Calcutta High Court (Appellete Side)
Kec International Limited & Another vs Union Of India & Others on 8 July, 2009
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
PRESENT:
THE HON'BLE JUSTICE
SANJIB BANERJEE
WP No. 9770 (W) of 2009
KEC INTERNATIONAL LIMITED & ANOTHER
-Versus-
UNION OF INDIA & OTHERS
Mr. Anindya Kumar Mitra
Mr. Siddhartha Mitra
Mr. Prateek Jalan
Mr. Anirban Roy
Mr. O.P. Jhunjhunwala
Mr. S.N. Pyne
...For the Petitioners.
Mr. Pratap Chatterjee
Mr. Aniruddha Ray
Mr. Anil Kumar Gupta
...For the Respondent Nos. 2 & 3.
Mr. Dipankar Gupta Mr. Jayanta Kumar Mitra Mr. Ranjan Bachawat Mr. Sandip Narayan Mr. Sayan Roy Chowdhury Mr. U.S. Menon Mr. Rajeev Kumar Jain ... For the Respondent No. 4.
Mr. Rarakeswar Paul Mr. Bharati Ghosh (Dutta) ...For the Respondent No. 1.
Hearing concluded on: July 6, 2009.
Judgment on: July 8, 2009.
SANJIB BANERJEE, J. : -
The petitioners assail the evaluation of two of the bids received by Bharat Sanchar Nigam Limited (BSNL) following a notice inviting tender. The project, as BSNL emphasises, is of great importance and is part of the upgrading of mobile telephone services in the country. The expanded description of the work in the tender documents is, "Planning, engineering, supply, installation, testing and commissioning of infrastructure for 18 million lines of cellular mobile expansion project phase-VI in East Zone."
On this petition being received, an order was made on June 12, 2009 restraining the respondent authorities from issuing any work order to the fourth respondent. The order recorded that the financial bids in response to the notice inviting tender were opened on February 28, 2009 when it was perceived that the first petitioner had quoted the lowest rates, but by a communication of May 8, 2009 the first petitioner was informed by BSNL that on an evaluation of the bids the fourth respondent had emerged as the lowest bidder. The Court observed that the communication lacked clarity as it was not possible to ascertain therefrom as to what factors weighed with BSNL "in amending the ranking." A doubt was also expressed as to whether the "re-evaluation" could have been undertaken without reference to the petitioners.
The matter was heard at length on the returnable date on June 19, 2009 when the fourth respondent was represented. A chart was handed over by BSNL to demonstrate that the evaluation of the bids was in accordance with the terms of the tender documents. The petitioners urged that the schedule of requirements (SOR) had been revised on September 6, 2008 and the bid submitted by the fourth respondent was not responsive to the revised SOR. The argument was that either the fourth respondent's offer had to be rejected or, in accordance with the tender conditions, the amount quoted in respect of the relevant material had to be appropriately loaded to the extent of the variance. Upon the rival contentions being noticed, the order dated June 19, 2009 continued the subsisting interim order and expeditious directions were given for affidavits to be filed.
It is a direct fight between the petitioner company and the fourth respondent as to who is entitled to be regarded as the lowest bidder, or L-1 in tender parlance. Neither can get the entirety of the order. Clause 41 of the special conditions of contract contained in the tender documents stipulates that, "L1 will be awarded 50% of the total work while L2 and L3 will be awarded the balance in the inverse ratio of their evaluated prices." The petitioners say that the process of evaluation adopted by BSNL was arbitrary and not in conformity with the express conditions of the tender documents. In effect, there are only two issues that have emerged - the quotation of the fourth respondent relating to engine alternators for generator sets and the quotation of the petitioner company for the annual maintenance contract for seven years following the warranty period.
The value of the work is well in excess of Rs.8000 crore. There has, thus, been an understandable tussle between the petitioner company and the fourth respondent as the difference in the quantum of work to be handled by L-1 and L- 2 would be over Rs.1000 crore. Even by BSNL's assessment, the ultimate difference in the rates quoted by the two major players is in the third digit from the left in figures running into 11 digits each. The difference in the rates, according to the BSNL figures, works out to about one-half of one per cent. So that the context of this commercial slugfest is put in perspective, the figures appearing in the BSNL justification of the evaluation in its affidavit may be noticed:
"3. ...
"(u) During evaluation of the Priced financial Bid, it was found that the petitioners' total quoted price including annual maintenance contract for all the three phases was Rs.8442,08,22,686/- whereas the gross price quoted by the respondent No. 4 for all the three phases was of Rs.8512,38,12,353/-.
(v) The gross price quoted by the petitioner for all the three phases put together without AMC is Rs.5202,58,74,641/- whereas the gross price quoted by the respondent No. 4 was Rs.5247,46,92,353/-.
(w) After evaluation, the gross price without AMC and spares for the petitioner was Rs.5203,55,44,214/- whereas that of the respondent No. 4 was Rs.5123,61,26,720/-. It is, therefore, clear that the quotation made by the respondent No. 4 decreased by the spare price amounting to Rs.135,76,61,769/- as submitted by the respondent No. 4 as against the absence of any quotation by the petitioner for the spares. I further say that after detailed evaluation in compliance of Clause 46.2 of the tender condition, the total evaluated price for the petitioner was Rs.50490393037/- as against that of the respondent No. 4 of Rs.50205833517/-. In view of the aforesaid, the respondent No. 4 emerges to be the L-1 bidder whereas, the petitioner emerges to be the L-2 bidder ..."
