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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION No 6623 of 2002
For Approval and Signature:
Hon'ble MR.JUSTICE R.K.ABICHANDANI
and
Hon'ble MR.JUSTICE KUNDAN SINGH
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1. Whether Reporters of Local Papers may be allowed : YES
to see the judgements?
2. To be referred to the Reporter or not? : YES
3. Whether Their Lordships wish to see the fair copy : NO
of the judgement?
4. Whether this case involves a substantial question : NO
of law as to the interpretation of the Constitution
of India, 1950 of any Order made thereunder?
5. Whether it is to be circulated to the concerned : NO
Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?
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ELECON ENGINEERING CO. LTD.
Versus
GUJARAT MINERAL DEVELOPMENT CORPORATION LTD.
--------------------------------------------------------------
Appearance:
MR. S.I. NANAVATI, Sr. Advocate with MR.D.S.
NANAVATI with MR.SAURIN MEHTA for Petitioners
MR. S.B.VAKIL, Sr. Advocate with MR ASPI M KAPADIA
for Respondent No. 1
MR.S.B.VAKIL, Sr. Advocate with MR A.S. VAKIL
with MR. SATYAJIT MITRA for Respondent No. 2
--------------------------------------------------------------
CORAM : MR.JUSTICE R.K.ABICHANDANI
and
MR.JUSTICE KUNDAN SINGH
Date of decision: 13/09/2002
ORAL JUDGEMENT
(Per : MR.JUSTICE R.K.ABICHANDANI for the Court)
1. The petitioners have challenged the action of the
respondent No.1 - Gujarat Mineral Development Corporation
Ltd. in issuing Letter of Intent dated 11th July 2002 in
favour the respondent No.2 - M/s TRF Limited, for award
of the contract for Designing, Engineering, Manufacture,
Supply, Transportation, Erection, Testing and
Commissioning of 600 TPH Lignite Handling System and 300
TPH Lime Handling System on turnkey basis for its
Akrimota Thermal Power Project, and have sought a
direction on the respondent No.1 to disqualify the tender
of the respondent No.2.
2. The petitioner No.1 is a public limited company
engaged in the field of design, engineering, manufacture,
supply, installation of bulk material handling plants and
equipments for power and other industries. The
respondent No.1 invited tenders for their Akrimota
Thermal Power Project on 1st March 2001. The tender
documents contained details about the scope of work and
other instructions and conditions. The last date and
time of submission of tender consisting of technical and
commercial bid (Part I) was 3rd August 2001 upto 14.00
hrs. Part II consisted of original price bid.
2.1 After some correspondence between the tenderers
and the respondent No.1, the respondent No.1 issued
clarifications in form of Updated Tender Specifications
on 21st May 2001, as per Annexure "B" to the petition and
the due date of submission was extended upto 8th June
2001 for submitting technical and commercial bid and the
price bid in two separate sealed envelopes. The bidders
submitted their offers on 20th June 2001.
2.2 After receiving the bids, the respondent No.1
sought clarification with regard to the commercial and
technical issues which were submitted by the bidders.
Ultimately, the respondent No.1, on 4th September 2001,
notified to the bidders about the frozen plant
requirements, as per Annexure "C" to the petition. On
5th September 2001, the respondent No.1 forwarded to the
bidders general (commercial) points to be considered by
all the bidders for the revised price bid in Annexure
"1-A" of that letter, which was to be considered
alongwith other Annexures sent with the letter dated 4th
September 2001 for revising the price bid. On 15th
September 2001, the respondent No.1, referring to its
earlier letters dated 4-9-2001, 5-9-2001 and 7-9-2001,
intimated to the bidders that their price bid for the
said tender was to be submitted latest by 15.00 hrs. of
19-9-2001, and that it would be opened on the same day by
16.00 hrs. The bidders were requested to confirm
adherence to the requirement of the respondent No.1
finalized after post-bid meetings as intimated in the
aforesaid letters. They were also intimated that -
"a specific confirmation about adherence to all
the requirements may be given on the
corresponding Annexures / Letter duly signed by
the Authorised Signatory latest by 18-9-2001. If
this confirmation is not received, the price bid
shall not be opened.
Please note that deviations are not acceptable."
(emphasis added)
2.3 According to the petitioner No.1, pursuant to
this communication, it had sent confirmation on 18th
September 2001 and submitted the price bid in a sealed
cover on 19th September 2001. In the said letter dated
18th September 2001, at Annexure "F" to the petition, the
petitioner No.1 informed the respondent No.1, referring
to its earlier letters, "We confirm our adherence to the
requirements finalized by GMDC after post bid meeting
held between us on 1-9-2001 and intimated to us vide
letters at Srl. No. 2, 3 & 4 under reference". The
letters duly signed were forwarded as required.
2.4 On 19th September 2001, the price bids were
opened as scheduled in presence of the bidders and
according to the petitioners, they came to know that the
lowest bid was of the respondent No.2 - TRF and the bid
of the petitioner No.1 was the second lowest. When the
price bid of the respondent No.2 was readover, it was
noticed that the respondent No.2 had made a conditional
offer, with respect to the commercial conditions,
offering imported goods on high seas sale basis as
against the GMDC's requirement to deliver the goods at
the project site. It was also stated in that price bid
that the exchange rate variations shall be payable by the
respondent No.1. According to the petitioners, these two
conditions specified in the offer of the respondent No.2
were in conflict with the mandatory conditions of the
tender and the undertaking taken from the bidders that
their offers would conform to the conditions communicated
to them in the said letters of the respondent No.1.
After opening the bids, evaluation was carried out by the
respondent No.1 in respect of cost loading on account of
differential power consumption as per Clause II.17.02,
(sheet 214) and free issue of cement and re-inforcement
steel for civil works based on quantities indicated by
the bidder as per Clause II.9.50 and schedule - M.
According to the petitioners, as directed by the
Government, the respondent No.1 further evaluated the
bids, exempting CST and GST components. It is the
petitioners' case that on comparison of prices quoted by
the bidders and evaluated as per relevant tender
conditions and also considering exemption of CST and GST
as directed by the State Government, the price quoted by
the petitioners of Rs.74=40 crores was net evaluated at
Rs.75=30 crores, while that of the respondent No.2, which
was quoted at Rs.65=80 crores was net evaluated at
Rs.75=06 crores. It is alleged that the prices of the
respondent No.1 as quoted and evaluated, although the
lowest, were based on major deviations from the tender
conditions, and that the respondent No.1 violated the
tender evaluation criteria incorporated in Clause
II.17.0, ignoring the loading that was required to be
done on account of such commercial deviations and issued
Letter of Intent on 11-7-2002, which fact the petitioners
came to know due to the caveat filed by the respondent
No.2 on 15th July 2002.
2.5 The petitioners had sent letters dated 30th April
2002 and 19th June 2002 (copies at Annexure "H"
collectively), bringing to the notice of the respondent
No.1 the irregularities in the tender of the respondent
No.2. It is alleged that the respondent No.2, with an
ulterior motive and for the reasons best known to the
respondent No.1, was given the contract in violation of
the provisions of Article 14 of the Constitution.
Inspite of the clear stipulation that no deviation from
the terms and conditions will be allowed and though the
bidders had submitted their confirmation letters that the
bids will conform to the terms and conditions
communicated to them in the said letters, the respondent
No.2 had deviated from the mandatory terms with respect
to delivery of material at site on F.O.R. basis and the
terms of payment by making a counter proposal to the
respondent No.1 in respect of arranging the "sale on high
seas basis" for the items which were to be imported
requiring the respondent No.1 to pay the custom duty
directly. It is contended that, by offering high seas
sale, the respondent No.2 automatically got an exemption
from the liability of State sales tax and derived the
benefit of competitive price. Such a course amounted to
deviation in violation of the mandatory condition of
providing delivery at the project site. It is alleged
that, by allowing such a bid of the respondent No.2, the
respondent No.1 had shown favouritism towards the
respondent No.2 and the decision making process was
vitiated. It is also the petitioners' case that the
respondent No.2 has not only deviated from the
requirement of "firm price offer" as per Clause 2(c) of
the tender terms and conditions, but it also did not
comply with the conditions communicated alongwith the
letter dated 5th September 2001 in Annexure "1-A"
thereto, in which it was specifically stated that, there
shall not be any escalation of price and variation in
exchange rate. The respondent No.2 had quoted the price
subject to condition of price variation on account of
variation in the exchange rate, and therefore, according
to the petitioners, its bid ought to have been rejected
at the threshold. It is contended that award of the
contract to the respondent No.2 was not only arbitrary
and illegal, but also amounted to favouritism and was
therefore malafide.
2.6 The petitioner No.1 filed additional affidavit
dated 2nd September 2002 placing on record certain
documents which included copy of the price bid submitted
by the respondent No.2 and the communications between the
parties.
3. In the affidavit-in-reply filed on behalf of the
Respondent No.1 - Corporation, a preliminary objection
was taken to the effect that the petitioners had not
quoted separate prices for the two plants but quoted a
total price of Rs.7,439=45 lacs though Schedule - B, i.e.
the Schedule of Prices contained in the Updated Technical
Specifications, required the tenderer to submit a lumpsum
firm price for design, manufacture, supply and delivery
separately for the Lignite Handling Plant and the Lime
Handling Plant. Moreover, the petitioners had quoted for
the two plants lumpsum price mentioning "crusher" and not
"sizer", which was required to be mentioned as per the
Updated Technical Specifications. Since a Sizer is more
expensive than a crusher, this was, according to the
respondent No.1, a major deviation in the schedule of
prices of the petitioners. A copy of the petitioners'
letter dated 18-9-2001 and a copy of Schedule - B i.e.
Schedule of Prices submitted by the petitioner are
annexed at Annexure "1" and "2" to the said reply. The
petitioners had not given total power consumption (KW)
equipment-wise, as required, but had given guaranteed
power consumption for various paths, as per Annexure "3"
to the said reply. Since pathwise equipments were not
shown, according to the respondent No.1, it would be
difficult to work out whether any loading and if yes,
what load in price was required to be given in the price
bid of the petitioner company. As regards the Schedule
of Prices (i.e. Schedule - B), of the respondent No.2,
it has been admitted in para 6 of the reply that it
contained the said two notes as per Annexure "4" to the
reply. According to the respondent No.1, the bidders
were required to give a specific confirmation about
adherence to all the requirements in its letters dated
4-9-2001, 5-9-2001 and 7-9-2001 and that the respondent
No.2 had by its letter dated 19-9-2001, a copy of which
is at Annexure "5" to the reply, confirmed that they will
adhere to all the requirements of the respondent No.1.
