CONSORTIUM OF TITAGARH FIREMA ADLER S.p.A.- TITAGARH WAGONS LTD, THROUGH AUTHORI Vs. NAGPUR METRO RAIL CORPORATION LTD AND ANR
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 1353-1354 of 2017, Judgment Date: May 09, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 1353-1354 OF 2017
(@ S.L.P. (CIVIL) NOS. 35104-35105 OF 2016)
Consortium of Titagarh Firema Adler ... Appellant(s)
S.P.A. – Titagarh Wagons Ltd.
through Authorized Signatory,
Titagarh Towers, 756, Anandapur,
E.M. Bypass, Kolkata - 700 107,
West Bengal
Versus
Nagpur Metro Rail Corporation Ltd. ... Respondent(s)
(NMRCL) having its Head Office at
Metro House, Bungalow No. 28/2,
Anand Nagar, C.K. Naidu Road,
Civil Lines, Nagpur
through its General Manager
(Procurement) & Anr.
WITH
CIVIL APPEAL NO. 1355 OF 2017
(@ S.L.P. (CIVIL) NO. 36308 OF 2016)
J U D G M E N T
Dipak Misra, J.
Nagpur Metro Rail Corporation Ltd., the 1st respondent herein, issued
a Notice Inviting Tender (NIT) on 25.01.2016 for the work of design,
manufacture, supply, testing, commissioning of 69 passenger rolling stock
(Electrical Multiple Units) and training of personnel at Nagpur Metro Rail
Project. The said project is being funded by KfW Development Bank,
Germany. As per the clause ITS 35.8 at all stages of bid evaluation and
contract, award would have to be subject to no-objection from KfW
Development Bank.
2. In response to the said NIT, three bidders submitted their bids. One
was found technically disqualified and thus, only the appellant and the
respondent No. 2 remained in contest. Upon opening of financial bid on
29.09.2016, it was found that the appellant had given a bid of Rs. 852
crores whereas the bid of the respondent No. 2 was Rs. 851 crores. The
Director Level Tender Committee of the 1st respondent agreed with the
report of the tender evaluation committee and recommended to accept the
lowest offer of respondent No. 2 and the work order was to be issued after
compliance of certain technical requirements. Before issue of work order,
the appellant filed Writ Petition No. 5818 of 2016 before the High Court
contending that respondent No. 2 was not technically qualified and,
therefore, its financial bid could not have been opened.
3. It was contended by the appellant herein before the High Court that
Clause 26 of the tender document prevented a person from getting any
information about the technical qualification of the competitor, till the
contract is awarded, which is arbitrary, unreasonable and violative of
Article 14 of the Constitution; that the respondent No. 2 is not having the
requisite experience as required under the NIT, for it does not meet the
eligibility criteria on its own, but was relying on the experience of its
subsidiary.
4. The Division Bench rejected the contention to go into the legality or
otherwise of clause 26 observing that the appellant had participated in the
tender bid knowing very well that such a clause existed and it was not open
to it to contend that the said clause is onerous and lacks transparency
and, therefore, violative of Article 14 of the Constitution; and it had
challenged the same only after it is found that its financial bid was
higher than that of respondent No. 2. It further observed that the matter
would have been different had the appellant, immediately after the tender
notice was published, challenged the said condition after NIT was issued.
The High Court placing reliance upon the decisions in New Horizons Ltd. v.
Union of India[1], Tata Cellular v. Union of India[2], Central Coalfields
Ltd. v. SLL-SML (Joint Venture Consortium)[3] and Afcons Infrastructure
Ltd. v. Nagpur Metro Rail Corporation Ltd.[4] dismissed the writ petition.
Be it noted, though the High Court felt that it could have non-suited the
writ petitioner only on the ground that it had participated in the tender
process knowing fully well that stipulation in nature of the clause 26.1
existed, yet proceeded to address the controversy and directed the owner to
produce the record solely for the further purpose of being satisfied as to
whether the decision making process by the employer/owner is legally valid
or not and further to examine as to whether the decision arrived at by the
owner that the respondent No. 2, the lowest bidder, possessed requisite
experience. After perusing the entire documents on record, the High Court
came to hold that:-
“15. It is to be noted that the tender evaluation committee consists of
Chief Project Manager/RS, General Manager/Procurement, Chief Project
Manager/Signaling and the General Manager /Finance. The said Committee has
evaluated the documents with regard to the technical qualification of the
petitioner as well as respondent no.2. The Committee has noted that
respondent no.2 was formed in June 2015 by merger of CRC Corporation and
CNR Corporation limited. The documents relating to the merger has been
submitted along with the bid. The Evaluation Committee has also noted that
after the incorporation of the respondent no.2, upon the merger of CSR
Corporation and CNR Corporation, respondent no.2 was awarded contract for
supply of 76 cars for Noida Metro Project by Delhi Metro Rail Corporation
Ltd. The Committee found that insofar as Clause No.12 is concerned, though
the minimum requirement was that the bidder must have an experience of
total 60 metro cars and out of which 30 cars should be either stainless
steel or aluminium, respondent no.2 was having an experience of total 594
metro cars and all the cars were of stainless steel. Insofar as clause 12.1
is concerned, which requires that out of the number of cars manufactured,
there has to be completed satisfactory revenue operation at least in one
country outside country of origin/manufacturer or in India or at least one
in G8 country of 30 metro cars, respondent no.2 was having an experience of
432 outside country of origin. It could thus be seen that the perusal of
the document placed on record would reveal that the decision making process
of the technical evaluation committee has been guided by the relevant
factors and it cannot be said that they have not taken into consideration
any of the relevant factors. We are, therefore, of the considered view that
the decision of the technical evaluation committee would fall within the
ambit of 'rationality'.
16. It is further to be noted that the minutes of the tender evaluation
committee was further placed for approval before the Director Level Tender
Committee consisting of Director (Rolling Stock and Systems), Director
(Projects) and Director (Finance). It could thus be seen that the matter
has not been examined at only one level of expert committee, but has gone
through examination at two levels of experts.”
5. Thereafter, the High Court referred to the authorities mentioned
hereinbefore and appreciated the principles stated therein and eventually
dismissed the Writ Petition.