The tender enquiry was published in early May, 2008. As is customary, the first stage involved assessing the eligibility of the bidders. Of the five that were in the fray, four were found to be technically responsive. The techno-commercial bids were opened in September, 2008. The price bids were opened in February, 2009. There were several modifications to the original requirements as indicated in the tender documents. The tender terms contemplated that modifications could be made and the tender documents contained detailed provisions to deal with various situations. Queries were raised from time to time by the intending bidders which were answered by BSNL and kept compiled.
The tender terms required strict adherence thereto, though BSNL retained the right to gloss over minor irregularities. The essential feature of the tender conditions was that if the price for any component was not quoted in the bid, then, for the purpose of evaluation of the offer, the highest price for the relevant item quoted by any of the other eligible bidders would be reckoned as the price quoted for such item by the omitting bidder. If the quantity quoted was less than what the SOR stipulated, the evaluation of the bid would be by adding the price of the shortfall in the quantity on a pro-rata basis. However, for the purpose of the supply, the total price for the item - notwithstanding the lesser amount quoted - would be taken to be the price quoted for the entire quantum for the item indicated in the SOR. In other words, a careless bidder would run the risk of a notional amount being added to the value of his bid for the purpose of the commercial assessment of his bid; and he would also have to supply the full complement of the material covered by an item at the total price therefor quoted by him for a lesser quantum. The notional adding of an amount to the value of the bid is referred to as 'loading.' For components forming part of the SOR stipulations, there was no corresponding benefit of 'de-loading'.
The tender papers were well arranged and divided into sections and appendices. The tender papers contained 11 sections and three appendices were part of the fourth section. The first section spelt out the eligibility criteria and the scope of the work. The work was to be completed on turnkey basis in the service areas in which BSNL had been licensed to operate its mobile services in the eastern region. The project was proposed to be executed in four parts, the first three of them in three phases and the fourth part in two phases. The second section gave instructions to bidders on the composition of the tender document; preparation of and documents comprising individual bids; bid prices; bidders' eligibility and qualification; and, technical and commercial evaluation. The third section covered the general conditions of contract and gave details on the performance security, warranty, prices, sub-contracts, liquidated damages and arbitration. The fourth section was entitled special conditions of contract and contained the delivery and payment schedule, basis for evaluation, warranty, annual maintenance contract, detailed technical requirements and infrastructure information. The remaining seven sections detailed schedules, lists and forms. The fifth schedule was the crucial schedule of requirement.
Some of the key terms of the tender documents that have been referred to by the parties are set out:
Instructions to Bidders:
"4. Composition of Tender Document 4.1. ...
4.2. The bidder is expected to examine all instructions, forms, terms and specifications in the tender document. Failure to furnish all information required as per the tender document or submission of the bid not substantively responsive to the tender document in every respect will be at bidder's risk and may result in rejection of the bid."
"6. Amendment of Tender Document "6.1 At any time, prior to the date of submission of bids, the purchaser may, for any reason, at its own initiative or in response to a query raised by a prospective bidder, can modify tender document by amendments.
"6.2. All such amendments shall be notified in writing or by FAX to all prospective bidders on the address indicated at the time of purchase of the tender document from the purchaser and these amendments shall form an integral part of the tender.
"6.3. In order to afford prospective bidders a reasonable time to take the amendment into account in the preparation their bids, the purchaser may, at its discretion, extend the deadline for the submission of bids suitably.
"6.4. The bidders are required to keep a watch on the BSNL Web site as indicated in the NIT with reference to any amendment to the tender document or to clarification to the queries raised by the bidders till a day prior to the opening of the tender. BSNL reserves the right to reject the bids if the bids are submitted without taking into account these amendments/clarifications. Further bidder will be fully responsible for obtaining of the tender document and amendments for their completeness."
"8. Bid Form The bidder shall complete the bid form and appropriate Price Schedules furnished in the bid documents, indicating the goods to be supplied, detailed description of the goods, quantity and prices as per section -VII."
"31. While all the conditions specified in the tender document are critical and are to be complied, special attention of bidder is invited to the following clauses of the bid documents, non-compliance of any one of which shall result in out right rejection of the bid:
(i) ...
(ii) ...
(iii) ...
(iv) ...
(v) Section-VII Price Schedule: Prices are not filled in as prescribed in
price schedule.
..."
Special Conditions of Contract:
"39. The sanctity of Sl.No and description as appearing in the SoR shall be maintained by the bidders irrespective of whether the component forms part of the indigenous or imported items. ..."
"46. Evaluation "46.1 ...
"46.2 Further, the tender shall be evaluated as a package quoted by the bidders for various equipments/materials/services as per the criterion given below:
(i) ...
(ii) ...
(iii) ...
(iv) ...
(v) ...
(vi) ...
(vii) In order to establish techno-commercial parity among the bids,
the financial bids shall be loaded as below:
(a) Cases in which bidder has not quoted the price of the item
mentioned in the SoR of the tender document and has not
given any comments/justifications for not quoting the same, the price bid will be loaded with the maximum price quoted for that item by any other bidder for the purpose of evaluation.
(b) Cases in which the bidder has quoted for less quantity for any of the items than that indicated in the SoR of the tender document, then the price bid will be loaded to the extent of the difference in quantity of the item to meet the full requirement of the SoR on a pro-rata basis for the purpose of evaluation.
For ordering purposes, the unit price in such cases shall be re- worked for the total quoted price with the revised quantity.
(c) ...
(d) No de-loading of the bid is envisaged, if the quoted quantity in the bid is higher than that requested in the tender for the purpose of evaluation.
(e) Loaded items shall be supplied free of all costs to BSNL.
(f) ..."
Detailed Technical Requirement:
"4.7 Specifications for E/A "4.7.1 ...
