1 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA . CWP No. 1798 of 2017 Reserved on: 11.12.2017 Date of Decision: 20.12.2017 M/s. [ENTITY] Petitioner. Vs. [ENTITY] Respondent. Coram: The Hon'ble Mr. Justice [ENTITY], Acting Chief Justice The Hon'ble Mr. Justice [ENTITY], Judge Whether approved for reporting?1 Yes. For the petitioner : Mr. [ENTITY], Senior Advocate, with Mr. [ENTITY], Advocate. For the respondent: Mr. [ENTITY], Senior Advocate, with Mr. [ENTITY], Advocate. [ENTITY], Judge:
By way of this writ petition, the petitioner has prayed for the following reliefs:
"(i) The letter dated 31.5.2017 (Annexure P-10) issued by the Additional General Manager of respondent cancelling the tender in question may kindly be held wrong, illegal, arbitrary, violative of terms and conditions mentioned in the tender documents and same may kindly be quashed and set aside.
Whether the reporters of the local papers may be allowed to see the Judgment?
(ii) That the records of the case may .
kindly be called for. The respondent may kindly be directed to proceed further for awarding the contract No. 23-SS/ADV/HPPTCL/220 KV GIS, Sunda in question from the stage of issuance of 'No Objection Certificate' by Financing Agency, ADB in favour of the petitioner.
(iii) Any other order or direction, which this Hon'ble Court deems just and proper may also be passed in favour of the petitioner and against the respondent."
2. In brief, the case of the petitioner is that the petitioner is a Joint Venture of Technofab Engineering Limited, which is a medium size Electro-Mechanical Engineering and Construction Company, serving the power, industrial and infrastructure sectors by taking up turnkey contracts, which cover engineering procurement and construction (EPC) mainly for rural electrification, power sub stations, water and sewerage treatment plants and water distribution. As per the petitioner, its other Joint Venture partners Sieyuan Electric Company Limited is a manufacturer, supplier, elector, commissioner and in the business of operation and maintenance of GIS equipments for sub-stations.
3. Respondent-Corporation received a loan towards Himachal Pradesh Clean Energy Transmission Investment Programme.
Part of the said loan was to be used for payments under Contract No.
23.SS/ADV/HPPTCL/220 KV GIS Sunda, which involved the work of design, engineering, manufacturing, fabrication, testing at manufacturer's work, transportation to the site, issuance, loading, .
unloading, storage, erection, testing and commissioning of 132/220 KV GIS Sub-station having 132 KV and 220 KV GIS equipments, 7 x 26.66/33.33 MVA, 22/132/220 KV, single phase auto transformers and other Sub-station equipments and associated civil works at Sunda in Shimla District of Himachal Pradesh on turnkey basis.
4. [ENTITY] P-2, respondent-Corporation invited bids by way of International Competitive Bidding from eligible bidders for Design, Engineering, Manufacture, Fabrication, Testing at Manufacturers Works, Transportation to Site, Insurance, Loading/Unloading, Storage, Erection, Testing and Commissioning of 132/220 KV GIS Sub-station having 132 KV and 220 KV GIS Equipments, 7x 26.66/33.33 MVA, 22/132/220 KV, Single Phase Auto Transformers and other Sub-station Equipments and Associated Civil Works at Sunda in Shimla District of Himachal Pradesh on Turnkey Basis. Deadline for the bids as per Annexure P-2 was 22.07.2016. A pre-bid conference was scheduled for 17.06.2016. Bids were slated to be opened at 15:00 hours on 22.07.2016 in the presence of [ENTITY]' representatives, who choose to attend on the address of the respondent-Corporation.
5. According to the petitioner, it being eligible to participate in the said bid, purchased the bidding documents. It submitted its bid for the contract in issue alongwith six other bidders.
The technical bid was opened by the respondent-Corporation on 30.08.2016 and thereafter respondent-Corporation sought certain post-
bid clarifications from the petitioner on 02.11.2016 and 07.11.2016. After completing the process of evaluation of technical bids, respondents opened the financial/price bid on 12.12.2016. In terms of evaluation process, as was provided in the evaluation criteria in [SECTION] of Commercial conditions, which provided for evaluation of qualification criteria, respondent-Corporation prepared a list of bidders in ascending order based upon the price bid so submitted by them. In the said process, petitioner was declared to be the lowest evaluated responsive bidder and thereafter, respondent-Corporation submitted the Financial Bid Evaluation Report to the Financing Agency, i.e., Asian Development Bank. It is the case of the petitioner that it reasonably believed that in the said report, petitioner was recommended by respondent-Corporation for award of the contract in question. It is further the case of the petitioner, that the Financial Agency, i.e., ADB after receiving the recommendations of the respondent-Corporation, itself scrutinized and examined the Financial Bid Evaluation Report, so submitted by the respondent and thereafter granted its concurrence for the award of the contract in question to the respondent by issuing 'No Objection Certificate', dated 07.03.2017. Thereafter, as per the petitioner, its case was placed by respondent-Corporation for administrative approval for awarding the contract in its favour. It is further the case of the petitioner that after opening of the financial bid and issuance of 'No Objection Certificate' in favour of the petitioner by the Financing Agency, some of the .