6. It is pertinent to mention that in the course of hearing of the
matter before the High Court, learned counsel for the writ petitioner
sought permission to withdraw the Writ Petition with further liberty to
approach the High Court after award of the contract. The Court, though
expressed its willingness to grant permission to withdraw the Writ
Petition, it was not inclined to grant liberty as sought by the learned
counsel for the petitioner. Simpliciter withdrawing was not accepted and
grant of liberty was insisted upon. Dealing with the said fact, the
Division Bench referred to a passage from Central Coalfields Ltd. (supra)
and expressed thus:-
“24. We find that if we accept the prayer as made by the petitioner, it
will be giving leverage to the petitioner to again approach this Court and
delay the project further. Taking into consideration the public interest,
we have ourselves scrutinised the entire minutes of the Tender Evaluation
Committee and Director Level Committee to find out as to whether the
decision making process, answers the test as laid down by Their Lordships
of the Apex Court. We have found that the decision making process cannot be
termed to be vitiated on the ground of arbitrariness, irrationality or mala
fides. Accepting the request of the learned senior counsel for the
petitioner would further permit the project to be delayed. Needless to
state that the project is an important project for the city of Nagpur. In
that view of the matter, though the prayer which on first impression
appears to be innocuous, is liable to be rejected.”
7. After dismissal of the Writ Petition, an application for review
(M.C.A. [Review] No. 1087 of 2016) was filed. The High Court, while
dealing with the application for review, noted the two grounds on which the
review was sought. It is worth reproducing:-
“i. While exercising the principle of Wednesbury reasonableness, the order
in review failed to take into account relevant omission in the process of
scrutiny, like (a) how rate discount cannot be granted and (b) improper
calculation of service tax which renders the applicant bid lowest.
ii. that there was suppression of relevant facts by respondent No. 2 before
the authorities.”
8. Dealing with the said aspect, the Division Bench held:-
“13. Shri S.G. Aney, learned senior counsel appearing on behalf of the
petitioner, submitted that when an action would fall in the ambit of malice
in law, it may not be necessary to implead the persons against whom
malafides are attributed as a party respondent. We find that by no stretch
of imagination the present case would fall in the ambit of malice in law.
If it is a case of applicant that the tender processing authorities in
order to favour the respondent No. 2 have deliberately made some omissions
or have committed some malafide act in order to help the respondent No. 2
to get the contract, then in that event such of the officers of the
respondent No. 1 who are attributed with such an act or omission, were
necessary parties. So also it was necessary for the petitioner to make
specific averments against those individuals. As already discussed
hereinabove, though a specific query was made in that regard, the learned
Senior Counsel appearing on behalf of the petitioners, as that stage,
fairly stated that no such malafides are attributed in the memo of
petition. In the light of this factual position, seeking review on the
ground that there was a wrong deliberate evaluation of price bids by
respondent No. 1 and the same act was malafide in order to favour the
respondent No. 2 and to illegally oust the petitioner, in our view, is an
imagination of a fertile brain of the draftsman.
14. We further find that the Review Application depicts total non-
application of mind. In paragraph No. 6.8 of the application, the
draftsman of the Review Application, has averred that the respondent No. 2
has not formed any JV/Consortium and as such, it was not eligible to bid in
the tender process. We do hope that the draftsman of the Review
Application understands the basic distinction between a Joint
Venture/Consortium and an incorporation of a new company after merger of
two companies into one.
15. It is further to be noted that though the memo of petition runs into
22 pages, the review application runs into 39 pages. We have no hesitation
to say that the Review Application has been drafted without application of
mind. The rules require that while filing a Review Application, a lawyer
should certify that good grounds exist for seeking review of the order. We
are at pains to say that in the present case the said certification has
been done in the most casual manner, only to show compliance with the
requirements of the rules.”
9. On the basis of the aforesaid analysis, the High Court dismissed the
application for review with costs of Rs. 1 lakh (Rupees One Lakh).
10. We have heard Dr. Abhishek Manu Singhvi, learned senior counsel with
Ms. Anannya Ghosh, learned counsel for the appellant in Civil Appeal Nos.
1353-1354 of 2017 and Mr. Raju Ramachandran, learned senior counsel with
Mr. Ramendra Mohan Patnaik, learned counsel for the appellant in Civil
Appeal No. 1355 of 2017, Mr. Mukul Rohatgi, learned Attorney General for
India, Mr. Gopal Subramaniam, learned senior counsel with Mr. R.P. Gupta,
learned counsel appearing for the 1st respondent, Mr. Shyam Divan, learned
senior counsel with Mr. S.S. Jauhar, learned counsel for the respondent
No. 2.
11. Assailing the defensibility of the order passed by the High Court,
learned senior counsel for the appellant submitted that the bid of the
respondent No. 2 is not that of a ‘single entity’ and it had relied on the
experience of its subsidiaries; that it has not submitted the bid on the
basis of its own experience but on the strength of the experience of the
subsidiaries of the erstwhile parent/original companies, upon the merger of
which respondent No. 2 came into existence, which is not only contrary to
the eligibility and qualification criteria but also to the settled position
of law which provide that unless the subsidiaries are constituents of the
Joint Venture (JV), their experience cannot be taken into consideration for
the purpose of considering the experience of the holding company; that the
respondent No. 2, on a standalone basis, does not possess the requisite
experience as provided under the tender conditions; that the respondent No.
2 should have given its bid either as a JV or as a consortium together with
its subsidiaries to avail the benefit of the experience of its
subsidiaries; that there is a specific restriction on the bidder to take
the experience of its subsidiaries, which are separate legal entities,
without forming a consortium or JV; that the subsidiaries of respondent No.
2 are separate and independent legal entities and the supplies in respect
of which experience is claimed by respondent No. 2 were supplies not made
by respondent No. 2 but by other independent legal entities; that
respondent No. 2 does not have requisite facilities for manufacture of the
car body on its own and it shall have to sub-contract the same to its
subsidiary companies, which is violative of Clause 4.4 of the tender
conditions of contract. In support of his submissions, learned senior
counsel for the appellant has placed reliance on Balwant Rai Saluja and
another v. Air India Ltd. and others[5], Rohde and Schwarz
Gmbh and Co. K.G. v. Airport Authority of India[6] and
Core Projects and Technologies Ltd. v. State of Bihar and another[7].