"4.7.2. REQUIREMENT: The Engine Alternator supplied should be of ready
-to- use type (RTU), the BHP of engine may be suitably enhanced as per site conditions in order to deliver the minimum required KVA at site. The engine alternators shall be of air cooled type. ..."
Annual Maintenance Contract:
"2.4. The supplier shall submit a list of spares required along with the bid and cost of the same is to be quoted in the price schedule. The price shall be same as that quoted in the bill of material against the concerned item in the SOR. ..."
The tender papers detailed the quantities of the various components that the bidders were required to quote for in table form in the SOR. The heading of the relevant section is of some significance:
"SECTION-V SCHEDULE OF REQUIREMENTS (PART-1)"
Of the divers pieces of equipment and parts sought by BSNL, a key component appears to have been engine alternators for use in diesel generator sets. The SOR as contained in the original tender papers required only air-cooled engine alternators to be supplied. BSNL says that there were several requests received from intending participants to modify the stipulation, both in clause 4.7.2 and in the schedule of requirements that stipulated that the engine alternators for the diesel generator sets shall be of the air-cooled type. According to BSNL, intending bidders suggested that BSNL allow both air-cooled and water- cooled engine alternator sets to be supplied without compromising on the specifications. BSNL submits that following such requests, it issued an addendum on September 5, 2008 giving an option to the bidders to meet the total requirement of engine alternators by quoting for air-cooled alternators in part and for water-cooled alternators for the rest. BSNL insists that the addendum of September 5, 2008 only gave bidders a choice and it was up to the bidders to either quote for air-cooled alternators only or for air-cooled alternators and water-cooled alternators in the ratio of 70:30. The exact words of the addendum of September 5, 2008 above the table that was in respect of only engine alternators read as follows:
"Addendum No: 4 dated 5th September 2008 to the Part III of the EZ tender:
In continuation of the earlier addendums/amendments, the following amendment may be noted against Part III of the tender CTD/IMPCS/TENDER/PH-VI/2008-09 dated 1st May 2008.
1. In partial modification of the Clause 4.7.2 of the Detailed Technical Requirements (DTR) of the Part III of the above tender and the related clarifications issued, water cooled Engine Alternators can also be supplied along with Air cooled Engine Alternators in the ratio 30:70 respectively. Similar functionalities as asked for Air Cooled Engine Alternators apply for the water cooled Engine Alternators as well.
Specifically, the following modifications may be noted in the revised SoR of Part III in relation to the Engine Alternators."
The next day a further addendum was published with the following writing appearing above the table containing all the items that were detailed in the original SOR with some modifications:
"Addendum 4.2 dated 06/09/2008 (Revised SoR) for Tender No. CTD/IMPCS/Tender/Phase VI/2008-09 Dated 01/05/2008 (Part III) There are a lot of queries on items & quantities in the SOR for Part 3 of Tender No. CTD/IMPCS/Tender/Phase_VI/2008-09 dated 01/05/2008. To clear it all, the revised consolidated SOR for Part-3 is given below:-
SECTION-V SCHEDULE OF REQUIREMENTS (PART-1)"
The petitioners submit that the document dated September 6, 2008 altogether altered the SOR and provided that the equipment and quantities indicated in such revised SOR would be what the bidders had to quote for. The petitioners suggest that even the addendum of September 5, 2008 had modified the SOR to the extent that the items of the original SOR had been indicated in the table appended to such addendum. The petitioners say that the revised SOR of September 6, 2008, particularly in the context of the words that preceded the table, could only imply that the entirety of the original SOR stood replaced by the modified SOR that was published as addendum 4.2.
Both BSNL and the fourth respondent take a different view. They contend that nothing in the document of September 6, 2008 detracted from the option given to bidders by the addendum published on the previous day. They say that it was open to bidders to either quote for the entire complement of engine alternators as the air-cooled type; or quote air-cooled and water-cooled engine alternators in the ratio of 70:30 as indicated by the addendum of September 5, 2008.
The matter turns on this solitary dispute. The petitioner company's bid provided for a supply of air-cooled and water-cooled engine alternators answering to the quantities specified in the revised SOR of September 6, 2008. The fourth respondent's offer indicated the full quota of engine alternators to be of the air- cooled type. If the petitioners are right in their interpretation, the evaluation of the fourth respondent's bid would entail loading on account of the water-cooled alternators that had not been quoted without any de-loading on account of the additional air-cooled engine alternators which the fourth respondent's bid included. It is the undisputed position at the Bar, that if the petitioners' understanding of the revised SOR is found to be appropriate, the loading factor on the fourth respondent's offer would push its evaluated price well above the total price quoted by the petitioner company.
There is also a minor matter of the petitioner company's bid not indicating the price of spares for the annual maintenance contract that resulted in a disadvantage to the petitioner company at the evaluation. The petitioners refer to annexure-II in section IV of the tender papers and say that the opening sentence of clause 2.4 therein - that of a bidder being required to submit a list of spares along with the bid and indicate the cost of such spares - covered not only the annual maintenance contract but also the spares during the period of warranty. The petitioners refer to the table under clause 2.4 and to subsequent clauses 2.5, 2.6, 2.7 and 2.8 to suggest that the opening sentence of clause 2.4 was unworkable since the cost of spares during the warranty period was built in to the quotation and could not be segregated and be made a part of the price of spares under the annual maintenance contract.
It is evident from the quotation submitted by the petitioner company, a copy of which appears at pages 217-218 of the petition, that line 19 pertaining to spares had been left blank in the spaces relating to ex-factory price, excise, sales tax, cenvat and freight thereon and the other details that the several columns of the bid form demanded. The petitioners have appended two sheets from the compilation of the various queries raised by bidders and the BSNL replies thereto. At page 196 of the petition, BSNL's response to the relevant query emphasised that the price of all spares required for maintenance should be provided but the price of the spares would not be part of the price bid evaluation. The same would be evident from the relevant extract from page 196 of the petition:
Clause in Tender Clarification sought BSNL Reply
Spares Will the spare pricing be No but price of all
part of price bid the spares required
evaluation? If yes, please for mtce should be
provide the quantity provided
required.
