 17/2013-14. The principles of judicial review are undoubtedly applicable to the exercise of contractual powers by State, in order to prevent arbitrariness or favouritism. However, such review is not that of merit of the decision. It is a review of the decision making process. Undoubtedly, respondent MIDC is an instrumentality or agency of the State Government. While exercising its powers or discretion, it is subjected to some constitutional limitations to which the State is subjected to. While dealing with public in entering into contract, action of respondent Corporation, therefore, needs to be free from arbitrariness and must be rational, fair and transparent. Article 14 of the Constitution speaks of equality before law and equal protections of laws. Therefore, in the matter of public contract, the respondent Corporation cannot choose to exclude a person by adopting extraneous or irrelevant consideration. If it does so, that will tantamount to denial of equality. Respondents MIDC, therefore, cannot act arbitrarily in entering into contractual relationship or refusing to enter into contractual relationship.
14. We agree with the observations of Mathew, J., in V. Punnan Thomas v. State of Kerala (MANU/KE/0020/1969 : AIR 1969 Ker 81 (FB) that:
"The Government is not and should not be as free as an individual in selecting the recipients for its largess. Whatever its activity, the Government is 104 still the Government and will be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal". The same point was made by this court in Erusian Equipment and Chemicals Ltd. v. State of West Bengal (MANU/SC/0061/1974 : AIR 1975 SC 266) where the question was whether blacklisting of a person without giving him an opportunity to be heard was bad? Ray, C.J., speaking on behalf of himself and his colleagues on the Bench pointed out that blacklisting on a person not only affects his reputation which is in Poundian terms an interest both of personality and substance, but also denies him equality in the matter of entering into contract with the Government and it cannot, therefore, be supported without fair hearing. It was argued for the Government that no person has a right to enter into contractual relationship with the Government and the Government, like any other private individual, has the absolute right to enter into contract with any one it pleases. But the Court, speaking through the learned Chief Justice, responded that the Government is not like a private individual who can pick and choose the person with whom it will deal, but the Government is still a Government when it enters into contract or when it is administering largess and it cannot, without adequate reason, exclude any person from dealing with it or take away largess arbitrarily. The learned Chief Justice said that when the Government is trading with the public, "the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure." This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal 105 with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts, quotas, licences etc., must be confined and structured by rational, relevant and non- discriminatory standard or norm and if the Government departs from standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory".
56. The Apex Court in the case of TATA CELLULAR VS UNION OF INDIA reported in 1996 AIR 11, 1994 SCC (6) 651 at paragraphs 70, 71, 73 and 74 has held as under;
70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.
106
71. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such an unfairness is set right by judicial review.
73. Observance of judicial restraint is currently the mood in England. The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of the court's ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action.
74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.
57. Admittedly, appellant has required technical qualification while the respondent No. 3 does not possess technical qualification. In the aforesaid decision, it is very clear that mere quoting lower bid amount is not sufficient unless essential technical qualification required for the performance of the contract is possessed by a bidder.
58. In the light of the aforesaid law laid down by the Apex Court, the action of respondent No.2 in 107 awarding the contract to respondent No.3 who admittedly, did not possess required technical qualification which is essential and critical for the performance of the contract and merely because the financial bid quoted by the respondent No.3 is lesser than the financial bid quoted by the appellant, it cannot be said that there has been no arbitrariness and unreasonableness in awarding the contract. The very fact that a critical contract of this nature requires expertise in the field and the respondent No.2 being the author of the tender documents, not verifying and scrutinizing the eligibility criteria of respondent No. 3 in the light of mandatory requirements of clause 01.01.01, 01.01.02 and 01.01.03 of PQR cannot be heard to say that the Respondent No3 is fully eligible and it is the lone bidder recognized by the Respondent No2 and that the Respondent No 2 has not recognized the Respondent No.4 for any purpose whatsoever and that it is an internal arrangement between the Respondent No3 and 4 for availing certain intangible services of non critical nature. Thus, in our considered 108 view, the decision making process adopted by the respondent No 2 is vitiated by arbitrariness and unreasonableness requiring interference at the hands of this court.