12. Mr. Gopal Subramaniam, learned senior counsel for the 1st respondent,
before placing his submissions, put forth the facts and canvassed that the
project was funded by KfW Development Bank, Germany and as per clause IB
35.8, all stages of bid evaluation and contract award would have to be
subject to a No Objection from KfW; that the appellant wrote to the 1st
respondent seeking amendment to clause 12.1 of Annexure III-A (PQ-Initial
filter) i.e. “Operation Performance” clause according to which, as it then
was, the bidder had to have satisfactorily delivered at least 30 metro cars
outside the country of manufacture or delivered in India and sought
inclusion of the condition that delivery to any of the G8 countries should
also be treated as acceptable; that the request of the appellant was
accepted and it became eligible to bid; that the 1st respondent extended
the date of submission of tender from 14th June to 24th June at the request
of the appellant; that all the bid documents were given to the independent
General Consultant of the 1st respondent consisting of M/s. Systra, M/s.
RITES, M/s. AECOM and M/s. Egis for Pre-qualification (PQ) and Technical
approval which held respondent No. 2 as qualified and Appraisal and Tender
Committee of the 1st respondent also gave their reports which were
forwarded on 29.8.2016 to KfW Germany for its no-objection; that the bids,
which were made on e-portal which is managed by the Government of
Maharashtra, were opened on 29.9.2016 and the bid of respondent No. 2 was
found to be the lowest at Rs.851 crores, whereas the bid of the appellant
was Rs.852 crores; that on 29.9.2016 and 3.10.2016, the appellant made
representations to the 1st respondent stating that respondent No. 2 was not
qualified as a holding company and could not have claimed benefit of
experience of a subsidiary and sought documents relating to eligibility of
respondent No. 2 vis-à-vis its experience; and that on 4.10.2016 the
appellant filed the Writ Petition before the High Court contending, inter
alia, that the appellant was not allowed to check the technical documents
of respondent No. 2, clauses 25.1 and 25.3 were not followed, bid –price
being so close to the appellant’s should have been re-evaluated and
evaluation process and grant of tender in favour of respondent No. 2 was
mala fide, which was dismissed by the High Court vide order dated
05.10.2016 holding that the evaluation of the bid was proper and appellant
could not challenge clause 26, which mandated confidentiality of technical
bids till grant of contract.
13. Learned senior counsel would further contend that the respondent No.
2, being a company owned by Government of People’s Republic of China, it
clearly came within the ambit of clause 4.1 of the bid-document as a
‘government-owned entity’. Learned senior counsel would urge that a single
entity can bid for itself and it can consist of its constituents which are
wholly owned subsidiaries and they may have experience in relation to the
project and all the subsidiaries form a homogenous pool under its immediate
control in respect of rights, liabilities, assets and obligations, that in
view of Article 164 of the Articles of Association of respondent No. 2, its
Board of Directors have been entrusted with the authority and
responsibility to discharge all necessary and essential decisions and
functions for the subsidiaries and, therefore, the experience of respondent
No. 2’s 100% wholly owned subsidiaries ought to be considered as part of
the parent company’s experience; and that the term ‘government owned
entity’ includes no bar against a government owned entity and its
subsidiaries. Learned senior counsel referred to the history of doctrine
of lifting the corporate veil and submitted that this Court has relaxed the
principles governing lifting of corporate veil and relied on the
authorities in State of U.P. v. Renusagar Power Co.[8] and New Horizons
Ltd. (supra). Mr. Gopal Subramanium would further contend that the bid
documents have been thoroughly examined by the 1st respondent and it
satisfied itself of the capability, experience and expertise of the
successful bidder, i.e., respondent No. 2, and the thorough analysis of the
technical qualification of respondent No. 2 is clear from the report of the
independent General Consultant; that the experience of respondent No. 2 in
supplying metro trains across the world exceeds the appellant’s experience
by a huge margin; that treating respondent No. 2 along with its 100%
subsidiaries as one entity is supported by the fact that Delhi Metro Rail
Corporation Ltd., which has on a similarly, if not same, worded bid-
document granted the tender to respondent No. 2, who had also bid there as
a parent company claiming experience of and execution through 100% wholly
owned subsidiaries; that there is no bar whatsoever, express or implied, in
the tender document to treat the parent company along with its 100% wholly
owned subsidiaries as one entity; that the scheme of the bid document is
such that which itself provides that parent company would have to perform
the works under the agreement in case the subsidiary failed and in view of
this, the objections raised by the appellant are hyper-technical. Learned
senior counsel would further submit that this Court has consistently held
that interference by the courts is required only when the decision taken by
the owner is irrational or arbitrary, or is vitiated by bias, favouritism
or malafide. He has placed reliance upon on the authorities in Montecarlo
Ltd. v. NTPC Ltd.[9], Michigan Rubber (India) Ltd. v. State of
Karnataka[10], Jagdish Mandal v. State of Orissa & Ors.[11] and Afcons
Infrastructure Ltd. (supra).
14. Mr. Shyam Divan, learned senior counsel for the respondent No. 2,
submitted that the respondent No. 1, being a government entity,
participated in the tender and gave all the details, which were duly
accepted by the respondent No. 2 and after examining the entire details of
supplies and commissioning of various contracts executed by the respondent
No. 2 and its 100% wholly owned subsidiaries issued Letter of Acceptance
dated 5.10.2016 in its favour to execute the contract. Learned senior
counsel further submitted that for the purposes of their experience in the
present tender, respondent No. 2 had provided the details in Form 4.4
Attachment-1 to the effect that it had supplied 606 metro cars in the last
10 years which is much higher than the appellant’s experience which would
be beneficial for the project and would further public interest. Mr.
Divan, strongly relied on Article 164 of the Articles of Association of
respondent No. 2, which was submitted along with the bid, and argued that
the Board of Directors of respondent No. 2 has been entrusted with the
complete right to make decisions for the company including subsidiaries
and, therefore, as long as the entity is a government owned entity, it
should include both the parent and its wholly owned subsidiaries.