Since the pathwise power consumption in the tender of the
petitioners was the lowest, it was treated as a base for
working out loading of price related to power consumption
for the other bidders. It is then stated that the
petitioners had quoted for Crusher instead of Sizer,
which could also call for price loading, since the cost
of Sizers would be much higher than the Crushers. It is
stated in paragraph 6 of the affidavit-in-reply that;
"Since the petitioner does not dispute that TRF is the
lowest bidder, it is not necessary to examine in detail
the question of loading the price". According to the
respondent No.1, since no sales tax was payable on
imported goods, no loading was required to be considered
in the bid of the respondent No.2. Moreover, since the
respondent No.2 had, by its letter dated 19-9-2001,
confirmed that only statutory variations shall be payable
on taxes and duties in percentage, there was no question
of respondent No.2 claiming any such sales tax on the
imported goods. It was stated that since the respondent
No.1 did not agree to sale on high seas for the imported
items, the contingency of loading of interest at 18% for
the period of atleast six months on the amount of custom
duty and port clearance charges did not arise and
therefore, "there was no question of loading the price
bid of the respondent No.2". In paragraph 7 of the
affidavit-in-reply, the respondent No.1 has taken the
stand that, in view of the confirmations given by the
respondent No.2 - TRF in its letter dated 19-9-2001, the
price bid submitted by the respondent No.2 was not in
contradiction with any undertaking given by it to the
respondent No.1. It is stated that the respondent No.1,
by its letter dated 10th July 2002 (copy at Annexure "6"
to the affidavit-in-reply), sought re-confirmation of the
petitioner on five points specified therein and the
respondent No.2 had re-confirmed the same. It is stated
in para 7 of the reply that, "The only reason for which
contract has been given to TRF is that its tender has
been found to be the most competitive and in the interest
of GMDC. In the price comparison, TRF was found to offer
lowest ex-factory price. Even after applying evaluation
criteria on the basis of tender conditions, TRF still was
the lowest bidder."
3.1 The respondent No.2, in its affidavit-in-reply,
reiterated the preliminary objections which have been
raised by the respondent No.1, stating that, any judicial
relief at the instance of the petitioner, whose tender /
offer did not comply with the terms and conditions of the
tender, would be misplaced. It was also submitted in
paragraph 3.2 of its reply that, Section D of the terms
and conditions in Tender Volume I indicated that it would
be permissible to a contractor to indicate / bring out
technical and commercial deviations and in that sense,
the specification may not be mandatory. In paragraph 3.3
of the reply, it is admitted that the respondent No.2
"made a conditional offer with respect to commercial
condition offering imported goods on high sea sale
transactions as against GMDC's requirement to deliver the
goods to project site. Schedule - B of Prices in the
tender / offer of TRF contains three notes. .......".
It is stated that the note regarding arrangement of sale
on high seas for the imported items like Sizer, Crushers
and flip flop screens was an option offered to the
respondent No.1 by the revised price bid of the
respondent No.2, and that, since by its letter dated 10th
July 2002 (copy annexed at Annexure "I" to the reply),
informed the respondent No.2 that the high seas was not
permitted, the respondent No.2 confirmed the same, and
therefore, in execution of the project by the respondent
No.2, no question of high seas sale was involved. It is
stated that since the respondent No.1, by its letter
dated 10th July 2001, informed the respondent No.2 that
exchange rate variation was not permitted and the
respondent No.2 confirmed the same, there was no
deviation done by the respondent No.2. Moreover, once
the respondent No.2 confirmed that there would be no high
seas sale of imported items, the question of custom duty,
port clearance charges to be paid by the respondent No.2
in advance, did not survive and therefore, there was no
question of loading the prices quoted by the respondent
No.2 on those counts. It is denied that any mandatory
condition was ignored by the respondent No.2 or that the
treatment similar to that given to the respondent No.2
was not extended to the other bidders.
3.2 In response to the additional affidavit dated 2nd
September 2002 of the petitioners, the respondent No.1
placed on record the events that took place after the
issuance of the Letter of Intent dated 11-7-2002,
pointing out that the Work Order was issued by it to the
respondent No.2 on 26-7-2002. Copies of the Letter of
Intent and Work Order are placed at Annexure "1" and "2"
of the said further reply dated 4th September 2002. In
paragraph 5 of the said affidavit-in-reply, while
referring to the Schedule of Prices of the respondent
No.2, the respondent No.1 admitted that it had not given
schedule of unit prices for material handling plant
components in Srl. No. 4.0 of Schedule of Prices. It
was, however, stated that "the price bid of the
petitioner was not rejected on the ground that the
petitioner in Schedule of Prices of its tender did not
give break up of ex-works firm price of material handling
plant equipment as per 2.02 (a) or had failed to give in
the schedule of price unit price for material handling
plant components". It was stated that this aspect had
been referred to in the affidavit-in-reply on behalf of
the respondent No.1 only in support of the preliminary
objection that the petitioner is not entitled to maintain
the petition. It is stated that the letter dated
19-9-2001 of confirmation sent by the second respondent
was received by the respondent No.1 before the price bids
were opened on that day. It is then stated that the
respondent No.2, in its tender, had indicated separately
custom duty of Rs.1,32,30,000=00 and therefore, if the
second respondent was not required to pay customs duty in
the event of high seas sale, the custom duty of
Rs.1,32,30,000=00 separately shown in the second
respondent's price would be required to be deducted, and
therefore, it would have made no difference if the
respondent No.1 were required to pay the customs duty in
the event of high seas sale. It is further stated in
paragraph 5.2 of the reply that in the event of high seas
sale, no sales tax at 4% or at all would have been
required to be paid since such tax was payable when sale
of goods was made within the State. Moreover, even in
case of high seas sale and assuming that respondent No.1
was required to pay port clearance and forwarding
charges, it would have recovered the same from the
respondent No.2. The calculation of interest for a
period of six months by the petitioner on the amount of
customs duty that the respondent No.1 would have had paid
if the high seas sale took place, was disputed, and as
stated in paragraph 5.3 of the reply, such interest would
be required to be calculated at 12.5% per annum for a
period of one month which amount would come to
Rs.1,37,812=50. The cost loading calculation of
Rs.1,12,65,000=00 for variation in exchange rate made by
the petitioner is disputed, and in paragraph 5.4 of the
reply, it is stated that such variation in exchange rate
was relatable only to customs duty and not to the entire
landed costs of the imported goods. According to the
respondent No.1, the petitioner had submitted a statement
on 16-5-2001, as per Annexure "4" to the said reply, in
which loading on account of variation in exchange rate
was calculated on customs duty and not on the landed
cost. It is stated that, any calculation of variation in
exchange rate was hypothetical, because, it would be
difficult to predicate whether on the date of the
clearance of the imported consignment 1 Euro would be
equal to Rs.42=09 ps. or higher or lower than that. It
is pointed out that, in July 2002, 1 Euro was equal to
Rs.49=00 and in the next month, it went down to Rs.47=00.
It is finally stated in paragraph 5.5 of the reply that,
even if the part charges were required to be loaded on
the price offered by the respondent No.2, the loading
would be of Rs.12,10,000=00 for port charges and
Rs.1,37,812=50 ps. for interest on customs duty and port
charges aggregating to Rs.13,47,812=50 ps. which was
lower than the difference of Rs.24,00,000=00 in the
prices given by the petitioners in paragraph 4.12 of the
petition.
4. It has been contended on behalf of the
petitioners that the revised price bid of the respondent
No.2 did not meet with the mandatory conditions of the
tender and therefore, its bid should have been rejected
when it was opened on 19-9-2001 and by not doing so, the
respondent No.1 has acted arbitrarily and in violation of
Article 14 of the Constitution. It was submitted that,
as per Clause 2(c)(i) of the tender terms and conditions
read with letters dated 4-9-2001, 5-9-2001 and 15-9-2001
of the respondent No.1, there were mandatory stipulations
that the prices offered would be firm, the price was to
be quoted on the basis of free delivery at the project
site on door delivery basis and that exchange rate
variation was not payable. Since these conditions were
mandatory, they could not have been relaxed by the
respondent No.1. It was submitted that, after a lapse of
about eight months, the respondent No.2 was given a
special opportunity by communication dated 10th July 2002
sent by the respondent No.1 to change its bid conditions,
without giving any such opportunity of altering the
revised price bid to the petitioner, who was the next
lowest tenderer. Such a course was calculated to favour
the respondent No.2, because, without such opportunity,
the deviated price bid of the respondent No.2 was liable
to be rejected at the threshold. It was submitted that,
by quoting the price with a rider that the goods imported
by the respondent No.2 will be delivered on the high seas
basis, the respondent No.2 was benefitting in sales tax
to the tune of Rs.30,05,000=00 and on the variation in
exchange rate, at Rs.1,12,65,000=00, as worked out in a
sheet attached to the additional affidavit of the
petitioners, dated 2nd September 2002. Moreover, by this
process, the respondent No.2 was also saving port
clearance and forwarding charges to the tune of
Rs.12,00,000=00 as well as interest on customs duty
amount which would have been paid by the respondent No.1
to the tune of Rs.11,90,000=00. As regards the exchange
rate variation, it was submitted that, in context of the
base exchange rate of Rs.42=09 adopted in note - 3 of the
Schedule - B of the prices quoted by the respondent No.2,
the additional liability on the respondent No.2 would
have gone upto Rs.1,12,65,000=00 on the basis of the
exchange rate that prevailed on 30th August 2002 of
Rs.48=50 which difference came to 15%. Thus, according
to the learned senior counsel, if proper evaluation of
the bids of the petitioners and the respondent No.2 was
done, the difference in the price bid due to technical
loading of Rs.24,00,000=00 would have vanished and the
net difference of price quoted by the petitioners and the
respondent No.2 would have tilted in favour of the
petitioners by Rs.1,30,165=00.
4.1 In support of the above contentions, the learned
Senior Counsel relied on the following decisions :
[a] The decision of the Supreme Court in Monarch
Infrastructure (P) Ltd. v. Commissioner,
Ulhasnagar Municipal Corporation, reported in
(2000) 5 SCC 287 was cited for the proposition
that, in the matters of tender process and award
of contract, while public interest is paramount,
there should be no arbitrariness in the matter of
award of contract and all participants in the
tender process should be treated alike. The
legal position was summed up by stating that the
Government was free to enter into any contract
with citizens but the court may interfere where
it acts arbitrarily or contrary to public
interest, and that the Government cannot
arbitrarily choose any person it likes for
entering into such a relationship or to
discriminate between persons similarly situate.