At the time that the petition was instituted on June 8, 2009 the petitioners were aware that the price of spares for the annual maintenance contract had not been discounted from the petitioner company's bid at the evaluation. A letter of May 14, 2009 issued by the petitioner company to the chief general manager, Kolkata telecom district, would reveal that the petitioners were aware that the cost of spares for the annual maintenance contract had not been deducted from the total price quoted by the petitioner company. Paragraph 25(h) of the petition also refers to such matter, though only to demonstrate that the petitioner company had been penalised for not adhering to the tender conditions but the fourth respondent had not been similarly treated in the matter relating to engine alternators. None of the 31 grounds taken in the petition complain of any arbitrariness on BSNL's part in including the unspecified cost of spares in the petitioner company's price for the purpose of evaluation of the bid. Ground N refers to the matter but in the context of the dissimilar treatment of the fourth respondent and in furtherance of the argument that what is sauce for the gander should be sauce for the goose. There is no prayer for any direction on BSNL to deduct the cost of spares from the petitioner company's bid price.
The petitioners' argument at the final hearing that BSNL had proceeded unfairly against the petitioners in not discounting the price of spares for the annual maintenance contract from the petitioner company's price bid has more to do with the petitioners' attempt to establish arbitrariness on BSNL's part in applying different sets of rules to the two bidders vying for the top slot than to seriously complain that the tender conditions did not permit the same. There is no lack of clarity in clause 2.4 of the annexure pertaining to annual maintenance contract and after the clarification given by BSNL following a query being raised there cannot be any dispute on such score.
Notwithstanding BSNL's submission to the contrary, the challenge in the petition is founded on the fourth respondent's failure to adhere to the revised SOR and BSNL's arbitrary action in refusing to load the fourth respondent's bid price with the highest price bid for the water-cooled alternators that the fourth respondent did not quote in its bid. BSNL insists that addendum 4.2 of September 6, 2008 was not understood by the petitioners to be what the petitioners now suggest. Whether or not addendum 4.2 is construed in the manner the petitioners would now have it, it is undeniable that from the time that the petitioner company first protested on May 1, 2009 it has maintained the same stand. In the petitioners' first letter following the discovery that the fourth respondent as the lowest bidder had been called for negotiations, the petitioners contended that the fourth respondent's price bid was liable to be loaded by the highest price quoted by any other bidder in respect of the items not quoted. Paragraph 6 of the letter of May 1, 2009 reflects such position:
"6. However, it appears that the line items of SoR Addendum 4.2 dated 06/09/2008 (Revised SoR) for which M/S ACME Tele Power Ltd. has not quoted any price have not been loaded by the highest price quoted by any other bidder as per sub clause 46.2(vii)(a). We believe that the application of procedures as mentioned in Para 46 in respect of M/s ACME would have resulted in its bid being higher than KEC International Ltd. in the zone."
The petitioner company confirmed its understanding of addendum 4.2 at the earliest available opportunity and put BSNL on notice. Whether it was because BSNL did not wish to engage in greater detail with a less successful bidder or whether BSNL altogether missed the point, it dealt with such assertion in the following cryptic manner in its response of May 8, 2009:
"Para-6: As bid conditions have been fulfilled by M/s. ACME, no loading has been necessitated."
The petitioner company did not tire of the point and laboured to insist that the rules of the game be applied to the fourth respondent's bid. The petitioner company issued two letters in quick succession on May 11, 2009 and May 14, 2009 which reflect its conviction that different sets of rules had been applied to its bid and to that of the fourth respondent and a tacit acceptance of the treatment of the petitioner company's price bid qua its failure to quote the price for spares in the annual maintenance contract:
Letter dated May 11, 2009:
"3. The opening narrative of Addendum 4.2 dated 06.09.2008 thus makes it mandatory on the part of the bidder to quote the prices as per the given SCHEDULE OF REQUIREMENT (PART-I), Section-V and hardly leaves room for further interpretations or reference to earlier related addendums issued by the BSNL, at the time of financial evaluation."
Letter dated May 14, 2009:
"10. It appears that CET deloaded the prices of the spares from the ACME Telepower Ltd and did not load the line items of SoR Addendum 4.2 dated 06/09/2008 (Revised SoR) for which M/S ACME Tele Power Ltd. had not quoted any price. The items for which ACME Telepower were to be loaded by the highest price quoted by any other bidder as per sub Clause 46.2(vii)(a) Section-IV SCC. ..."
It is the same conviction of the petitioners that is reflected all over the petition and the grounds therein. Two of the paragraphs of the petition may be noticed in particular:
"12. BSNL thereafter issued a further Addendum bearing No. Addendum
4.2 dated 6th September, 2008 stating therein that there were a lot of queries regarding the items and quantities in the Schedule of Requirements for Part 3 of the said tender and issued a revised consolidated schedule of requirements for Part 3. The said revised Schedule of Requirements, inter alia, incorporated the modifications prescribed by Addendum No. 4 dated 5th September, 2008. It is pertinent to note that with the said modification bidders had to mandatorily submit the price schedule for the price bid under Part VII of the tender document by including all the items of the consolidated schedule of requirements relating to water cooled engine alternator as well as the original tender requirement of air cooled engine alternator. Copy of Addendum 4.2 to the tender document dated 6th September, 2008 is annexed hereto and marked as ANNEXURE "P-4"."