15. In reply to the submissions advanced by the respondent No.1, Dr.
Singhvi, learned senior counsel appearing for the appellant in Civil Appeal
Nos. 1353-1354 of 2017 would submit that Clause 4.1 treats a government
owned entity like any other bidder and does not give any concession or
preferential treatment to it and if a company cannot include its
subsidiaries and count their experience as its own experience for the
purpose of submitting a bid (without forming a consortium/JV), the same
criteria applies to the government owned entity. He further referred to
Clause ITB 43, 43.1 to 43.4, 39.3, 42.1, 42.2 and Clause 1.14 of the
General Conditions of contract and submitted that in case of award of work,
the joint and several responsibility and liability on all the members of
the proposed JV/consortium in the event of default has to be fixed and such
purpose would be defeated in the event if it is found that respondent No.
2, having placed its bid as a single entity, is entitled to rely upon and
surreptitiously include the experience of its subsidiary companies and it
would be impossible to place responsibility and liability on the
subsidiaries in the even the respondent No. 2 or its subsidiaries default
in their obligations under the tender documents. Criticizing the letter
dated 22.6.2016 written by respondent No. 2, it is submitted by learned
counsel for the appellant that the letter is a unilateral communication to
the 1st respondent and does not legally constitute a binding agreement and
in the absence of adherence to prescribed formats under the tender
documents, such a letter has no sanctity and cannot be treated as a
substitute to be a legally valid and binding agreement between the
respondent No. 2 and its subsidiary companies inasmuch as the letter
wrongly states that the experience of its subsidiaries is the experience of
the parent as the holding company owns only shares in its subsidiary and
being the owner of shares does not mean that the holding company owns the
assets, liabilities and experience of the subsidiary and placed reliance on
Mrs. Bacha F. Guzdar, Bombay v. Commissioner of Income Tax, Bombay[12].
16. Learned senior counsel would further contend that the respondent No.
2 has tried to couch within its own ambit, the experience of six of its
subsidiaries and the entity designated by respondent No. 2 as the entity
responsible for completion of work under the present tender i.e. M/s. CRRC
Dalian Co. Ltd. does not have any prior experience at all, while the
remaining five entities/subsidiaries may have had prior experience; that
there is gross and manifest arithmetical error in service tax payable which
results in the appellant’s bid being lower than Rs.32.82 crores; that there
is suppression of serious material facts by respondent No. 2 regarding
supply of defective metro cars by their subsidiaries in Singapore and Hong
Kong which had to be recalled and allegation of payment of kickbacks in
Phillipines and these disclosures were required to be made in terms of
Annexure III of the tender documents, which would have required the 1st
respondent to disqualify respondent No. 2 from the tender process.
17. To appreciate the rival submissions raised at the Bar certain
relevant conditions from the NIT are required to be appreciated. Clause
4.1 deals with the eligibility criteria. It reads as follows:-
“4.1 A bidder may be a firm that is a private entity, a government-owned
entity – subject to ITB 4.3 – or any combination of such entities in the
form of a joint venture (JV) under an existing agreement or with the intent
to enter into such an agreement supported by a letter of intent. In the
case of a joint venture, all members shall be jointly and severally liable
for the execution of the contract in accordance with the contract terms.
The JV shall nominate a representative who shall have the authority to
conduct all business for and on behalf of any and all the members of the JV
during the bidding process and, in the event the JV is awarded the
contract, during contract execution. Unless specified in the BDS, there is
no limit on the number of members in a JV.”
……
4.3 The Agency’s eligibility criteria to bid are described in Section V –
Eligibility criteria and social and environmental responsibility.”
18. Placing reliance upon Clause 4.1, it is contended by the learned
senior counsel for the appellant that conditions embodied in the said
clause clearly stipulate the conditions precedent to fulfil to earn the
status of a consortium or a Joint Venture and the said postulates provide
the distinctions, as regards the obligations, responsibilities, etc. to be
fulfilled by a bidder who is a “single entity” and a bidder who is a
consortium or a Joint Venture. For the aforesaid purpose, our attention
has been drawn to Clauses 4.7. 4.8 and 4.11. We have also been invited to
peruse the Clauses 11.3.1.3, 11.3.1.4, 11.3.1.9, 12.2 and 43.3.
19. Clauses 12 and 12.1 being relevant are reproduced below:-
“12. Delivery Record
Has the bidder/consortium/joint venture of its members, individually or
jointly as a member of other consortia/joint venture have experience of and
carried out vehicle design, interface (with other designated contractors
such as signaling, track, traction, etc.) assembly & supply, testing and
commissioning of minimum of total 60 metro (i.e. MRT, LRT, Suburban
Railways or High Speed Railways) cars out of which minimum 30 cars shall be
either stainless steel or aluminium in the last ten (10) years.
12.1. Operation Performance
Out of 60 or more cars commissioned in accordance with SN 12 above, have
minimum of total 30 metro (i.e. MRT, LRT, Suburban Railways or High Speed
Railways) cars completed satisfactory revenue operation.
* At least in one country outside the country of origin/manufacture.
* Or in India
* Or at least in one G8 country viz. Canada, France, Germany, Italy,
Japan, United Kingdom and United States in the last three (3) years”.
20. Relevant portion of Section V – Eligibility criteria and social
and environmental responsibility is extracted below:-
“Bidders that are government-owned enterprises or institutions may
participate only if they can establish that they (i) are legally and
financially autonomous (ii) operate under commercial law. To be eligible,
a government-owned enterprise or institution shall establish to the
Agency’s satisfaction, through all relevant documents, including its
Charter and other information the Agency may request, that it: (i) is a
legal entity separate from their government (ii) does not currently receive
substantial subsidies or budget support; (iii) operates like any commercial
enterprise, and, inter alia, is not obliged to pass on its surplus to their
government, can acquire rights and liabilities, borrow funds and be liable
for repayment of its debts, and can be declared bankrupt.”
21. Clause 27 that deals with clarification of bids and Clause 29 that
deals with determination of responsiveness, being relevant, are reproduced
below:-
27. Clarification of Bids
27.1 To assist in the examination, evaluation, and comparison of the bids,
and qualification of the Bidders, the Employer may, at its discretion, ask
any Bidder for a clarification of its bid, given a reasonable time for a
response. Any clarification submitted by a Bidder that is not in response
to a request by the Employer shall not be considered. The Employer’s
request for clarification and the response shall be in writing. No change,
including any voluntary increase or decrease, in the prices or substance of
the bid shall be sought, offered, or permitted, except to confirm the
correction of arithmetic errors discovered by the Employer in the
evaluation of the bids, in accordance with ITB 31.