It was also a settled position that it is open to
the Government to reject even the highest bid at
a tender where such rejection is not arbitrary or
unreasonable or such rejection is in public
interest for valid and good reasons. On the
facts of the case, it was held that the High
Court was justified in setting aside the award of
contract in favour of the appellant because the
appellant had not fulfilled the conditions
relating to clause 6(a) of the Tender Notice, but
the same was deleted subsequent to the last date
of acceptance of the tenders. It was held in
paragraph 14 of the judgement that the authority
calling for the tenders is the best judge on the
question whether the new tender conditions were
better than what were prescribed earlier.
[b] The decision of the Supreme Court in Sterling
Computers Ltd. v. M/s M & N Publications Ltd.
and others, reported in (1993) 1 SCC 445 was
cited for the proposition that, even while taking
decision in respect of commercial transactions, a
public authority must be guided by relevant
considerations and not by irrelevant ones. If
such decision is influenced by extraneous
considerations, which it ought not to have taken
into account, the ultimate decision is bound to
be vitiated, even if it is established that such
decision had been taken without bias. It was
held that the action or the procedure adopted by
the authorities which can be held to be State
within the meaning of Article 12, while awarding
contracts in respect of properties belonging to
the State, can be judged and tested in the light
of Article 14. The executive does not have an
absolute discretion in the matter of grant of any
privilege to others. It was held that the norms
and procedures prescribed by the Government and
indicated by courts have to be more strictly
followed while awarding contracts which have
along with a commercial element a public purpose.
The Supreme Court held that the decision making
process was open to judicial review though the
court cannot act as an appellate authority. If
the decision making process was violative of
Article 14, the Court can strike down the
decision and action taken pursuant thereto.
[c] The decision of the Supreme Court in Tata
Cellular v. Union of India, reported in (1994)6
SCC 651 was cited for the proposition that the
principle of judicial review would apply to the
exercise of contractual powers by Government
bodies in order to prevent arbitrariness or
favouritism. The Government, as a guardian of
the finances of the State, was expected to
protect the financial interest of the State and
the principles laid down in Article 14 of the
Constitution have to be kept in view while
accepting or refusing a tender. The right to
choose cannot be considered to be an arbitrary
power, and if the power is exercised for any
collateral purpose, the exercise of that power
will be struck down. It was held that the duty
of the Court was thus to confine itself to the
question of legality, and the Court was concerned
as to whether a decision-making authority
exceeded its powers or committed an error of law
or committed a breach of the rules of natural
justice or reached a decision which no reasonable
tribunal would have reached, or abused its
powers. It was also held that it was open to the
court to review the decision-maker's evaluation
of the facts and the court will intervene where
the facts taken as a whole could not logically
warrant the conclusion of the decision-maker.
[d] The decision of the Supreme Court in
G.J.Fernandez v. State of Karnataka, reported in
1990 (2) SCC 488 was cited to point out that it
was held in paragraph 15 of the judgement that
any deviation from the guidelines, if made,
should not result in arbitrariness or
discrimination. Where the non-conformity with,
or relaxation from, the prescribed standards
results in some substantial prejudice or
injustice to any of the parties involved or to
public interest in general, guidelines cannot be
deviated.
[e] The decision of the Supreme Court in Ramana
Dayaram Shetty v. International Airport
Authority of India, reported in (1979) 3 SCC 489,
was cited for the proposition that 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. It
was held that 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. In paragraph 12 of the
judgement, it was held that the power or
discretion of the Government in the matter of
grant of largesse 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 such 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. In
paragraph 34 of the judgement, the Supreme Court
held that, both having regard to the
constitutional mandate of Article 14 as also the
judicially evolved rule of administrative law,
the State authority was not entitled to act
arbitrarily in accepting the tender of a party,
but was bound to conform to the standard or norm
laid down in the notice inviting tenders. It was
held that once the standard or norm which was
reasonable and non-discriminatory was laid down,
the authority was not entitled to depart from it
and to award the contract to the respondent who
did not satisfy the condition of eligibility
prescribed by the standard or norm. It was held
that if there was no acceptable tender from a
person to satisfy the condition of eligibility,
the respondent authority could have rejected the
tender and invited fresh tenders on the basis of
a less stringent standard or norm, but it could
not depart from the standard or norm prescribed
by it and arbitrarily accept the tender of the
respondent No.4. The Court held that the action
of the respondent No.1 authority in accepting the
tender of the respondent No.4 even though they
did not satisfy the prescribed condition of
eligibility, was clearly discriminatory, since it
excluded other persons similarly situate from
tendering for the contract and that it was also
arbitrary and without reason.
[f] The decision of the Supreme Court in Minerals &
Metals Trading Corporation of India Ltd. v.
Sales Tax Officer, reported in 1998(7) SCC 19 was
cited for the proposition that high seas sale was
not liable to sales tax.
[g] The decision of the Supreme Court in Harminder
Singh Arora v. Union of India and others,
reported in (1986) 3 SCC 247 was referred in
order to point out that, in paragraph 19 of the
judgement, the Supreme Court held that, if the
tender form submitted by any party is not in
conformity with the conditions of the tender
notice, the same should not have been accepted.
It was held that the concerned authority had
arbitrarily and in a fanciful manner, accepted
the tender of the respondent No.4. The Court
held that the State or its instrumentality has to
act in accordance with the conditions laid down
in the tender notice, and that if the authorities
chose to accept the tender of respondent No.4 for
supplying pasteurized milk, the appellant should
also have been given an opportunity to change his
tender. In paragraph 29 of the judgement, the
Supreme Court held that if the authority or the
State Government chooses to invite tenders, then
it must abide by the result of the tender and
cannot arbitrarily and capriciously accept the
bid of respondent No.4 although it was much
higher and to the detriment of the State.
[h] The decision of the Supreme Curt in West Bengal
Electricity Board v. Patel Engineering Co.
Ltd., reported in AIR 2001 SC 682 was referred to
point out that, in paragraph 25 of the judgement,
the Supreme Court held that it was essential to
maintain the sanctity and integrity of process of
tender / bid and also award of a contract. The
Court held; "In a work of this nature and
magnitude where bidders who fulfill
pre-qualification alone are invited to bid,
adherence to the instructions cannot be given a
go-bye 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 I.T.B. by
the State or its agencies (the appellant) in
favour of one bidder would create justifiable
doubt 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. ............
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. ..."
In paragraph 32 of the judgement, the Supreme
Court observed that, "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 work of the project as it serves
given 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 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 contracts 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."
[i] The decision of the Supreme Court in Dutta
Associates Pvt. Ltd. v. Indo Merchantiles Pvt.
Ltd., reported in (1997) 1 SCC 53 was cited for
the proposition that whatever procedure the
Government proposes to follow in accepting tender
must be clearly stated in the tender notice and
that any abuse of powers for extraneous reasons
would expose the authorities concerned to
appropriate penalties. It was held that, having
determined the "viability range", the Government
called upon only the appellant to make a counter
offer to come within the "viability range" and
his revised offer at the higher of the "viability
range" was accepted. It was found that no such
opportunity to make a counter - offer was given
to any other tenderers including the first
respondent, which was a vitiating factor.
[j] The decision of the Supreme Court in Kanhaiya Lal
Agrawal v. Union of India, reported in (2002) 6
SCC 315 was referred to for the proposition that
the Court is normally reluctant to intervene in
matters of entering into contracts by the
Government, but if the same is found to be
unreasonable, arbitrary, mala fide or is in
disregard of mandatory procedures it will not
hesitate to nullify or rectify such actions. The
Supreme Court held that it was settled law that
when an essential condition of tender is not
complied with, it is open to the person inviting
tender to reject the same. Whether a condition
is essential or collateral could be ascertained
by reference to the consequence of non-compliance
thereto. If non-fulfilment of the requirement
results in rejection of the tender, then it would
be an essential part of the tender otherwise it
is only a collateral term. The Supreme Court
reiterated this legal position on the basis of
its earlier decision in G.J. Fernandez v. State
of Karnataka, reported in (1990) 2 SCC 488.
[k] The decision of the Bombay High Court in Larsen &
Toubro Ltd. v. Gujarat State Petroleum
Corporation Ltd., XLI (2) 2000(2) 1814 was cited
for the proposition that when it comes to the
matter of exceeding or abusing the authority to
bring about a contractual transaction the
judicial review is permissible to prevent
arbitrariness in the matter in which the public
authority functions while entering into a
contract.
[l] The decision of the Bombay High Court in Konark
Infrastructure Pvt. Ltd. v. Commissioner,
Ulhasnagar Municipal Corporation, reported in AIR
2000 BOMBAY 389 was cited to point out that the
High Court held that the Municipal Commissioner
had acted arbitrarily in considering the bid of
the highest bidder which did not fulfill the
eligibility conditions on the last date which was
prescribed for the submission of bids. The
Municipal Commissioner, in view of the well
settled position in law, was bound to consider
each bid in terms of the tender conditions which
had been prescribed and which were in existence
on the date prescribed for the submission of
offers. Even if the tender conditions were to be
relaxed thereafter, the benefit of relaxation
could not have been made available only to the
existing bidders since the relaxation operated to
widen the field of eligibility and competition.
5. The learned senior counsel appearing for the
respondent Nos.1 and 2, stating that there was no
conflict between the interests of the respondents Nos. 1
and 2, has argued the matter for both the respondent No.1
authority and the respondent No.2 tenderer.
5.1 The learned senior counsel appearing for the
respondents Nos. 1 and 2 raised a preliminary objection
against the maintainability of the petition on the ground
that no relief could be granted to the petitioner who was
not eligible as per the terms and conditions of the
contract on three grounds. It was submitted that the
tender of the petitioner was not in conformity with the
terms and conditions of the original tender as well as
U.T.S. (Updated Technical Specifications). It was
pointed out from the petitioners' pricebid, a copy of
which is at Annexure "II" to the affidavit-in-reply of
the respondent No.1(Schedule B being the Schedule of
Prices), that the petitioner company had not given
separate prices for the lignite handling plant and lime
handling plant, but had quoted a lumpsum price in its
said revised price bid for both lignite and lime handling
plants. It was then stated that the petitioners had
offered "crusher" instead of "sizer" in the Schedule of
Prices at Srl. No. 1(a) & (b), pointing out from the
proforma Schedule - B which is in Volume II "Updated
Technical Specifications for Material Handling Plant in
Auxiliaries" that, against Srl. No. 1(a), prices were
to be quoted for "Lignite Handling Plant" as specified as
per enclosed layout drawing including Sizer, stacker cum
reclaimer and crusher system for lignite and other
systems as specified"; and against Srl.No.1(b), for "lime
handling plant as specified as per enclosed layout
drawing including sizer, impact crushers and other
systems as specified"; while in Schedule - B filled in by
the petitioner as per Annexure "II" to the petition,
against these two items "crusher" was mentioned and not
"sizer" which means that the petitioner was offering a
different type of machinery instead of sizers which were
required to be supplied as per the terms of the contract.