Regarding hardship and prejudice:
59. As regards the contention of the respondents that 50% of project has been completed with 90%, of the designs having been approved apart from expending huge amount of money in the process and that initiating the process at the instance of the appellant at this juncture could cause severe financial burden on the respondent No 5 state which would eventually cause untold hardship and misery to the public at large. It is necessary at this juncture to refer the admitted facts and the circumstances available on record. The NIT which is subject matter of the present writ petition is the fourth in the row. Earlier notices inviting tenders which were floated by respondent No.2 have not been acted upon for the reasons referred to in the earlier portion of the order. The appellant herein 109 being aggrieved by the award of contract in favour of respondent No.3 in the factual background referred to herein above had approached this court on 10.10.2022 by filing the present writ petition which was disposed of by the impugned order on 02.11.2022. There was an interim order operating in favour of the appellant.
After dismissal of the writ petition when the appellant approached this court by filing this writ appeal, this Court on 07.12.2022 passed the following order;
"ORDER IN THE MAIN WRIT APPEAL Xxxx As certain arguable points are raised in the appeal. The appeal is admitted.
Issue notice to the respondent Nos. 4 and 6. List the appeal for further consideration on 24.01.2023.
We make it clear that any action initiated pursuant to the impugned order passed by the learned Single Judge is subject to the final outcome of the appeal".
60. Thus in view of this factual aspect of the matter, as rightly contended by the learned Senior counsel for the appellant, respondents cannot find appellant to be responsible for the delay in execution of the project.
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61. Submission on behalf of Respondent as regards the issue pertaining to the public interest is concerned, it is necessary to note that the Office Order dated 23.07.2020 has been issued in exercise of Rule 144 in the defense interest of the Nation. Needless to mention that this court cannot be oblivious of the fact that respondent No.4 is a Chinese entity from a country which shares land border with India. Considering the nature of the transaction and the nature of work to be carried out by the respondent Nos. 3 and 4 and also the mandatory requirement of registration with the competent authority not having been complied with a mere claim of public interest getting adversely affected cannot be pitted against the national interest. As taken note of by the Delhi High Court the in case of DPSC Engineering Private Limited (supra) and the reasoning assigned there which we are in complete agreement with and as the facts and circumstances of present case similar to one involved therein, it cannot be said, that the reinitiating the tender process would be against the public 111 interest. Respondent No. 2 ought have ensured that there is complete compliance with the Office Order which has been issued in the interest of National security from the defense perspective which assumes greater national significance, than the public interest as sought to be made out by the Respondent . CONCLUSION:
62. For the aforesaid reasons and analysis we answer the points raised as under:
Respondent No.3 not being technically qualified entered into Consortium Agreement with the Respondent No.4 and both Respondent No.3 and 4 jointly submitted and participated as Bidders in the Tender Process. Respondent No 4 or the consortium of Respondent No.3 and 4 not having complied with mandatory requirement of registration with competent authority as required under the Office Order dated 23.07.2020 and acceptance of their bid by the respondent No.2 is vitiated by arbitrariness and unreasonableness. Consequently, the contention of 112 respondents that the respondent No.3 is a lone bidder and that there is no requirement of any registration mandated under the Office Order in view of the clarification issued vide Official Memorandum cannot be accepted.
63. In view of the reasons assigned above, the entire process of awarding the contract by respondent No.2 in favour of Respondent No.3 cannot be accepted as valid. Appellant an Indian entity admittedly possess technical qualifications essential for the performance of the contract. The respondent-authorities in the circumstances may consider the bid of the appellant as per the notice inviting tender. Since the aforesaid crucial aspects of the matter have missed the attention of the learned Single Judge, appellant has made out grounds for interference. Appellant is an Indian entity, admittedly possess technical qualification essential for the performance of the contract. The respondent authorities in the circumstances may consider the bid of the appellant.113
64. Hence, the following;
ORDER (1) Writ Appeal is allowed. Order dated 02.11.2022 passed by the Learned Single Judge in W.P.No.20333/2022 is set aside.
(2)Bid submitted by consortium of respondents 3 and 4 with the
respondent No.2 is held to be invalid. Consequently, Letter of Intent dated 29.09.2022 issued by respondent No.2 in favour of respondent No.3 is set aside.
(3) Respondent No.2 is directed to consider the bid of the appellant pursuant to the Notice Inviting Tender dated 24.06.2022 bearing enquiry No.77/ 22/ 6055/ LSY as per Annexure-C and convey its decision within a period of four 114 weeks from the date of receipt of the certified copy of this order.
No order as to cost.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE RU