27.2 If a Bidder does not provide clarifications of its bid by the date and
time set in the Employer’s request for clarification, its bid may be
rejected.
29. Determination of Responsiveness
29.1 The Employer’s determination of a bid’s responsiveness is to be based
on the contents of the bid itself, as defined in ITB 11.
29.1.1 General Evaluation: Prior to the detailed evaluation of Bids, the
Employer will determine whether each Bid:
has been properly signed; and
has been accompanied by a valid Bid Security; and
meets the Qualification (Initial Filter) Evaluation Criteria – The Employer
will evaluate the eligibility and acceptability based on Initial Filter
criteria indicated in these documents. The technical proposals of only
those Bidders, who qualify in the Initial Filter evaluation, will be
evaluated.
Signed copy of Statement of Integrity, Eligibility and Social and
Environmental Responsibility
A ‘NO’ answer to any of the above items will disqualify the Bid/ Bidder.
29.1.2 Evaluation of Technical Package: The Employer will evaluate the
technical proposal to determine the technical suitability and acceptability
as per Works Requirements - General Specifications and Technical
Specifications of only such Bidders who qualify based on BDS ITB 29.1.1
above.
The Technical Proposal as submitted in accordance with BDS ITB Para 11.3.1
(including its relevant sub-paras) shall be evaluated for its conformity
with the general and technical requirements as per Par 2, Sections VII-A
and VII-B, as well as against the back of the parameters provided in Part1,
Annexure IV-C. Furthermore, the adequacy and appropriateness of the
Bidder’s responses to the related requirements in Part 1 shall be
evaluated.
29.2 A substantially responsive bid is one that meets the requirements of
the bidding documents without material deviation, reservation, or omission.
A material deviation, reservation, or omission is one that,
(a) if accepted, would:
Affect in any substantial way, the scope, quality, or performance of the
Works specified in the contract; or
Limit in any substantial way, inconsistent with the bidding documents, the
employer’s rights or the bidder’s obligations under the proposed contract;
or
(b) if rectified, would unfairly affect the competitive position of other
bidders presenting substantially responsive bids.
29.2.1 Evaluation of qualifying conditions: Bids that include
qualifications which:
1. seek to shift to the Employer, another government agency or another
contractor all or part of the risk and/or liability allocated to the
Contractor in the Bidding Documents; or
2. which includes a deviation from the Bidding Documents which would render
the Works, or any part thereof, unfit for their intended purpose; or
3. fails to fulfill the eligibility criteria as mentioned in SN 12, 12.1
and 13 of “(A) FILTER OF APPLICANTS – CHECKLIST of INITITAL FILTER
EVALUATION CRITERIA”; or
4. which fails to commit to the date specified for the completion of the
Works as specified under Key Dates 6 and 9 under Section IX. Particular
Conditions (PC) Part A – Contract Data ‘Table: Summary of Sections’
will be deemed non-conforming and shall be rejected.
29.3 The Employer shall examine the technical aspects of the bid submitted
in accordance with ITB 16, in particular, to confirm that all requirements
of Section VII, Works Requirements have been met without any material
deviation, reservation or omission.
29.4 Bids which are:
not fulfilling the General Evaluation Criteria as per ITB 29.1.1 above,
not substantially responsive as per ITB 29.2 above
having material deviation or reservation as per ITB 29.2 above
not fulfilling the qualifying conditions as per ITB 29.2.1 above, and
not fulfilling the Employer’s Requirements – General Specification and
Technical Specification as per ITB 29.1.2 above will be deemed non-
conforming and shall be rejected by the Employer, and shall not be allowed
subsequently to be made responsive by correction or withdrawal of the
nonconforming deviation or reservation.
29.5 If any Bid is rejected, pursuant to ITB 29.4 above, the Financial
Package of such Bidder shall be returned unopened.
29.6 Bidders may note that pursuant to their qualification in the ‘Initial
Filter Evaluation Criteria’ and ‘Technical Evaluation’ as per ITB 29.4
above, in case the Bidder (applies to each individual member in case of a
Joint Venture/Consortium) is debarred/blacklisted by Government of
India/State Government/Government undertaking after the due date of
submission of Bid but before opening of financial package by NMRCL, they
shall inform the same to NMRCL in writing within 5 working days of issue of
such debarment, failing which it will be considered that the Bidder has
willfully concealed the information and the Bidder shall be solely
responsible for all implications that may arise in accordance with the
conditions of this Bid. Any such debarment will result in disqualification
of the Bidder and the Financial Package of such Bidder shall be returned
unopened.”
22. As the learned senior counsel has also stressed upon Clause 4.11 of
the Technical Proposal, we think it apt to extract the relevant part of the
said clause:-
“1. A notarized copy of Consortium Agreement relating to the composition
of the bidder shall be submitted, if a bidder is a consortium. Should the
bidder be an entity established or to be established to bid for this
contract, details of the shareholders’ agreement or proposed shareholders’
agreement shall be supplied together with the percentage participation and
percentage equity in the agreements.
2. The contractual arrangements and copies of agreements in relation
thereto must, as a minimum, provide information on all members or
participants involved, their respective participation in the Bid, the
management structure, ownership and control of the members or participants
comprising the bidder and the name of the lead member who would have
overall lead management responsibility for the Works, the registered
addresses of all parties and the names of their respective senior partners,
chairmen or managing directors as appropriate. Such agreements should also
reflect the joint and several liabilities of the members to the Employer in
the vent that the contract is awarded to them and provide “deadlock”
provisions in the event that decisions of the Consortium cannot be reached
by unanimous agreement.”
23. As the uncurtained facts would reveal, on 17.02.2016 the appellant
wrote to the 1st respondent seeking amendment to the “operation performance
clause”, i.e., Clause 12.1 of the Annexure III-A (PQ-Initial Filter).