"19. Further and in any event, the failure of the Respondent No. 4 to quote any prices for supply and services relating to water cooled engine alternators as required under the amended Schedule of Requirements attracted Clause 46.2(vii) of the SCC which provides that if a bidder has not quoted the price of the item mentioned in the Schedule of Requirements and has not given any justification for the same, the price bid would be loaded with the maximum price quoted for that item by any other bidder for the purpose of evaluation. In view of this provision, the Petitioners state that the bid submitted by Respondent No. 4 ought to have been loaded with the highest quoted price in respect of Line Items No. 13.1(b) to 13.5(b), 35.1(b) to 35.5(b) for each phase of the bid."
Both BSNL and the fourth respondent submit that the interpretation of addendum 4.2 cannot be other than what BSNL, the architect thereof, understood it to be. The fourth respondent urges that addendum 4.2 has to be read alongside, and in the context of, addendum 4. The fourth respondent submits that the test in judicial review is as to whether the act complained of was unreasonable. The argument is that if it was possible to interpret the document either way, the court should lend towards the interpretation thereof by the authority which had authored it. The fourth respondent says that it had quoted the more high-priced air-cooled alternator and was ready to face the consequence thereof since other bidders had the choice of quoting a lower price by offering to supply 70 per cent air-cooled engine alternators and 30 per cent water-cooled engine alternators. It would be unfair, according to the fourth respondent, for it to be loaded with the price for the water-cooled alternators that it did not wish to supply as it preferred the more efficient air-cooled alternators that require less maintenance and no monitoring since water-cooled alternators would require a minimum level of water therein to be maintained.
BSNL's justification of the process of evaluation is summarised at paragraphs 3(n) and 3(o) of its affidavit:
"3. ...
"(n) From a perusal of the said addendum No. 4 dated September 5, 2008, it is clear that only requirement Clause that is Clause 4.7.2 of the subject tender was modified to the extent that water cooled engine alternators can also be supplied along with air cooled engine alternators in the ratio 30:70 respectively and there was no restriction imposed on the bidders who was prepared to supply the air cooled engine alternators for the entire tendered quantity. I reserve my right to make appropriate submission in this regard at the time of hearing, if necessary.
"(o) Subsequently, the respondent No. 2 issued a further addendum being addendum 4.2 dated September 6, 2008 (Revised SOR) for the subject tender. From the said addendum 4.2, it is clear that to clear any further complication or confusion, the said revised consolidated SOR was formulated under the said addendum 4.2 dated September 6, 2008. From, Clause 13 of the said addendum which deals with the engine alternators, it is clear that the schedule of requirement as mentioned in the earlier addendum No. 4 dated September 5, 2008 remains the same that the water cooled engine alternators can also be supplied along with the air cooled engine alternators in the ratio 30:70 respectively and the same does not provide any restriction upon the bidders who intends to supply only the air cooled engine alternators for the entire tendered quantity. ..."
The petitioners submit that even allowing for free play in the joints as is necessary for the government or an authority to choose a person with whom it does business, there cannot be any arbitrariness involved in the decision. The petitioners refer to a judgment reported at (1994) 6 SCC 651 (Tata Cellular v. Union of India) and the extent of the inquiry made by the Supreme Court on judicial review to arrive at the following conclusion at paragraph 148 of the report:
"148. ...From this letter we are not able to fathom the reason for omission. As seen above, Tata Cellular was originally selected for Delhi. By implementation of the judgment of the High Court it has been left out. Before doing so, as rightly urged by Mr Soli J. Sorabjee, this appellant ought to have been heard. Therefore, there is a clear violation of the principle of natural justice. On an overall view we find it has two distinctive qualifications. In that:
1. It has not borrowed from any commercial bank.
2. It has an annual turnover from Indian parameters of Rs 12,000 crores and the annual turnover of the foreign parameters of Rs 51,000 crores. Comparatively speaking, the other companies do not possess such high credentials yet it has been awarded low marks with regard to the reliance on Indian public financial institutions and financial strength of the parameters/partner companies.
These qualifications could have been validly urged had it been heard. Then, we do not know what decision could have been arrived at."
The petitioners rely on another judgment reported at (2001) 2 SCC 451 (W.B. State Electricity Board v. Patel Engineering Co. Ltd. & ors) for the proposition that relaxation of bid conditions would not be permissible. The respondent nos. 1 to 4 before the Supreme Court had bid for the project and there was an apparent mistake in certain figures mentioned. The Supreme Court considered both the aspect of bids being required to conform to the tender terms and the matter of public interest in awarding a government work to the bidder who had bid the lowest, subject to other things being equal. Paragraphs 24 and 31 of the report are relevant:
"24. The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant, Respondents 1 to 4 and Respondents 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfil prequalification alone are invited to bid, adherence to the instructions cannot be given a go-by by branding it as a pedantic approach, otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the rule of law and our constitutional values. The very purpose of issuing rules/instructions is to ensure their enforcement lest the rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provided under the ITB, by the State or its agencies (the appellant) in favour of one bidder would create justifiable doubts in the minds of other bidders, would impair the rule of transparency and fairness and provide room for manipulation to suit the whims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity. In our view such approach should always be avoided. Where power to relax or waive a rule or a condition exists under the rules, it has to be done strictly in compliance with the rules. We have, therefore, no hesitation in concluding that adherence to the ITB or rules is the best principle to be followed, which is also in the best public interest."