It was further pointed out that there was
non-confirmation on the part of the petitioners by not
giving the break-up of consumption of electricity
equipment-wise as required under the terms and conditions
of the contract, and that, by giving a break-up
path-wise, instead of equipment-wise, of the power
consumption, the petitioners had not complied with the
requirements of the tender. Initially, one more
inconsistency was pointed out as to the petitioners' not
giving a break-up equipment-wise in the schedule, but
later on, that aspect was not pursued, since, even the
respondent No.2 had not given a break-up in its revised
price bid in Schedule B in respect of the material
handling plant components covered under clause (4) of
that schedule. The learned senior counsel submitted
that, in view of the deviations in the petitioners'
standard, the petitioner company could not have been
considered as eligible and therefore, the petition was
not maintainable at the instance of such an ineligible
petitioner. It was submitted that these non-compliances
made the petitioners' bid totally unacceptable and it
could not be made responsive by any process of loading of
the price quoted by the petitioners, and that
irrespective of whether anything could be said against
the acceptance of the bid of the respondent No.2, it
would be impossible to accept the bid of the petitioners.
If that be so, at the instance of the petitioners, this
petition could not be entertained. It was submitted that
though the petitioners' bid was not rejected on the
aforesaid grounds, and these aspects were not required to
be taken into account, because, the petitioner was not
the lowest bidder, it was open for the respondents to
contend before this Court that, at the instance of such
an ineligible petitioner, the Court should not exercise
its discretionary power, particularly when this was not a
public interest litigation. It was submitted that what
was required by the tender conditions was "sizers" and
"impact crushers" needed for the two plants, while the
petitioner had quoted the price bid mentioning "crushers"
only. The sizers were costlier than the crushers and
even if it was a mistake in mentioning crushers instead
of sizers on the part of the petitioner, the respondent
No.1 - Corporation cannot proceed upon the petitioner's
mistake. It was also submitted that there was no meaning
in evaluating the bid of the petitioner unless it could
have taken its bid to a price lower than the price quoted
by the respondent No.2. It was submitted that using
"crusher" at certain places and "sizers" at other places
in its Schedule of Prices by the petitioner was nothing
else but a smart exercise meant to throw dust in the eyes
of the respondent No.1 and to hoodwink them in a
technical tender. A tenderer who comes with a plea of
mistake shows poor credentials and is not fit to be given
a contract of this type, argued the learned senior
counsel. It was also submitted that the petitioner's bid
was not capable of evaluation in absence of
equipment-wise guaranteed power generation. It was
submitted that the petitioners had not mentioned in
Schedule - D equipment-wise power consumption. It was
submitted that the expression "total power consumption"
in clause 16.30.4 (sheet 213 of Volume II) did not mean
only total power consumption, but total equipment-wise
power consumption. The learned senior counsel took us
through various clauses of the Updated Technical
Specifications in support of his arguments. It was
submitted that if the preliminary objection of the
respondents is upheld, then no occasion would arise to
decide the other points raised in the matter. He
submitted that a bidder who submits a bid for something
which is not asked for, is not a bidder at all, and that
a bidder would be one who bids for the items which are
invited. There is, therefore, no violation of Article 14
of the Constitution. Even if as a result of loading the
price quoted by the respondent No.2 is raised, it will
not become higher than the price quoted by the petitioner
and therefore, there was no violation of Article 14 of
the Constitution. It was submitted that the price bid of
the respondent No.2 was not required to be loaded on the
basis of two alleged deviations contained in notes 2 and
3 of the Schedule of Prices filed by the respondent No.2.
It was contended that, since no sales tax was payable on
high seas sale of goods, there was no question of any
additional liability on the part of the respondent No.1
Corporation arising from the stipulation contained in
note - 2 of Schedule B of the revised price bid filed by
the respondent No.2 in which the respondent No.2 had
mentioned that the goods to be imported and named therein
will be sold on high seas basis. It was submitted that
the respondent No.2 had confirmed by its communication
dated 19-9-2001 which was submitted before the revised
price bids were opened that it would be abiding by the
terms and conditions communicated by the respondent under
its letters dated 4-9-2001, 5-9-2001 and other
communications and therefore, the subsequent letter dated
10th July 2002 to the respondent No.2 sent by the
respondent No.1 was only intended to get re-confirmation
from the respondent No.2 and the effect of
re-confirmation was that the notes Nos. 2 and 3 put by
the respondent No.2 in Schedule - B of prices regarding
sale on high seas basis and exchange variation, stood
withdrawn, and therefore, since no such conditions
remained, there could arise no question of loading the
revised price bid of the respondent No.2, which was
opened on 19th September 2001. It was submitted that the
communication dated 10th July 2002 sent by the respondent
No.1 to the respondent No.2 was not a negotiation at all
and the respondent No.1 was only getting earlier terms
re-confirmed. It was also contended that the contention
which was developed during the arguments on behalf of the
petitioners that the respondent No.2 had given its
confirmation letter on 19-9-2001 though it was required
to be given on 18-9-2001, as per the communication dated
15-9-2001 of the respondent No.1, was only in respect of
a procedural relaxation and no essential condition of the
contract was thereby violated. It was argued that the
respondent No.1 could relax such requirement, which was
not a deviation from the terms and conditions of tender,
by taking the confirmation letter of the respondent No.2
on 19-9-2001 instead of 18-9-2001, which was the last
date for sending confirmation as stipulated in the letter
of the respondent No.1, dated 15-9-2001.
5.2 In support of his preliminary objection, the
learned senior counsel heavily relied upon the decision
of the Supreme Court in Raunaq International Ltd. v.
I.V.R. Construction Ltd., reported in (1999) 1 SCC 492,
in which the Supreme Court held in paragraph 8 of the
judgement that the challenger, M/s I.V.R. Construction
Ltd. also did not fulfil the qualifying criterion of
having laid pipeline for a distance of 3 KMs, and that in
these circumstances, "we fail to see any basis for
passing the impugned order". Reliance was also placed on
the observation made in paragraph 27 of the judgement, in
which the Supreme Court held that the relaxation was
permissible under the terms of the tender, and was
granted to M/s Raunaq International Ltd. on valid
principles looking at the expertise of the tenderer and
his past experience although it did not exactly tally
with the prescribed criteria. The Supreme Court further
held : "What was more relevant, M/s I.V.R. Construction
Ltd. who have challenged this award of tender themselves
do not fulfil the requisite criteria. They do not
possess the prescribed experience qualification.
Therefore, any judicial relief at the instance of a party
which does not fulfil the requisite criteria seems to be
misplaced. ....... "
5.3 The learned senior counsel also relied upon an
order of this Court made on 12-8-2002 in Special Civil
Application No. 6511 of 2002 for pointing out that, in a
case where the expert committee of the Board noticing
that the certificate produced by the petitioner regarding
experience did not contain details and did not mention
quantity dealt with and the activities undertaken by the
petitioner, and after considering the relevant aspects,
found that the bidder was disqualified against the
criteria of experience, it was held that the decision of
the Board in not accepting the technical bid of the
petitioner could not be said to be arbitrary or illegal
and the petition was summarily rejected.
6. The respondent No.1, while inviting sealed
tenders for the Akrimota Thermal Power Project, gave
technical specifications, schedules and general terms and
conditions in various sections of the tender documents.
Volume I contained terms and conditions for turnkey
execution of material handling plant with auxiliaries.
In section (A) thereof, the instructions to the bidders
were incorporated. Instructions in clause (6) provided
that, "Issuance of tender Documents will not be construed
to mean that such bidders would be automatically
considered. Only bids, responsive to technical
specifications and general terms and conditions and
complying the requirements thereof shall only be
considered". As per clause (8) of the instructions, the
offer was to be made by the tenderer in two parts,
namely, Technical and Commercial Bid - Part I (unpriced
bid) and Price Bid - Part II. Adequate cross-references
shall be given, if required, to enable to correlate
details of both the Bids. The price bid was to contain
only prices as per the schedules and also additional /
alternative prices, if called for. Clause (10) did not
contemplate ay price bid variation.
6.1 Tender terms and conditions incorporated in
section (c) of Volume I of the Tender Documents contained
various clauses, of which, the following (emphasis
supplied) were referred to during the hearing :-
"2. Instructions to Bidders :
(a) xxxxx
(b) xxxxx
(c) Prices quoted should be firm, and the
same will not be subject to any price
escalation till completion of work except
of statutory variation in excise duty and
sales tax.
Purchaser prefers the prices on divisible
contract basis and therefore, please
quote separately as under :
I) Supply prices (item-wise)
II) Erection, testing and
commissioning charges
For supervision of Erection of and
commissioning per-day rates shall be
quoted in the price bid.
The tenderer should quote prices only on
free delivery at our power project site
on door delivery basis. The rates other
than project basis will not be
considered, unless and otherwise called
for.
The price schedules accompanying the
technical specifications indicate the
type of contract sought whether unit
prices or lump sum and shall be duly
filled in.
(g) i. Bidder's specific attention is
invited to the requirement that
the price quoted in the bid shall
be based on furnishing all
materials and services completely
in accordance with the bid
specifications and attachments
thereto.
ii. Incomplete bids and amendments
and additions to bids after
opening of price bid may not be
considered.
xxxxx
"(i) The prices quoted shall be based on
delivery F.O.R. project site."
19. Taxes, Duties, etc. :
Sales Tax / Central Sales Tax shall be
paid extra as applicable. (In case of
indivisible works contract, no sales tax
is applicable and therefore will not be
paid. Tenderer has to confirm this).
xxxxx
xxxxx
The tenderer should clearly mention, if
any tax or duty are included in the
quoted prices. The offer should also
indicate the rates / amounts of taxes and
duties included.
xxxxx
1. Sales Tax :
For sales tax also, the details similar
to excise duty as above shall be
furnished.
xxxxx
2. Sales Tax on Works Contract :
........ However, the bidder shall
indicate expressly specifying the items
subject to Sales Tax indicating the value
and rates while quoting the price. .....