According to the said Clause, the bidder is required to have satisfactorily
delivered at least 30 metro cars outside the country of manufacture or
delivered in India. The amendment that was sought related to inclusion of
the condition that delivery to any of the G8 countries should also be
treated as acceptable. Such an amendment was for the appellant’s merged
entity, which gave it the requisite experience, had manufactured and
delivered metro cars only in G8 countries. The request of the appellant
was accepted by the employer and supply to any of the G8 countries was
included as permissible. That apart, the appellant’s request seeking
extension of time to bid was also acceded to and accordingly time was
extended and final date of submission was declared to be 08.07.2016. The
time that was fixed at 4 p.m. was extended till 7 p.m. at the request made
by the appellant. The purpose of narrating these aspects is only to
highlight that the allegations of mala fide are farther from the truth.
24. The core issue, as we perceive, pertains to acceptance of the
technical bid of the respondent No. 2 by the 1st respondent and we are
required to address the same solely on the touchstone of eligibility
criteria regard being had to the essential conditions. The decision on
other technical aspects, as we are advised at present, is best left to the
experts. We do not intend to enter into the said domain though a feeble
attempt has been made on the said count.
25. The anchored submission by the learned senior counsel for the
appellant is that the respondent No. 2 does not really fulfil the
eligibility criteria but the 1st respondent, for some unfathomable reason,
has deliberately closed its eyes to the fact that has been projected and
adroitly conferred the status of single entity on the 2nd respondent.
26. What is urged before this Court is that the respondent No. 2 could
not have been regarded as a single entity and, in any case, it could not
have claimed the experience of its subsidiaries because no consortium or
joint venture with its subsidiaries was formed. With regard to
relationship of holding and subsidiary companies, we have been commended to
the authorities in Balwant Rai Saluja (supra) and also the judgment of the
Delhi High Court in Rohde and Schwarz Gmbh and Co. K.G. (supra). The
essential submission is that respondent No. 2 as the owner of the
subsidiary companies including their assets and liabilities, cannot claim
their experience and there is necessity to apply the principle of “lifting
the corporate veil”, as has been laid down in Renusagar Power Co. (supra)
and Life Insurance Corporation of India v. Escorts Ltd. and others[13]. It
is also argued that the Government owned entity cannot be treated
differently, for a Government owned entity is distinct from the Government
and, for the said purpose, inspiration has been drawn from the authority in
Western Coalfields Limited v. Special Area Development Authority, Korba and
another[14]. It has also been urged that when the tender has required a
particular thing to be done, it has to be done in that specific manner, for
the law envisages that where a power is given to do a certain thing in a
certain way, the thing must be done in that way or not at all. For the
aforesaid purpose, inspiration has been drawn from the authority in Central
Coalfields Ltd. (supra) wherein reliance has been placed on Nazir Ahmad v.
King Emperor[15].
27. Before we proceed to deal with the concept of single entity and the
discretion used by the 1st respondent, we intend to deal with role of the
Court when the eligibility criteria is required to be scanned and perceived
by the Court. In Montecarlo Ltd. (supra), the Court referred to TATA
Cellular (supra) wherein certain principles, namely, the modern trend
pointing to judicial restraint on administrative action; the role of the
court is only to review the manner in which the decision has been taken;
the lack of expertise on the part of the court to correct the
administrative decision; the conferment of freedom of contract on the
Government which recognizes a fair play in the joints as a necessary
concomitant for an administrative body functioning in an administrative
sphere or quasi-administrative sphere, were laid down. It was also stated
in the said case that the administrative decision must not only be tested
by the application of Wednesbury principle of reasonableness but also must
be free from arbitrariness not affected by bias or actuated by mala fides.
The two-Judge Bench took note of the fact that in Jagdish Mandal (supra) it
has been held that, if the decision relating to award of contract is bona
fide and is in public interest, courts will not, in exercise of power of
judicial review, interfere even if a procedural aberration or error in
assessment or prejudice to a tenderer, is made out. The decisions in
Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and
another[16], B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. and
others[17] and Michigan Rubber (India) Ltd. (supra) have been referred to.
The Court quoted a passage from Afcons Infrastructure Ltd. (supra) wherein
the principle that interpretation placed to appreciate the tender
requirements and to interpret the documents by owner or employer unless
mala fide or perverse in understanding or appreciation is reflected, the
constitutional Courts should not interfere. It has also been observed in
the said case that it is possible that the owner or employer of a project
may give an interpretation to the tender documents that is not acceptable
to the constitutional Courts but that by itself is not a reason for
interfering with the interpretation given. After referring to the said
authority, it has been ruled thus:
“24. We respectfully concur with the aforesaid statement of law. We have
reasons to do so. In the present scenario, tenders are floated and offers
are invited for highly complex technical subjects. It requires
understanding and appreciation of the nature of work and the purpose it is
going to serve. It is common knowledge in the competitive commercial field
that technical bids pursuant to the notice inviting tenders are scrutinized
by the technical experts and sometimes third party assistance from those
unconnected with the owner’s organization is taken. This ensures
objectivity. Bidder’s expertise and technical capability and capacity must
be assessed by the experts. In the matters of financial assessment,
consultants are appointed. It is because to check and ascertain that
technical ability and the financial feasibility have sanguinity and are
workable and realistic. There is a multi-prong complex approach; highly
technical in nature. The tenders where public largesse is put to auction
stand on a different compartment. Tender with which we are concerned, is
not comparable to any scheme for allotment. This arena which we have
referred requires technical expertise. Parameters applied are different.
Its aim is to achieve high degree of perfection in execution and adherence
to the time schedule. But, that does not mean, these tenders will escape
scrutiny of judicial review. Exercise of power of judicial review would be
called for if the approach is arbitrary or malafide or procedure adopted is
meant to favour one. The decision making process should clearly show that
the said maladies are kept at bay. But where a decision is taken that is
manifestly in consonance with the language of the tender document or
subserves the purpose for which the tender is floated, the court should
follow the principle of restraint. Technical evaluation or comparison by
the court would be impermissible. The principle that is applied to scan and
understand an ordinary instrument relatable to contract in other spheres
has to be treated differently than interpreting and appreciating tender
documents relating to technical works and projects requiring special
skills. The owner should be allowed to carry out the purpose and there has
to be allowance of free play in the joints.”