"31. The submission that remains to be considered is that as the price bid of Respondents 1 to 4 is lesser by 40 crores and 80 crores than that of Respondents 11 and 10 respectively, public interest demands that the bid of Respondents 1 to 4 should be considered. The Project undertaken by the appellant is undoubtedly for the benefit of the public. The mode of execution of the work of the Project should also ensure that the public interest is best served. Tenders are invited on the basis of competitive bidding for execution of the work of the Project as it serves dual purposes. On the one hand it offers a fair opportunity to all those who are interested in competing for the contract relating to execution of the work and, on the other hand it affords the appellant a choice to select the best of the competitors on a competitive price without prejudice to the quality of the work. Above all, it eliminates favouritism and discrimination in awarding public works to contractors. The contract is, therefore, awarded normally to the lowest tenderer which is in public interest. The principle of awarding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely because a bid is the lowest the requirements of compliance with the rules and conditions cannot be ignored. It is obvious that the bid of Respondents 1 to 4 is the lowest of bids offered. As the bid documents of Respondents 1 to 4 stand without correction there will be inherent inconsistency between the particulars given in the annexure and the total bid amount, it (sic they) cannot be directed to be considered along with the other bids on the sole ground of being the lowest."
A judgment reported at (2007) 8 SCC 1 (Reliance Energy Ltd. v. Maharashtra State Road Development Corpn. Ltd.) is placed on behalf of the petitioners, again to emphasise on the expanse of judicial review in matters relating to consideration of bids by the government or governmental agencies. The Supreme Court emphasised on the need to have a level playing field for all bidders. Paragraphs 36 and 38 of the report deal with the application of constitutional principles to rule out any arbitrariness about the process:
"36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of "non-discrimination". However, it is not a free-standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to "right to life". It includes "opportunity". In our view, as held in the latest judgment of the Constitution Bench of nine Judges in I.R. Coelho v. State of T.N., Articles 21/14 are the heart of the chapter on fundamental rights. They cover various aspects of life. "Level playing field"
is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field". We may clarify that this doctrine is, however, subject to public interest. In the world of globalisation, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)(g) of the Constitution. This is because the said doctrine provides space within which equally placed competitors are allowed to bid so as to subserve the larger public interest. "Globalisation", in essence, is liberalisation of trade. Today India has dismantled licence raj. The economic reforms introduced after 1992 have brought in the concept of "globalisation". Decisions or acts which result in unequal and discriminatory treatment, would violate the doctrine of "level playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of "equality" should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of "level playing field". According to Lord Goldsmith, commitment to the "rule of law" is the heart of parliamentary democracy. One of the important elements of the "rule of law" is legal certainty. Article 14 applies to government policies and if the policy or act of the Government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional."
"38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This "legal certainty" is an important aspect of the rule of law. If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate doctrine of "level playing field"."
BSNL submits that it would have been well within its rights to reject the petitioner company's bid as it did not adhere to the tender specifications by not detailing the list or cost of spares in the annual maintenance contract. BSNL submits that it is unconscionable of the petitioner company to question BSNL's bona fides despite the generosity shown to it by the authority. BSNL seeks to make a distinction between an addendum and an amendment and adds that since the clarification of September 6, 2008 was an addendum and not an amendment, it could not obliterate what was provided for in the addendum issued on the previous day.
Despite the fourth respondent adopting the justification of the evaluation as proffered by BSNL, there is a subtle point that it seeks to make. The fourth respondent suggests that the amendment to the SOR was by the addendum of September 5, 2008. The submission is that clause 4.7.2 of the detailed technical requirement in section IV of the tender papers was retained notwithstanding the documents of September 5 and September 6, 2008. It is contended that if the fourth respondent adhered to the requirement of clause 4.7.2 and BSNL accepted the same, it should bear scrutiny in judicial review. The fourth respondent asserts that there is no element of public interest involved in the challenge launched by the petitioners and it is only to further the petitioners' cause for obtaining a larger chunk of the work for which the present proceedings have been brought. The fourth respondent says that it is in negotiation with BSNL and is likely to lower the price quoted. Any interference in the process, according to the fourth respondent, would result in inevitable delay in the implementation of a project of great public importance.
The fourth respondent submits that even if there are errors that may appear to the court, it should not necessarily interfere in such a matter which is in the contractual domain. A judgment reported at (2005) 6 SCC 138 (Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. & anr.) is cited for the proposition that the discretionary power under Article 226 should be exercised only in furtherance of public interest and not merely on the basis of a legal point. Paragraph 15 of the report is placed:
"15. The law relating to award of contract by the State and public sector corporations was reviewed in Air India Ltd. v. Cochin International Airport Ltd. and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should interfere."
The fourth respondent says that the scope of judicial review in the matter of award of contracts by the government or governmental agencies has been recently reviewed in a judgment reported at (2007) 14 SCC 517 (Jagdish Mandal v. State of Orissa & ors.) where several other judgments were noticed. A number of celebrated cases, including that of Tata Cellular, were referred to in the judgment before the legal position was summarised at paragraph 22 of the report:
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."
The fourth respondent cautions against a strained construction being made of addendum 4.2 without reference to the circumstances leading up to the issuance thereof. The fourth respondent reminds of the salutary principles relating to the interpretation of a contractual term where the intention of the parties is the paramount consideration. An analogy is drawn by referring to a judgment reported at 1989 Supp (1) SCC 487 (Provash Chandra Dalui & anr. v. Biswanath Banerjee & anr.) where the surrounding circumstances have been emphasised:
"10. 'Ex praecedentibus et consequentibus optima fit interpretatio.' The best interpretation is made from the context. Every contract is to be construed with reference to its object and the whole of its terms. The whole context must be considered to ascertain the intention of the parties. It is an accepted principle of construction that the sense and meaning of the parties in any particular part of instrument may be collected 'ex antecedentibus et consequentibus;' every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that is possible. As Lord Davey said in N.E. Railway Co. v. Hastings:
"... the deed must be read as a whole in order to ascertain the true meaning of its several clauses, and... the words of each clause should be so interpreted as to bring them into harmony with the other provisions of the deed if that interpretation does no violence to the meaning of which they are naturally susceptible...."