27. Title :
"Both legal and equitable title to all
the material, equipment and apparatus
covered by the contract shall pass to the
purchaser as and to the extent the
prorata contract price of the material,
apparatus or equipment is paid. Nothing
in this paragraph shall be construed as
releasing or waiving any responsibility
of the supplier hereunder, but on the
contrary, the supplier shall remain as
fully responsible as though this
paragraph was not contained herein."
6.2 The general terms and conditions for packing and
transport and for the erection of material etc. were
contained in Parts II and III of section (C) in Volume I
of the tender documents. Clause (6) relating to transit
insurance in Part II section (C), inter alia, provided as
under :
"6. Transit Insurance :
Since the prices expected are F.O.R.
destination, the transit insurance will be
arranged by the supplier at his cost.
Supplier will be fully responsible for all losses
/ damages during transit and the purchaser will
be fully indemnified against such losses /
damages.
xxxxx
xxxxx "
Clause 24(a) of the general terms and conditions
for erections of material (Part III of section 3 in
Volume I) relating to taxes, reads as under :
"24. Taxes :
(a) General Taxes :
The contractor shall be responsible for and shall
pay out of his own moneys, all taxes, dues fees,
cesses, octroi and charges payable to Central or
State Governments or dues payable on material
purchased by him or constructional plant provided
by him for the works, and on all materials
brought by him on the site and used for the works
and shall indemnify the purchaser against any
liability on account of any such taxes, dues,
fees, cess, octroi and charges.
6.3 Volume II of the Tender Documents contained
Updated Technical Specifications for Material Handling
Plant with Auxiliaries. These technical specifications
are regarding system description, required equipment and
services, material handling plant, equipment design
criteria and technical specifications, bunker filling
facilities, handling facilities, general erection
requirement, quality assurance programme, bids evaluation
amongst other specifications. From Clauses II.3.10.1,
3.20.2, 4.01.1 (Sr.No.11), 4.01.2 (Sr.No.1 & 3), 8.26.2,
8.31, 10.01.2 (Sr.No. c & d), 11.13, 16.30.3 (a, c & d),
16.30.4, it was pointed out by the learned Senior Counsel
for the respondents that, in these clauses, there was
specific mention of "Sizers" as well as "Impact Crushers"
which were to be supplied as the machinery in the two
plants of the project. The learned Senior Counsel for
the petitioners, referring to Clauses 8.26, 8.26.3,
11.13, 16.30.3, on the other hand, submitted that
"Sizers" were described in these clauses as "Sizer
Crushers" and therefore, Sizers were also a type of
Crushers which expression included both Sizer as well as
Impact Crushers. It was submitted that, in clause
16.30.4, there was in fact no mention of "Sizer" but
"Roller Crusher" was mentioned in place of "Sizer".
6.4 On the aspect of guarantee of total power
consumption, both the sides referred to the following
clauses :
"II.16.30.4 Bidder shall guarantee the total power
consumption required at the input
terminals of drive motors of the
following equipment at the above
mentioned guaranteed capacity performance
requirements.
All Conveyors, Belt feeders, Feeder
breaker, Vibrating feeder, Eccentric disc
/ Roller screen, Flip flop screens, Roll
Crusher, Impactor crushers, magnetic
separators, Stacker cum Reclaimer,
connected to one stream.
II.16.30.6 Liquidated Damages for Power Consumption
:
II.16.30.6.1 If the total power consumption at the
input terminals of various drive motors
exceed the guaranteed figure of power
consumption, the liquidated damages shall
be payable by the contractor at a rate of
Rs.1,00,000/- per KW of excess power
consumption over the guaranteed figure."
6.5 On the aspect of bid evaluation, the following
clauses were referred :
"II.17.00 BID EVALUATION :
II.17.01 The bids will be evaluated based on the
following evaluation criteria for award
of Turnkey Contract for the material
handling plants equipment with
auxiliaries. The bids would be evaluated
based on the technical bid & commercial
bid and the price bid. On completion of
the technical and commercial bid aspects
evaluation, price bids would be opened.
II.17.02 Evaluation of Proposals :
The contract price, as quoted would be
technically evaluated with the objective
of bringing all the bidders at par to the
extent possible, on specified technical
parameters. To the above, price quoted
would be adjusted to factor in the
commercial issues, terms & conditions of
the bid. The difference in auxiliary
power consumption shall be loaded
Rs.1,00,000 per KW. ..... "
6.6 The frozen (mechanical) requirements for all the
bidders in the revised price bid called for by letter
dated 4th September 2001, at Annexure "C" to the
petition, included in Annexure II thereof, sizing
machines and impactor crushers, at items 8 and 9.
6.7 The General (Commercial) Points to be considered
by all the bidders for their revised price bid in
Annexure IA to the letter of the respondent No.1, dated
5-9-2001, at Annexure "D" to the petition, contained the
following commercial points at Srl.No.5 :
"5. i. The prices shall be firm and no
escalation allowed.
ii. Only statutory variations shall be
payable on taxes and duties in
percentage.
iii. Exchange rate variation shall not be
payable." (emphasis added).
6.8 By letter dated 15th September 2001, at Annexure
"E" to the petition, inviting tenders latest by 19th
September 2001 at 15.00 hrs., the bidders were instructed
to specifically confirm adherence to all the requirements
of GMDC finalised after the post bid meetings and
intimated to them under the letters dated 4-9-2001,
5-9-2001 and 7-9-2001 latest by 18-9-2001 with a warning
that the price bid will not be opened if the confirmation
was not received and that "deviations are not
acceptable".
7. It will be noticed from the settled legal
position emanating from the decisions of the Apex Court
referred to earlier in para 4.1, that the rule against
arbitrariness is firmly established if in the decision
making process the State agency in exercise of its
procurement functions acts in an unreasonable, arbitrary
or malafide way or in disregard of the mandatory
procedure, and that when an essential condition of tender
is not complied with, the tender may be rejected by the
authority. The question therefore is whether the
conditions of tender in respect of which non-compliance
is alleged against the respondent No.2 were essential or
merely ancillary.
7.1 A legally enforceable agreement can only be
created when the essential elements of a contract are
present. There must be an offer by one party and
acceptance of that very offer by another party supported
by valuable consideration together with the intention and
capacity of the parties to be bound in contract. It was
argued on the basis of the instructions to the bidders
and the terms and conditions of the tender that the
deviations in the revised price bid of the respondent
No.2 were in breach of the tender requirement that no
price variation will be allowed, and that the delivery
was to be on project site basis. On the other hand, the
respondent No.1 - Corporation has contended that the
petitioner was not the lowest tenderer and no useful
purpose would have been served by loading its revised
price bid and that since there were deviations in the
petitioner's offer, it was ineligible and therefore, the
plea against the validity of the offer of the respondent
No.2 cannot be entertained at the behest of the
petitioner.
8. Most commonly, the Government agencies will be
requesting offers for supply, works and services. The
request for tender which is sometimes called invitation
to treat is not an offer. The tender, bid or quote
received from a supplier or a provider of service is an
offer. Fixing of terms and condition is an important
part of managing procurement functions. It underpins the
achievement of value for money and the ultimate object of
the procurement. Therefore, when the terms and
conditions on which the offers are invited are indicated
by the State agency, the offer made by the tenderer which
is not in compliance of such terms and conditions may not
be accepted by the agency. Where a public body enters
into a contract with a supplier, a dispute arising out of
the contract will often be determined as per the terms of
the contract by private law proceedings. However, the
decision of a public body to enter or not to enter into a
contract may be subject to judicial review which is the
primary mechanism for enforcing rule of law by reviewing
the legality of the decision. The Court can examine
whether in exercise of statutory discretion, such
decision is taken lawfully and whether it constitutes
abuse of power. If the decision is purely commercial,
the Court will not ordinarily intervene, but if there is
some ulterior purpose or excess or abuse of power, the
Court will do so and is entitled to examine the motives
of a public body.
8.1 The authority must choose between one of the
three procedures for its procurement functions; the open
procedure permitting all interested suppliers to tender,
the restricted procedure permitting suppliers invited to
participate by the contracting authority to the tender,
and, the negotiated procedure under which direct
discussions and negotiations take place between the
authority and one or more suppliers of its choice in
certain circumstances. Once a call for competition has
been advertised, the authority is ordinarily bound to
proceed with the procedure it has chosen. Should it find
necessary to resort to negotiations amongst those who
responded to the call for competition by submitting their
tenders, it must do so in a manner which is
non-discriminatory which postulates that there should be
negotiations with all concerned and not a secret
negotiation with a chosen participant to oust others.
There should be no discrimination in the award of major
contracts for public works, supplies and services by a
Governmental agency whose freedom to decide tender it
will accept is, unlike in case of procurement by a
private party, circumscribed by the mandate of Article 14
of the Constitution which forbids discrimination amongst
those who are similarly situate.
8.2 In the present case, the facts on record clearly
establish that, after having been told in no uncertain
terms by the communication dated 15-9-2001 inviting
revised price bids from the bidders that no deviation
will be allowed and though this stipulation was
specifically confirmed on 19-9-2001 when the revised bids
were given and opened, the bid of the respondent No.2
showed in Schedule - B i.e. the Schedule of Prices that,
while quoting "lumpsum price for design, manufacture,
supply and delivery F.O.R. Akrimota Site including
packing, forwarding, transporting to site, unloading at
site, storage at site", at the end of this price
quotation, following foot-notes were added :
"2. We shall arrange sale on high seas for the
imported items like Sizer / Crusher and Flip flop
(sic) Screens. The purchaser shall render all
procedural assistance to operate sale on High
Seas basis. The purchaser shall pay custom duty
directly to the custom authority and recover the
same from the outstanding bills.
3. Exchange Rate Variation
The exchange rates considered as on 5-9-2001 are
as below :
Pound 1 = Rs.68.31
US $1 = Rs.47.37
Euro 1 = Rs.42.09
Any variations in the exchange rate on the date
of clearance of imported consignment from the
custom will be to purchaser's account."