28. In Tamil Nadu Generation and Distribution Corporation Ltd. (TANGEDCO)
rep. by its Chairman & Managing Director and another v. CSEPDI-Trishe
Consortium, rep. by its Managing Director and another[18], the Court, after
referring to Jagdish Mandal (supra) and taking note of the complex fiscal
evaluation and other aspects, held:
“36. … At this juncture we are obliged to say that in a complex fiscal
evaluation the Court has to apply the doctrine of restraint. Several
aspects, clauses, contingencies, etc. have to be factored. These
calculations are best left to experts and those who have knowledge and
skills in the field. The financial computation involved, the capacity and
efficiency of the bidder and the perception of feasibility of completion of
the project have to be left to the wisdom of the financial experts and
consultants. The courts cannot really enter into the said realm in exercise
of power of judicial review. We cannot sit in appeal over the financial
consultant’s assessment. Suffice it to say, it is neither ex facie
erroneous nor can we perceive as flawed for being perverse or absurd.”
29. In Reliance Telecom Ltd. and another v. Union of India and
another[19], the Court referred to the authority in Asia Foundation &
Construction Ltd. v. Trafalgar House Construction (I) Ltd. and others[20]
wherein it has been observed that though the principle of judicial review
cannot be denied so far as exercise of contractual powers of Government
bodies are concerned, but it is intended to prevent arbitrariness or
favouritism and it is exercised in the larger public interest or if it is
brought to the notice of the court that in the matter of award of a
contract power has been exercised for any collateral purpose. Thereafter,
the Court in Reliance Telecom Ltd. (supra) proceeded to state thus:
“75. … In the instant case, we are unable to perceive any arbitrariness or
favouritism or exercise of power for any collateral purpose in the NIA. In
the absence of the same, to exercise the power of judicial review is not
warranted. In the case at hand, we think, it is a prudent decision once
there is increase of revenue and expansion of the range of service.”
And again:
“76. It needs to be stressed that in the matters relating to complex
auction procedure having enormous financial ramification, interference by
the Courts based upon any perception which is thought to be wise or assumed
to be fair can lead to a situation which is not warrantable and may have
unforeseen adverse impact. It may have the effect potentiality of creating
a situation of fiscal imbalance. In our view, interference in such auction
should be on the ground of stricter scrutiny when the decision making
process commencing from NIA till the end smacks of obnoxious arbitrariness
or any extraneous consideration which is perceivable.”
30. The learned counsel for the appellants invited our attention to the
authority in W.B. Electricity Board v. Patel Engineering Co. Ltd.[21]
wherein it has been ruled:
“24. … The appellant, Respondents 1 to 4 and Respondents 10 and 11 are all
bound by the ITB which should be complied with scrupulously. In a work of
this nature and magnitude where bidders who fulfil prequalification alone
are invited to bid, adherence to the instructions cannot be given a go-by
by branding it as a pedantic approach, otherwise it will encourage and
provide scope for discrimination, arbitrariness and favouritism which are
totally opposed to the rule of law and our constitutional values. The very
purpose of issuing rules/instructions is to ensure their enforcement lest
the rule of law should be a casualty. Relaxation or waiver of a rule or
condition, unless so provided under the ITB, by the State or its agencies
(the appellant) in favour of one bidder would create justifiable doubts in
the minds of other bidders, would impair the rule of transparency and
fairness and provide room for manipulation to suit the whims of the State
agencies in picking and choosing a bidder for awarding contracts as in the
case of distributing bounty or charity. In our view such approach should
always be avoided. Where power to relax or waive a rule or a condition
exists under the rules, it has to be done strictly in compliance with the
rules. We have, therefore, no hesitation in concluding that adherence to
the ITB or rules is the best principle to be followed, which is also in the
best public interest.
x x x x x
31. … Thae Project undertaken by the appellant is undoubtedly for the
benefit of the public. The mode of execution of the work of the Project
should also ensure that the public interest is best served. Tenders are
invited on the basis of competitive bidding for execution of the work of
the Project as it serves dual purposes. On the one hand it offers a fair
opportunity to all those who are interested in competing for the contract
relating to execution of the work and, on the other hand it affords the
appellant a choice to select the best of the competitors on a competitive
price without prejudice to the quality of the work. Above all, it
eliminates favouritism and discrimination in awarding public works to
contractors. ... Merely because a bid is the lowest the requirements of
compliance with the rules and conditions. …”
31. Having stated this, we have to see, how the 1st respondent has
perceived the offer of the respondent No. 2 in the backdrop of the tender
conditions. It is not in dispute that the project in question has been
funded by KfW Development Bank, Germany and as per Clause ITB 35.8, it is
necessary at all stages of bid evaluation and contract award has to be
subject to no-objection from KfW Development Bank. Emphasis has been laid
on the approach of the High Court which has taken note of the fact that the
respondent No. 2 had been awarded the tender by the Delhi Metro Rail
Corporation. It has also been highlighted that the papers relating to the
financial bid along with report were forwarded to KfW which gave its no-
objection. Be it noted, the appellants have been quite critical about the
acceptance of the offer and the 1st respondent has given a number of
reasons to justify the same. As indicated earlier, we are only concerned
with the eligibility criteria and not with the fiscal aspect.
32. Respondent No. 2, as is evident, is a company owned by the People’s
Republic of China and, therefore, it comes within the ambit of Clause 4.1
of the bid document as a Government owned entity. We have already
reproduced the said clause in earlier part of the judgment. As perceived by
the 1st respondent, a single entity can bid for itself and it can consist
of its constituents which are wholly owned subsidiaries and they may have
experience in relation to the project. That apart, as is understood by the
said respondent, where the singular or unified entity claims that as a
consequence of merger, all the subsidiaries form a homogenous pool under
its immediate control in respect of rights, liabilities, assets and
obligations, the integrity of the singular entity as owning such rights,
assets and liabilities cannot be ignored and must be given effect. While
judging the eligibility criteria of the second respondent, the 1st
respondent has scanned Article164 of the Articles of Association of the
respondent No. 2 which are submitted along with the bid from which it is
evincible that the Board of Directors of the respondent No. 2 has been
entrusted with the authority and responsibility to discharge all necessary
and essential decisions and functions for the subsidiaries as well.