In construing a contract the court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the court can do about it. In the construction of a written instrument it is legitimate in order to ascertain the true meaning of the words used and if that be doubtful it is legitimate to have regard to the circumstances surrounding their creation and the subject-matter to which it was designed and intended they should apply."
The fourth respondent says that it would be injudicious to treat addendum 4.2 in isolation and cites the judgment reported at (1993) 4 SCC 181 (Deokabai v. Uttam) for the principle enunciated at paragraph 5 of the report:
"5. It is well settled that the terms of a document, like the present one, have to be read as a whole. The document as translated, though wrongly at certain places, figures at pp. 45 to 47 of the paperbook. Taking out a term in isolation and giving it a meaning torn from the context may tend to lead to a wrong interpretation causing injustice. ..."
The principles of judicial review have now been held to be applicable to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. There are limitations, though, in the exercise of the power of judicial review as the State or an authority answering to the description of Article 12 of the Constitution may be presumed to be working for the protection of the financial interest of the State. No entrenched right inheres in the bidder quoting the lowest for the supply that it seeks to make. The State or an authority may have reasons to prefer a better person over the one who has quoted the lowest. Such right to choose is incidental to the State's right to contract. Yet, the State being the State, its every action has to pass the test of Article 14 of the Constitution; the power to choose cannot be exercised for any collateral purpose or run the risk of failing upon judicial review. The essential feature of judicial review is to set at right any unfair action. A mere illegality may not always amount to unreasonableness, but at the end of the day it is the reasonableness of the decision-making process that falls for scrutiny in judicial review.
It is not BSNL's case that despite the petitioner company being the lowest bidder BSNL exercised its prerogative in seeking a better party to award the greater share of work. It was open to BSNL to disregard the petitioner company despite its most attractive bid if BSNL had put forth reasonable grounds for exercising such prerogative. But the stand taken is that the evaluation was conducted on the basis of the tender documents and the decision-making process is sought to be justified thus. It is also not BSNL's argument that the petitioner company's bid was not responsive as it did not specify the cost of spares for the annual maintenance contract or list them. BSNL has already taken such action as it considered reasonable for this transgression on the petitioner company's part.
Clause 4.7.2 of the detailed technical requirement specified that engine alternators "shall be of air cooled type." The moment addendum 4 was published, the "shall be" in the second sentence of clause 4.7.2 had per force to be read as "may be." The argument of the fourth respondent that clause 4.7.2 was not subservient to addendum 4.2 cannot be accepted since its mandate stood already diluted by addendum 4 issued on the previous day. There is an element of vagueness about addendum 4. There is no doubt that it gave a choice to bidders to offer to supply water-cooled alternators along with air-cooled ones. Did it then require bidders to offer to supply the full compliment in air-cooled alternators or a combination of exactly 70:30 of air-cooled and water-cooled alternators or any combination of the two as long as air-cooled alternators did not fall below 70 per cent and water-cooled alternators did not exceed 30 per cent? If the air-cooled alternators are the more preferred, as both BSNL and the fourth respondent suggest, it would irrational that a bidder with an 80:20 mix of air-cooled alternators and water-cooled alternators would stand disqualified though it would appear to be a better offer than a 70:30 mix of air-cooled and water-cooled alternators. But it is unnecessary to get into such issue save to appreciate the nature of the queries that may have been raised following the obvious option given by addendum 4. The last sentence above the table in addendum 4 referred to modifications in the SOR and the SOR being revised "in relation to Engine Alternators." As a stand-alone sentence it would imply that the SOR in respect of engine alternators stood modified to the extent indicated in the table. But since such sentence followed the option offered earlier in the addendum for water- cooled alternators to also be supplied along with air-cooled alternators, it is reasonable to read the modified SOR relating to engine alternators in addendum 4 to permit bidders to offer to supply only air-cooled alternators as per the original SOR or a mix of air-cooled and water-cooled alternators in accordance with the modification provided in such addendum.
The document issued on September 6, 2008, however, had an element of finality and firmness about it. It spoke of there being many queries relating to the items and quantities in the SOR. The document professed to clear all doubts and proclaimed the table appended to it to be the "revised consolidated SOR." The table carried the same heading as did the original SOR in section V of the tender documents. Some of the quantities, pertaining to engine alternators, stood modified from the SOR relating to engine alternators published the previous day. Item 13.2(a) of addendum 4, for instance, required 15 kva air-cooled three-phase 1500 rpm diesel generator to be supplied in the amounts of 1400, 1050 and 1050, respectively, over the three phases. This stood modified to 490, 280 and 280, respectively, in item 13.2(a) of the "revised consolidated SOR" of the following day. It was not an isolated case. The quantities in respect of items 13.2(b), 13.3(a) and 13.3(b) as appearing in addendum 4 were also altered in addendum 4.2. What was item no. 13.4(a) in addendum 4 answered to item no. 13.5(a) in addendum 4.2. Item 13.4(b) in addendum 4 became item 13.5(b) in addendum 4.2. Item 31 and all sub-items thereunder in addendum 4 relating to services for engine alternators stood renumbered as item 35 with its sub-items in addendum 4.2.