8.3 Thus, out of the material which was to be
supplied and transported to the Akrimota Project Site,
the imported items mentioned in the above note No.2
namely, "items like sizer / crusher and flip flop
Screens", were to be sold to the respondent No.1 on "High
Seas Basis" and the respondent No.1 purchaser was
expected to render procedural assistance to operate sale
on high seas basis which stipulation was altogether
different from the tender condition requiring supply and
delivery F.O.R. Akrimota site. It is significant to
note that this condition of supply of the goods which
were to be imported by the respondent No.2 has not been
separately mentioned in any deviation schedule, but is an
integral part of the prices quoted in the schedule of
price (Schedule - B). The offer of price made by the
respondent No.2, thus, did not conform to the essential
terms of the tender conditions that "the tender should
quote prices only on free delivery at our power project
site on door delivery basis" under clause 2(c) in which
it was clearly warned that "the rates other than the
project basis will not be considered, unless and
otherwise called for", and again stipulated in clause
2(i) that, "the prices quoted shall be based on delivery
F.O.R. Project Site". Having confirmed by its letter
dated 19-9-2001, (copy at Annexure "5" of the
affidavit-in-reply of the respondent No.1) that the
respondent No.2 was adhering to the requirements of the
respondent No.1 finalized after the post bid meetings
conveyed through the letters of the respondent No.1 dated
4-9-2001, 5-9-2001 and 7-9-2001, the respondent No.1
quoted the above prices in Schedule - B of the tender
with a rider that the sale of the items mentioned in note
No.2 will be arranged by it on the high seas basis. The
mode of delivery at site which was stipulated was thus
changed in respect of the said import items which were
major items of a considerably high value.
8.4 In fact, the specific confirmation regarding
adherence to all requirements, as sought for in the
letter dated 15-9-2001 of the respondent No.1, was to be
given by the respondent No.2 latest by 18-9-2001 and it
was stated thus in that letter (a copy of which is at
Annexure "3" to the affidavit-in-reply of the respondent
No.2) : "If this confirmation is not received, the price
bid shall not be opened". The confirmation letter was,
however, written by the respondent No.2 on 19-9-2001 (a
copy of which is at Annexure "4" to the
affidavit-in-reply of the respondent No.2), and if the
instructions given by the respondent No.1 in its letter
dated 15-9-2001 were to prevail, it could not have been
opened on 19-9-2001, because, the last date of intimating
a specific confirmation was fixed as 18-9-2001 by the
respondent No.1. The respondent No.1, however, opened
the tender of the respondent No.1 on 19-9-2001 despite
the above stipulation in its letter of 15-9-2001.
9. As noted above, on 19-9-2001, when the tenders
were opened, the bid of the respondent No.1 was hedged
with the two conditions mentioned in the notes No. 2 and
3 of the Schedule of Prices. Having given a price
quotation against the stipulation that the delivery was
to be at the project site, the respondent No.2 was given
a stealthy opportunity by a belated communication of July
10, 2002, (a copy of which is at Annexure "6" to the
affidavit-in-reply of the respondent No.1), now in
context of its revised bid, to confirm the points
mentioned therein. The relevant portion of this short
but significant letter of the respondent No.1 to the
respondent No.2, reads as under :
"Dear Sir,
With reference to your revised price bid referred at
Sr.No.4 above, please arrange to confirm the following to
enable us to conclude on the issue :
1. Amount of Service tax / Excise Duty included in
item No.2.01 (a) to be specified with %age
thereof.
2. The rate of Excise duty specified as 5% to 16% to
be identified.
3. Works Contract Tax on 2.12 (a) if becomes
applicable shall be the responsibility of the
supplier.
4. High Sea Sale is not permitted.
5. Exchange Rate variation is not permitted.
Your expeditious reply in above regard shall help us to
finalize the matter at an early instance.
Thanking you,
Yours faithfully,
For GMDC Ltd.
[S.B.VORA]
GENERAL MANAGER [POWER]"
9.1 The respondent No.2 promptly confirmed all the
above points on that very day, as per the endorsement
appearing below the said letter :
"To GMDC
We hereby confirm that all the points, raised in
this fax (from point 1 to point 5) shall be
complied with, by us.
For TRF Ltd.
[K.K.Singh]
Sr.Divisional Manager [Marketing]"
9.2 The Letter of Intent was issued by the respondent
No.1 to it on the next day i.e. on 11-7-2002 and the
Work Order on 26-7-2002 after this petition was filed on
19-7-2002, in respect of which, the respondent No.1 had
filed caveat on 15-7-2002.
9.3 Once the open procedure permitting all the
interested parties to tender was adopted, the respondent
No.1 could not have resorted to any discussion or
negotiation with the respondent No.2 alone by letter
dated 10th July 2002 after the bids were opened on
19-9-2001 and the revised bid of the respondent No.2 was
found to be not acceptable, without making it agree to
the aforesaid five points mentioned in the said letter
including the two crucial aspects regarding "high seas
sale" and "exchange rate variation". Such a course
clearly discriminated against the other tenderers
including the petitioner with whom no such negotiation
for enabling alteration in the price bid was at all made.
The action of the respondent No.1 in approaching the
respondent No.2 by letter dated 10th July 2002 and
enabling it to change its stipulations of price bids
quoted in Schedule - B by it, so that the contract could
be awarded to it, was clearly discriminatory against the
petitioner and violative of Article 14 of the
Constitution. It is settled law that the decision making
process can be examined by this Court in its power of
judicial review and the Court can intervene in cases
where discrimination is practised.
10. Heavy reliance was placed on behalf of the
respondent No.1 and 2 by their learned senior counsel on
Raunaq case (supra) in support of the contention that the
respondent No.1 had all the power to relax the conditions
of tender and award the contract to the respondent No.2,
whose tender was the lowest. There can be no dispute
over the proposition that the State agencies exercising
their procurement functions by inviting offers for work
or services have the necessary leeway, in their
commercial wisdom, to act in their best commercial
interest and therefore, may relax a requirement, which it
was permissible to be relaxed under the terms and
conditions announced, in a manner which is not
discriminatory and calculated to favour the beneficiary
of such relaxation. The power of relaxation of a
non-essential condition of a tender will, however, not
included the power to allow a chosen tenderer to change
the material aspects of its price bid. As noted above,
it was stipulated in clause (6) of instructions to the
bider that "only bids responsive to technical
specifications and general terms and conditions and
complying with the requirements thereof shall only be
considered". The prices were required to be quoted only
as per the Schedule under clause (8) (Part II) of the
instructions and as provided under clause 2(g)(ii) of the
tender terms and conditions, incomplete bids and
amendments and additions after opening the price bids
were not to be considered.
10.1 The letter dated 10th July 2002 written by the
respondent No.1 only to the respondent No.2 nearly ten
months after the revised price bids of all tenderers were
opened, was clearly calculated to give to the respondent
No.2 an opportunity to alter its bid, after it was opened
by removing the two vital conditions that it had
incorporated in the Schedule of Prices in notes No. 2
and 3, by which, the lumpsum price was quoted in the
price bid on the footing that the machinery required to
be imported was to be sold by the respondent No.2 to the
respondent No.1 on high seas basis and adverse exchange
variation was on the account of the respondent No.1. The
high seas sale clause would have meant that the risk in
respect of all such goods would pass to the respondent
No.1 alongwith the title, in view of the stipulation
contained in clause 27 of the terms and conditions of
tender, at the time when the sale takes place on high
seas and not at the delivery site, as was required by the
essential terms and conditions of the contract announced
with the instructions to the tenderers. Under section 26
of the Sale of Goods Act, unless otherwise agreed, the
goods remain at seller's risk until property therein is
transferred to the buyer, but when the property therein
is transferred to the buyer, the goods are at the buyer's
risk, whether delivery has been made or not. Therefore,
the condition imposed by the respondent No.2 while
quoting the bid price in Schedule B was a significant
departure from the basis on which the price bid was
invited by the respondent No.1 and it could not have been
accepted by the respondent No.1, because, the revised
price bid of the respondent No.2 did not comply with the
mandatory instructions that, "the tenderer should quote
prices on free delivery at our power project site door
delivery basis" in clause 2(c), and that "the price shall
be based on delivery F.O.R. project site" in clause 2(i)
of tender terms and conditions.
10.2 Thus, it is not as if the respondent No.1
exercised any legitimate power of relaxation, but
instead, it showed a special favour to the respondent
No.2 by allowing it to alter its revised price bid by
removing the conditions that it had incorporated by notes
No.2 and 3 while quoting the price in Schedule - B.
Admittedly, such opportunity was not given to anyone else
including the petitioner who was the next lowest bidder
by Rs.24 lacs for enabling it to alter its price bid.
10.3 The significance of the concession shown to the
respondent No.2 by the respondent No.1 of allowing it to
alter its price bid by its letter dated 10-7-2002 can be
gauged also from the fact that, if sale of the items to
be imported was allowed to take place on high seas basis,
sales tax at 4% would not have been required to be paid
and therefore, to that extent, the respondent No.2 would
have benefitted since the sale and delivery at project
site would have entailed payment of sales tax of
approximately Rs.30.05 lacs by the respondent No.2, as
per the petitioner's calculations, on such goods, which
could be avoided by it on the sale transaction taking
place on the high seas. The respondent No.2 would have
also realised the sale price of those goods earlier than
stipulated and, as noted above, been relieved of the risk
being attached to the goods sold on high seas which would
have, under the terms of the contract, continued on it
till the site of delivery and when title passed to the
respondent No.1 under clause 27 of the terms and
conditions of the contract.
10.4 The assertion of the petitioner that payment of
sales tax was meant to be avoided by the respondent No.2
by incorporating the stipulation in the price bid that
the goods to be imported will be sold on high seas basis
has been met by the respondent No.1 in paragraph 5.2 of
its affidavit-in-reply to the additional affidavit of the
petitioner by simplying stating that even in case of high
seas sale assuming that GMDC was required to pay port
clearance and forwarding charges, it would have recovered
the same from the respondent No.2 and that no sales tax
would have been required to be paid by it. This is an
over-simplification of the issue, for the simple reason,
that sales tax was payable by the respondent No.2 if the
goods were to be sold and delivered at the project site
where alone the title under the terms of the contract
passed to the respondent No.1, which payment was sought
to be avoided by the respondent No.2 by incorporating
sale on high seas clause in note No.2 of its price bid.
The question was not of any increase in liability of the
respondent No.1 regarding sales tax, but it was avoidance
of the sales tax by the respondent No.2 and the
consequential gain to it to the tune of nearly Rs.30
lacs, as alleged, from the total firm price quoted by it.