According to the 1st respondent, the term “Government owned entity” would
include a government owned entity and its subsidiaries and there can be no
matter of doubt that the identity of the entities as belonging to the
Government when established can be treated as a Government owned entity and
the experience claimed by the parent of the subsidiaries can be taken into
consideration. Learned senior counsel for the 1st respondent has drawn our
attention to the “lifting of corporate veil” principle or doctrine of
“piercing the veil” and in that context, reliance has been placed on
Littlewoods Mail Order Stores, Ltd. v. McGregor[22], DHN Food Distributors
Ltd. and others v. London Borough of Tower Hamlets[23] and Harold
Holdsworth & Co. (Wakefield) Ld. v. Caddies[24]. Learned senior counsel
has also placed reliance upon the principles stated in Renusagar Power Co.
(supra) that have been reiterated in New Horizons Ltd. (supra). In the
written submission filed on behalf of the 1st respondent, the relevant
paragraphs from Renusagar Power Co. (supra) have been copiously quoted. It
is also urged that in the current global economic regime the multinational
corporations conduct their business through their subsidiaries and,
therefore, there cannot be a hyper-technical approach that eligibility of
the principal cannot be taken cognizance of when it speaks of the
experience of the subsidiaries. It is also contended by Mr. Subramaniam
that in the context of fraud or evasion of legal obligations, the doctrine
of “piercing the veil” or “lifting of the corporate veil” can be applied
but the said principle cannot be taken recourse to in a matter of the
present nature.
33. With regard to the satisfaction of the 1st respondent, it has been
highlighted before us that the said respondent had thoroughly examined the
bid documents and satisfied itself about of the capability, experience and
expertise of the respondent No. 2 and there has been a thorough analysis of
the technical qualification of the respondent No. 2 by the independent
General Consultant and the reports of the Appraisal and Tender Committee of
the 1st respondent and also the no-objection has been received from KfW
Development Bank, Germany which is funding the entire project. Narrating
the experience of the respondent No. 1, it has been stated in the written
submission filed on behalf of the 1st respondent:
“36. That it is further clear from the record that besides being the lowest
bidder, the experience of R 2 in supplying Metro Trains across the world
exceeds the Petitioner’s experience by a huge margin. Where for clause 12,
R 2 has shown a figure of 594 Metro Cars, Petitioner has shown only 72
Cars; and for clause 12.1 where R 2 has shown 432 Cars, Petitioner has
again shown only 72 Cars. This vast experience of R 2 would be beneficial
for the project and would further public interest.
37. That R 1 without any malice, or malafide has treated R 2 along with
its 100% subsidiaries as one entity. This understanding of the clause has
been at the ends of both parties viz. R 1 and R 2, who were ad idem vis-à-
vis the eligibility of the parent company to bid using the experience and
executing the contract through its various 100% wholly owned subsidiaries.
38. That the above understanding of R 1 of treating R 2 along with its
100% subsidiaries is supported by the understanding of the Delhi Metro Rail
Corporation Ltd., which has on a similarly, if not same, worded bid-
document granted the tender/agreement to R 2, which had even there bid as a
parent company claiming experience of and execution through 100% wholly
owned subsidiaries.
39. That moreover, there is no bar, whatsoever, express or implied, in
the tender document to treat the parent company along with its 100% wholly
owned subsidiaries as one entity. Therefore, the scope of judicial review
should be limited in adjudging the decision taken by R 1 in the best
interest of the project, and thereby, the public.
40. That arguendo, no project, whatsoever, has been caused to the
project or to other bidders including the Petitioner by the above
understanding of the tender conditions by R 1. It is humbly submitted that
R 2 fulfilled all the technical requirements. The bid-document itself
provided for bidding as a consortium, and did not require in such a case
fulfilment of any material condition, which if not fulfilled would
prejudice any parties or the project. Moreover, the scheme of the bid-
document is such that it itself provides for a Parent Company Guarantee.
According to this Parent Company Guarantee Form, a parent company would
have to perform the works under the agreement in case the subsidiary
failed. Therefore, the objections raised by the Petitioner are hyper-
technical and have been raised only to stall the project once it was found
to be unsuccessful.”
34. As is noticeable, there is material on record that the respondent No.
2, a Government company, is the owner of the subsidiaries companies and
subsidiaries companies have experience. The 1st respondent, as it appears,
has applied its commercial wisdom in the understanding and interpretation
which has been given the concurrence by the concerned Committee and the
financing bank. We are disposed to think that the concept of “Government
owned entity” cannot be conferred a narrow construction. It would include
its subsidiaries subject to the satisfaction of the owner. There need not
be a formation of a joint venture or a consortium. In the obtaining fact
situation, the interpretation placed by the 1st respondent in the absence
of any kind of perversity, bias or mala fide should not be interfered with
in exercise of power of judicial review. Decision taken by the 1st
respondent, as is perceptible, is keeping in view the commercial wisdom and
the expertise and it is no way against the public interest. Therefore, we
concur with the view expressed by the High Court.
35. Resultantly, the appeals, being devoid of merit, are dismissed. In
the facts and circumstances of the case, there shall be no order as to
costs.
.............................J.
[Dipak Misra]
............................J.
[Amitava Roy]
New Delhi;
May 09, 2017
-----------------------
[1] (1995) 1 SCC 478
[2] (1994) 6 SCC 651
[3] 2016 (8) SCALE 99 : (2016) 8 SCC 622
[4] 2016 (8) SCALE 765
[5] (2014) 9 SCC 407
[6] (2014) 207 DLT 1
[7] 2011 (59) BLJR 183
[8] (1988) 4 SCC 59
[9] 2016 (10) SCALE 50
[10] (2012) 8 SCC 216
[11] (2007) 14 SCC 517
[12] AIR 1955 SC 74
[13] (1986) 1 SCC 264
[14] (1982) 1 SCC 125
[15] AIR 1936 PC 253
[16] (2005) 6 SCC 138
[17] (2006) 11 SCC 548
[18] 2016 (10) SCALE 69
[19] 2017 (1) SCALE 453
[20] (1997) 1 SCC 738
[21] (2001) 2 SCC 451
[22] (1969) 3 All ER 855
[23] (1976) 3 All ER 462
[24] (1955) 1 WLR 352