Clause 31(v) of the instructions to bidders in the tender papers provided that the failure of a bidder to fill in the prices as prescribed in the price schedule would result in the rejection of the bid. Clause 46.2(vii) of the special conditions of contract stipulated that in case a bidder had not quoted the price of any item mentioned in the SOR and had not justified for not quoting the same, the price bid was to be loaded with the maximum price quoted for that item by any other bidder for the purpose of evaluation. It is true that the tender documents gave BSNL some elbow room to exercise discretion to not reject a bid on a technical transgression. But as much as BSNL's reasonable stand in not rejecting the petitioner company's bid for it not quoting for spares in its annual maintenance contract has to be applauded, its interpretation of addendum 4.2 cannot be appreciated. It is possible that BSNL understood addendum 4.2 to be as it suggests, but that is of no importance. What is of consequence is as to how a reasonable bidder would understand addendum 4.2 to imply. For, the document was intended for bidders and its interpretation lies in what it conveyed rather than what it intended to convey. The expression "to clear it all" and the firm finality in the publication of "the revised consolidated SOR" would admit of no other construction but that it was such modified SOR that bidders had to adhere to.
In the context of sending messages or issuing instructions, communication is, in its barest sense, the transfer of information from one point to another. The intention of any piece of communication is for the sender to get the desired result when the receiver has interpreted what is being sent through the channels. If, for any reason, what the receiver understands differs from what was intended to be sent (and this could be because of an inefficient use of language, of using an improper channel or medium, or even because of noise in the channel), the "information" has not, in fact, been "transferred." The very act of communication is rendered useless and the communication has never happened. The onus is on the sender to ensure that the receiver is conveyed that which the sender intended to communicate; that it retains the fidelity of what he meant to communicate as it is transferred to the receiver.
Language is but a tool in the communication process. In real terms, the mere denotation of a word does not really convey its entire meaning. The connotations attached to the word, the context in which it is said, the tone of voice (or punctuations) used when it is spoken, the body language of the sender when the word is expressed, the environment in which it is uttered, the very appropriateness of the word on the occasion it is articulated, the receiver's faith in the reliability of the sender and his own attitude to the sender, the subject and to himself - all contribute to the meaning that is finally garnered by the receiver.
Language, particularly in cold writing, is an inexact mode of communication. The nuance of a word used by the communicator may often be lost in transit. In the written word, the communicator does not have the advantage of his tone or voice or gesture to convey the exact meaning of that which is being communicated. The intent has necessarily to be culled out from the expression of it in a written communication. The interpretation of that which has been communicated in writing should lend more towards how it is capable of being understood rather than how it was intended to be understood. If beauty is in the eye of the beholder, the true meaning of a written word is as it appears to a reasonable reader. A revised and consolidated SOR issued by a statutory authority in the context of the strict adherence clauses strewn all over the tender documents would necessarily imply that such revised SOR overwrote all previous SORs and was the only one that was to be complied with.
On such assessment of the purport of addendum 4.2, the process of evaluation adopted by BSNL is found to be inappropriate. There may not have been any mischief about the way that BSNL approached the evaluation but the very fact that there was a gap in what it says was intended to be communicated and what was, in fact, communicated would result in the decision-making process being rendered arbitrary from the petitioner company's - or any reasonable bidder's - perspective even if there may not have been any obvious mala fides on BSNL's part. The arbitrariness is in BSNL failing to see the point despite its attention being drawn to the interpretation of addendum 4.2 and its cursory response thereto. The unfairness is in BSNL refusing to read addendum 4.2 from the reasonable reader's, or rational bidder's, perspective. The unreasonableness is in BSNL failing to appreciate that all the strict adherence clauses in its tender documents applied with all stringency to the "revised consolidated SOR." The irrationality is in BSNL's carelessness to ensure that what it says it intended to convey was, in fact, conveyed by addendum 4.2; a simple indication of the option or the alternative figures being indicated in parentheses in the relevant columns would have sufficed. After all, it was a project of value in excess of Rs 8000 crore which required sophisticated equipment to be supplied and a complicated system to be set up, ironically, to enable better communication.
The test of equality as recognised by Article 14 of the Constitution has to be seen more from the recipient's point of view than the State's. An erroneous yardstick equally applied to all results in discrimination and smacks of arbitrariness. The flawed benchmark may not have been chosen out of malice or caprice and yet the high test under Article 14 would render the State action unreasonable. Equality is as much about the sanctity of the decision-making process as it is about the uniform application thereof. Public interest lies in ridding the decision-making process of any element that would lead to discrimination.
In matters pertaining to the challenge to a tender process there is, almost invariably, a clash of commercial interest that is involved. A petitioner in such circumstances espouses a personal cause against a commercial rival through the medium of the State or an authority. Such petitioner is rarely a champion of public interest; it is for the court in judicial review to assess whether there is an element of public interest involved. If the rules of the game are blemished such that the decision-making process precludes a level playing field, then, irrespective of the commercial interest of the challenger, the court sees a facet of public interest. The incidental commercial interest then pales into the background.
The process of evaluation in the instant case is found to be faulty as a reasonable bidder would have understood the table appended to addendum 4.2 to be the final, and inviolable, schedule of requirements. Whatever may have been BSNL's perception or whatever may have been its intention, the test is in the sense that addendum 4.2 communicated to any reasonable bidder keen to adhere to the strict terms of the tender documents.
A writ of mandamus do issue cancelling the evaluation of the bids conducted by BSNL with a direction to reassess the bids by treating the schedule of requirements published under addendum 4.2 as the applicable list of materials and quantities thereof. The exercise should be completed as expeditiously as possible so as not to occasion any delay in the implementation of the project. WP No. 9770 (W) of 2009 is allowed as indicated. Since no mala fides can be attributed to either BSNL or the fourth respondent, there will be no order as to costs.
Urgent certified photostat copies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(Sanjib Banerjee, J.) Later:
The fourth respondent seeks a stay of the operation of the order which is declined.
(Sanjib Banerjee, J.)