Therefore, even if the price bid of the respondent No.2
were to be evaluated, as it stood without allowing it to
alter the same as was sought to be done by the respondent
No.1 through its letter of 10th July 2002, the bid of the
respondent No.2 ought to have been evaluated keeping in
mind that the price quoted by it was on the footing that
the import items will be sold on high seas basis and
therefore, the amount quoted did not include the sales
tax component in respect thereof, so that the bid of the
respondent No.2 could be equated for a just comparision
with the price bid of the tenderers, who had quoted the
price on delivery at site basis and therefore, had
included the sales tax component in the total price
quoted by them in their price bids. The price bid of the
respondent No.2 as per Schedule - B did not, in reality,
include the sales tax component in respect of the goods
which, as per note No.2 of its schedule of prices, were
to be sold on high seas basis. One cannot compare the
price quotation which included sales tax component with
the price bid which would not have included sales tax
component due to the high seas sale clause and say that
the price quoted by the bidder without including sales
tax component which was includible in it as per the
stipulation, was lower than the price quoted by another
bidder by including the sales tax payable on the goods
which alone was the way of giving quotation as per the
instructions to the bidders. By straightaway accepting
the bid of the respondent No.2 without evaluating it on
the basis of two material clauses of "high seas sale" and
"exchange rate variation" for comparison with others
bids, and instead, giving an opportunity to the
respondent No.2 to alter its price bid by withdrawing its
stipulations which were contrary to the tender
conditions, the respondent No.1 has acted in a
discriminatory manner against the petitioner and such a
course adopted by it has vitiated the decision making
process and is in gross violation of Article 14 of the
Constitution.
10.5 Not only the impact of the sales tax components
on goods stipulated to be sold on high seas basis was
ignored in the price bid of the respondent No.2, but the
impact of payment of port charges and interest on custom
duty was also ignored for the purpose of evaluation of
the bid of the respondent No.2. According to the
petitioner, the interest on the amount of custom duty,
that would have been paid by the respondent No.1 instead
of the respondent No.2 paying it, on goods sold on the
high seas and brought to land, for six months, would have
come to Rs.11,90,000=00, and that amount should have been
loaded in the price bid of the respondent No.2, while
according to the respondent No.2, as stated in paragraph
5.5 of its affidavit-in-reply, even if the price offered
by the respondent No.2 was to be loaded on this count,
the loading would be of Rs.1,37,812=50 for interest and
Rs.12,10,000=00 for port charges, aggregating to
Rs.13,47,812=50 which was lower than the difference of
Rs.24,00,000=00 in the price worked out by the petitioner
in paragraph 4.2 of the petition.
10.6 By the stipulation in note No.3 in Schedule of
Prices of the revised price bid of the respondent No.2,
it had stipulated that any variation, in the exchange
rate as on 5-9-2001, on the date of clearance of imported
consignment from the custom will be to the purchaser's
account, which means, if the exchange rate of 1 pound =
68.31, US $ 1 = 47.37 and Euro 1 = 42.09, as it stood on
5-9-2001, increased, the additional burden was to be
borne by the respondent No.2. Therefore, the bid price
quoted by the respondent No.2 was not firm, as the
respondent No.2 was entitled to recover the difference
due to variation in exchange rate from the respondent
No.1, if it created additional burden on the respondent
No.2. It was specifically provided by tender condition
No.2(c) and the letter dated 5-9-2001 inviting the
revised price bids in clause 5(iii) of its Annexure "1",
that price quoted should be firm and the same will not be
subject to any price escalation till completion of work
and that exchange rate variation shall not be payable.
The exchange rate variation clause stipulated in note
No.3 of the price bid of the respondent No.2 was thus
clearly contrary to the said bid conditions which
required firm price to be quoted and under which no such
increase could be claimed.
10.7 The stand of the respondent No.1 in paragraph 5.4
of its reply dated 4-9-2001 is that exchange rate
variations would have an upward or downward movement and
it would be difficult to predict whether on the date of
clearance of the imported consignment, one Euro would be
equal to Rs.42=09 paise or lower or higher than that. It
is admitted in that paragraph that, in July 2002, one
Euro was equal to Rs.49=00 and in August, 2002, it went
down to Rs.47=00 which figure was higher than Rs.42=09
paise taken as the basis by the respondent No.2 for
comparing the future variation in the exchange rate. The
respondent No.1 instead of judging the price bid of the
respondent No.2 as it was, and ignoring the fact that the
variation in exchange rate clause stipulated in note No.3
of its schedule B of Schedule of Prices directly violated
the conditions of the tender that the price quoted should
be firm and no escalation or exchange variations will be
allowed, gave a rejuvenating opportunity to the
respondent No.2 by its letter dated 10th July 2002 to
wriggle out the imbroglio that could have nullified its
tender as non-responsive, because of "sale on high seas"
and "exchange rate variation" clauses included by the
respondent No.2 in its price bid contrary to the tender
conditions. This special opportunity given to the
respondent No.2 to withdraw the "high seas sale" and
"exchange rate variation" clauses in notes No.2 and 3 of
its price bid in Schedule - B was a stark instance of
favouritism towards the respondent No.2 when none other
were bestowed upon such favour of an opportunity to alter
the price bid in any manner.
10.8 The respondent No.1 admittedly did not evaluate
the bid of the respondent No.2 in respect of "high seas
sale" clause and "exchange variation" clause which might
have tilted the balance in favour of the petitioner, but
instead gave a golden opportunity, after eight months of
the opening of the revised price bids, to the respondent
No.2 to withdraw its two major stipulations in notes No.2
and 3 from the price bid, which the respondent No.2
gladly grabbed. This arbitrary action on the part of the
respondent No.1 most mildly viewed can be said to be
suffering from legal malafides, discriminatory and
grossly violative of Article 14 of the Constitution.
11. In the above background of the matter, the
learned senior counsel appearing for both the respondents
Nos. 1 and 2 laid heavy emphasis on the preliminary
objection raised by these respondents against the
maintainability of the petition at the instance of the
petitioner on the ground that the petitioner was not
eligible on certain counts and went to remind us that
this was not a public interest litigation to warrant the
Court to inquire into the validity of the acceptance of
the tender of the respondent No.2 by the respondent No.1
at the instance of the petitioner, who had deviated from
the terms of the tender in its offer. Three deviations
were attributed to the petitioner which we may now
proceed to consider.
11.1 The first alleged deviation was that the
petitioner did not quote separate prices, in its Schedule
- B of prices in respect of the lignite handling plant
and the lime handling plant, but had quoted a lumpsum
price of Rs.74,39,45,000=00 for both. It would appear
from Schedule - B of prices filed by the petitioner that
the requirement of the schedule was to provide lumpsum
firm price for design, supply and delivery F.O.R.
Akrimota site of the material (lignite & lime) handling
plants, with auxilliaries including packing, forwarding,
sales tax charges and excise duty charges etc.
........., but exclusive of recommended spares as below;
"(a) For lignite handling plant as specified
as per enclosed layout drawing including
sizer, stacker cum reclaimer and crusher
system for lignite and other systems as
specified.
(b) For lime handling plant as specified as
per enclosed layout drawing including
sizer, impact crushers and other systems
as specified"
11.2 This would mean that the lumpsum price quoted was
to be the exclusive of the recommended spares. The price
of recommended spares, common for both lignite and lime
handling system, was separately mentioned in column 2.05
of the Schedule - B as Rs.1,71,65,000=00 with a note that
"the price of recommended spares indicated at Srl. No.
2.05 was not included in total price at Srl. No.1 on
Sheet 1 of 16 of this Schedule". In this regard, we may
note that, admittedly, the price bid of the petitioner
was not rejected by the respondent No.1 on the ground
that, in the Schedule of Prices of its tender, the
petitioner did not quote separate price for each plant at
Srl. Nos. 1(a) and (b) and did not give a break-up of
ex-works firm price of material plant equipment or had
failed to give in the schedule of prices, the unit price
for material plant components. This fact is
categorically admitted by the respondent No.1 in
paragraph 5 of its affidavit-in-reply dated 4-9-2001
which deserves to be re-produced hereunder :
"With reference to second respondent's Schedule
of prices (pp 199 to 208), I beg to point out
that unlike the petitioner, TRF submitted
separate prices for lignite handling plant and
for lime handling plant and given break up price
for item 1.00 as well as break up of ex-works
firm price of material handling plant equipment
as per 2.02(a). It is true that the second
respondent has not given schedule of unit prices
for material handling plant components in serial
No. 4.0 of Schedule of prices. However, I state
that the price bid of the petitioner was not
rejected on the ground that the petitioner in
Schedule of prices of its tender did not give
break up of ex-works firm price of material
handling plant equipment as per 2.02 (a) or had
failed to give in the schedule of price unit
price for material handling plant components. I
submit that this aspect has been referred to in
the affidavit-in-reply on behalf of the GMDC only
in support of the preliminary objection that the
petitioner is not entitled to maintain the
petition. " (emphasis added).
11.3 The other ground urged against the
maintainability of the petition was that while quoting
lumpsum price at Srl.No.1 of Schedule - B (Annexure 2 to
the affidavit-in-reply of the respondent No.1), at item
1(a), in the column of description, "crusher" was
mentioned in place of "sizer" which was in the Proforma
Schedule B of the Updated Tender Specifications and
therefore, the petitioner would have supplied only
crusher and not sizer which was the recommended spare.
The petitioner's case was that sizers were in fact
enumerated in clause (3) of its price bid in Schedule - B
at Srl.No.3.2 and 3.5 and the lumpsum supply firm price
for the material handling plant equipment mentioned in
clause 2.02 (a). According to the petitioner's learned
counsel, the word "crusher" came to be retained in the
description column, because, in the tender stipulations
the proforma of Schedule B i.e. the Schedule of Prices,
"Roll Crusher" was mentioned and not "Sizer". However,
the petitioner was to supply sizers and this was never
doubted by the respondent No.1 when the technical bid of
the petitioner was scrutinized and which included the
specifications of sizers. It will be seen from the
petitioner's price bid schedule - B that, at Srl. Nos.
4.112, 4.113 and 4.115 (a), there was a clear mention of
three types of sizers which corresponded to the frozen
plant (mechanical) requirements at item 8 for sizers, in
Annexure "II" of the letter dated 4-9-2001 of the
respondent No.1 (a copy of which is at Annexure "C" to
the petition), by which the revised bids were called for.
It will be noted that the sizers are at various places of
the Updated Technical Specifications, Volume II,
described by the respondent No.1 as "sizer crushers"
also. Crushers can be Sizer Crushers or Impact Crushers
as can be seen from Clauses 8.26, 8.30, 16.30.3 of the
Updated Technical Specifications. According to the
petitioner, as per the details given in the Schedule of
Prices, sizers were indeed mentioned and the word
"crusher" in the description column in place of "sizer"
was only a mistake. We are not concerned with the fact
whether the word "crusher" has been written by the
petitioner in the Schedule of Prices by mistake or not.
Those are the matters which would be for the respondent
No.1 to examine and not for the Court. The fact however
remains that "crusher" is a genus and "sizer-crushers"
and "impact-crushers" appear to be two types of crushers
as described at various places of volume II of the tender
documents. The respondent No.1 never sought any
clarification from the petitioner on this aspect of the
matter and had proceeded to consider the price bid after
scrutinizing the technical bid in which particulars about
the sizers as well as impact crushers to be offered were
to be mentioned. Again, this, admittedly, was never the
ground for rejecting the bid of the petitioner by the
respondent No.1, and as stated by it in paragraph 7 of
the affidavit-in-reply dated 29-7-2002, the bid of the
respondent No.2 TRF was accepted as it was the lowest
bidder and that, its tender was found to be most
competitive and in the interest of the respondent No.1.
In paragraph 6 of the affidavit-in-reply, it was asserted
that the respondent No.2 being the lowest bidder, it was
not necessary to examine in detail the question of
loading the price. The evaluation of the price bid of
the respondent No.2 for comparing it with the price of
the petitioner was required to be done as these
respective bids stood as on 19-9-2001 when they were
opened. The respondent no.1 compared the bid of the
respondent No.2 as altered on 10th July 2002 by
withdrawing the stipulations of sale on high seas and
exchange rate variations with the bid of the petitioner
which was without any alteration. The concept of equal
opportunity required that both these bids should have
been evaluated and compared as they stood when opened, in
which event, the price bid of the respondent No.2 would
have been required to be loaded on account of deviation
clause contained in its price schedule in notes No. 2
and 3. Without doing that, it was erroneous on the part
of the respondent No.1 to assume that the price bid of
the respondent No.2 was the lowest.
11.4 The third deviation urged as a ground against the
maintainability of the petition was that the petitioner
had not submitted power consumption as per Schedule-D and
instead it had submitted total power consumption
pathwise. It was contended that, the petitioner was
required to give total power consumption equipment-wise
under clause II.17.00 of the Updated Technical
Specifications. It will be noticed from clause 16.30.4
(sheet 213 of the UTS) that bidder was required to
"guaranteed the total power consumption required at the
input terminals of the equipment mentioned therein at the
guarantee capacity performance requirements stated in
clause 16.30.3 (on Sheet 212 of the U.T.S.). According
to the petitioner, total power consumption required at
the input terminals of drive motors would mean such total
power consumption of all the motors of the equipments
enumerated under clause 16.30.4 and not motor-wise power
consumption. Even clause 16.30.6 providing for
liquidated damage for excess power consumption provided
that if the total power consumption at the input
consumption at various drive motors exceeds the
guaranteed figure of power consumption, liquidated
damages shall be payable by the contractor at a rate of
Rs. 1 lac per KW of excess power consumption over the
guaranteed figure which according to the learned counsel
for the petitioner showed that the emphasis was on total
power consumption of all motors and not equipment-wise or
motor-wise. Clause 16.30.4.1 required that the equipment
common to different path shall be tested for performance
once as per the above requirement during testing of
particular path and test results of such tests shall be
used for other paths, as applicable to common portions.
The petitioner had guaranteed power consumption for
various paths for the lignite and lime handling system as
per Annexure "3" to the reply of the respondent No.1,
stating that the guaranteed power consumption was worked
out considering the equipments listed under clause
16.30.4 of the specifications. The respondent No.1
admittedly did not seek any clarification on this aspect
from the petitioner and did not reject the petitioner's
tender on the ground of the alleged deviation which is
now proffered as a preliminary objection against the
maintainability of the petition on the ground that the
petitioner was not eligible. In fact, the guaranteed
power consumption of the petitioner was found to be the
lowest and that is why, it was, admittedly, adopted as
the basis by the respondent No.1 for evaluation of the
other bids which were loaded for the power consumption in
excess of the petitioner's guaranteed total power
consumption at the rate of Rs.1 lac per each additional
KW. It is difficult to comprehend that if equipment-wise
or motor-wise power consumption was to be indicated as
per the say of the respondent No.1, then why the
petitioner's guaranteed total power consumption of all
motors pathwise given, was adopted as basis for loading
other bids for evaluating them. We are not for a moment
suggesting that the petitioner had adhered to the
requirements on the aspect of power consumption, but this
discussion has become necessary only because, though
admittedly the petitioner's bid was not rejected on the
ground of any such inconsistency, it is now put up as a
ground for holding that the petitioner is ineligible and
therefore, no relief can be granted against the
respondent No.2 at the instance of this petitioner. The
contention now raised by the respondent No.1 in this
regard which was not adopted by it for holding that the
petitioner's bid was not responsive on this count, cannot
be pressed into service for holding that the petition is
not maintainable.
11.5 When the respondent No.1 did not reject the
petitioner's price bid on the ground that there was any
deviation of not giving separate prices for the two
plants at Srl. No.1 of the Schedule - B or of not giving
break-up of the ex-works lumpsum firm price or sizers
were not mentioned therein or that equipment-wise power
consumption was not quoted, it does not stand to reason
that the grounds that were not made any basis by the
respondent No.1 for treating the petitioner's bid as
deviating so as to merit rejection should find favour
with the Court at the instance of the very respondent
No.1 for holding that, the petition was not maintainable
due to the alleged non-conformity of the above aspects
which the respondent No.1 did not consider to be
sufficient for rejecting the petitioner's bid on the
ground of impermissible deviations as being
non-responsive.
12. The very basis on which the arguments against the
maintainability was advanced, in our opinion, is,
therefore, fallacious and not even warranted by the
decision of the Supreme Court in Raunuq's case (supra).
It will be noted from the said decision that, under
clause 1.4 of the qualifying criteria, it was provided;
"Notwithstanding anything stated above, the owner
reserves the right to assess the bidder's capability and
capacity to perform, should the circumstances warrant
such assessment in the overall interest of the owner".
As observed by the Supreme Court in paragraph 8 of its
judgement, the case before it was not a case where any
malafides had been alleged against any member of the
Board, nor was there any allegation of any collateral
motive for awarding the contract to Raunaq International
Ltd. and that the only ground of challenge in the writ
petition was that M/s Raunaq International Ltd. did not
fulfill the qualifying criterian of having laid such
pipeline for a distance of 3 KMs. In paragraph 15 of the
judgement, the Supreme Court, in terms, held that, where
the decision making process had been structured and the
tender conditions set out the requirements, the Court is
entitled to examine whether these requirements have been
considered. However, if any relaxation is granted for
bonafide reasons, the tender conditions permit such
relaxation and the decision is arrived at for legitimate
reasons after a fair consideration of all offers, the
Court should hesitate to intervene. In the present case,
there is no question of any relaxation being given for
bonafide reasons, of the stipulations which were
incorporated by the respondent No.2 in its price bid
which the respondent No.1 itself found to be
objectionable and therefore, enabled the respondent No.2
to withdraw them from the price bid. That surely was not
a relaxation for any bonafide reason of a non-essential
stipulation. Therefore, the decision in Raunaq's case
(supra) cannot assist the respondents.
13. It was urged for the respondents that this Court
should keeping in view that the petitioner had mentioned
only "crusher" and not "sizer" which was a more expensive
item and had not given the break-up of prices for the two
plants, decide that the petitioner was ineligible and
therefore, this petition was not maintainable since no
relief could be given to an ineligible bidder as per the
ratio of Raunaq's case. It will be seen that, in
Raunaq's case, the petitioner's bid was rejected on the
ground that it was ineligible. In the present case, the
learned senior counsel has argued that, though the
respondent No.1 had not rejected the bid of the
petitioner as ineligible on any ground, we should hold so
after examining its bid in the context of the deviations
alleged for the first time by the respondent No.1 in
response to this petition. It will not, in our opinion,
be appropriate for the court exercising its power of
judicial review to embark upon evaluation of the
petitioner's bid and declare that the petitioner was
ineligible and then, to reject the petition. Judicial
review is for examining the validity of the decision
making process and not for undertaking the decision
making process of a State agency. The question of
eligibility of a tenderer when in issue is required to be
decided initially by the State agency inviting tenders.
The decision making process is to be undertaken by the
State agency, which has to decide on acceptance of a
tender, and not the Court. When there is a serious
consideration of validity of the tender involved, without
the tender bid being evaluated as per the terms and
conditions laid down for the purpose by the respondent
No.1, there arises no scope for the Court to decide
whether the tender bid was acceptable or not. The
process of evaluation of the bids was necessarily to be
undertaken by the State agency when the bids were opened
and as they stood, for the purpose of finding out as to
who was the lowest bidder. Having not undertaken the
process of evaluation of the petitioner's bid for the
variations now alleged and having proceeded on the
footing that the price bid of the respondent No.2 was the
lowest, which fact is seriously disputed by the
petitioner, the respondent No.1 cannot for the purpose of
defeating the petition, ask the Court to undertake the
exercise of evaluation of the petitioner's bid and to
hold, in retrospect, that the petitioner was not eligible
or that its bid was liable to be rejected when it was not
in fact rejected on any such ground by the respondent
No.1, as admitted before us. This smoke screen of
preliminary objection cannot, therefore, hide the
illegality committed by the respondent no.1 in the
decision making process of allowing the respondent No.2
to alter its bid eight months after it was opened without
giving similar opportunity to the other bidders.
14. All the revised price bids were required to be
considered objectively and without discrimination and in
accordance with the specified criteria. A public
authority while performing its procurement functions
should recognize its responsibility to strike an
appropriate balance between its legitimate requirement
that it should be free to perform its proper functions on
behalf of the public and the corresponding requirement
that it should have due regard for the legitimate rights
and interests of the individual and group of individuals.
When a public authority falters and violates rule of law
by exercising its power to make contracts arbitrarily and
acts with unjustifiable differentiation denying equality
of treatment, as has happened in the present case, there
needs to be a means of redress and the Court can
intervene to correct such wrong.
15. For the reasons that we have given hereinabove,
we are convinced that the decision of the respondent No.1
in awarding the contract to the respondent No.2 is
discriminatory, arbitrary and smacks of favouritism and
therefore, unconstitutional and void being violative of
Article 14 of the Constitution. The impugned award of
contract by the respondent No.1 to the respondent No.2,
by issuing the impugned Letter of Intent and the Work
Order consequential thereto, is, therefore, hereby set
aside, with liberty to the respondent No.1 to re-consider
the bids of the parties in accordance with law and the
essential terms and conditions notified by it for the
contract. Rule is made absolute accordingly with no
order as to costs.
[ R.K.ABICHANDANI, J.]
[ KUNDAN SINGH, J.]
parmar*
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