unsuccessful non-responsive bidders started making misleading representations to the respondent-Corporation calling upon it to exclude the service tax components from its/their price bid on the pretext that the same was wrongly included in the price bid in [SECTION], [SECTION] and [SECTION] thereof. Their intent was to scuttle down the process of finalizing the award in favour of the petitioner. It is further the case of the petitioner that after the price bid was opened and petitioner came to know that it was the lowest bidder, it submitted a report to respondent of works executed by the joint venture partner of the petitioner vide Annexure P-8, which demonstrated that the petitioner was having the expertise to its credit for executing the work, which was the subject matter of the tender in issue. Petitioner further contends that thereafter it made representations to the respondent-Corporation to award the work in its favour. According to the petitioner, in a hot haste manner, respondent-
Corporation, without appreciating the factum of the petitioner having been declared the successful bidder and 'No Objection Certificate' having been issued in its favour by Financing Agency, it again approached the Financing Agency for the purpose of seeking their approval for cancellation of tender, for which NOC already stood granted by the said Financing Agency. It is further the case of the petitioner that it was shocked to receive a letter, dated 31.05.2017, from Additional General Manager of the respondent-Corporation, as Annexure P-10, vide which the petitioner was informed by the said officer that tender pertaining to .
contract No. 23-SS/ADV/HPPTCL/220 KV GIS Sunda had been cancelled. Feeling aggrieved, present petition stands filed by it praying for reliefs already mentioned above.
6. In its reply filed to the writ petition, respondent-Corporation denies the allegations levelled in the writ petition. It stands mentioned in the preliminary submissions by the respondent-Corporation that petitioner was not L-1 at any point of time during the evaluation and processing of bids. It is further mentioned in the preliminary submissions that [SECTION] Instructions to [ENTITY] Vol.-1 Commercial Conditions of the Bidding Document for the work in issue, confer upon the respondent-Corporation right to annul the bidding process and reject all bids at any time prior to award of the contract. It is further mentioned in the preliminary submissions that Clause 36.1 of the contract which deals with Correction of Arithmetical Errors, under Heading E-Evaluation and Comparison of Bids, [SECTION] ITB Vol-1 Commercial Conditions of the Bidding Document vide Sub-clause (B) clearly provides that where there were any errors between the total of amounts of Schedules 1 to 4 and the amount given in [SECTION], the former shall prevail and the latter shall be corrected accordingly.
7. In reply on merit to the petition, it stands mentioned in para-
8 thereof that during evaluation of the financial bids, overall bid amount of M/s. [ENTITY] was found to be lowest, which was `83,40,211/-
less than what was quoted by the petitioner. It further stood mentioned therein that Financial Bid Evaluation Report (hereinafter referred to as "FBER") was accordingly sent to the funding agency, namely, Asian Development Bank for its consideration and approval as per defined procedure and guidelines under the loan agreement signed with the said Bank. It is further mentioned in the reply that in view of certain "extraneous reasons", replying respondent incorporated certain issues pertaining to joint venture partner of lowest bidder in some other tender work to the funding agency for consideration and decision in the matter. It is further mentioned that funding agency vide its e-mail, dated 24th February, 2017 did not approve award of work and desired that bids be re-evaluated as per [SECTION] of Bid Document.
Pursuant thereof, as per replying respondent, it sent revised evaluation report, wherein the petitioner although being overall L-2 throughout became lowest ex-works bidder because component of taxes and duties given by M/s. [ENTITY] (L-1) in [SECTION], [SECTION] and [SECTION] were included, whereas the price quoted by the petitioner was without taxes and duties.
Para-8 of the reply is quoted hereinbelow for ready reference:
"8. The averments in para-10 of the petition are not admitted as stated therein. It is respectfully submitted that during evaluation of the financial bids, overall bid amount of M/s. [ENTITY] was found to be lowest, which was Rs.83,40,211/- less than the quoted bid by the petitioner. The Financial Bid Evaluation Report (FBER) was accordingly sent to the funding agency namely Asian .
Development Bank (ADB) for their consideration and approval as per defined procedure and guidelines under the loan agreement signed with ADB. However, in view of certain extraneous reasons, the replying respondent incorporated certain issues relating to the joint venture partner of Lowest bidder in some other tendered work to the funding agency for consideration and decision in the matter. The funding agency vide its e-mail dated 24th February 2017 did not approve award of the work and desired that the bids be re-evaluated having consideration to [SECTION] Bid Document. The aforesaid provision of the Tender Document inter alia stipulates for evaluation of bids without taxes and duties. Pursuant to that, the replying respondent sent revised evaluation report wherein the Petitioner although being overall L-2 throughout became lowest ex-works bidder because the component of taxes and duties given by M/s.
[ENTITY] (L-1) in [SECTION], [SECTION] and [SECTION] were included whereas the price quoted by the petitioner was without taxes and duties. It is further clarified that though in [SECTION], [SECTION] and [SECTION] meant for quoting ex-works price, M/s. [ENTITY], the overall Lowest-1 bidder, quoted ex-works price as well as taxes and duties in separate columns but in Schedule-6 i.e. Grand Summery for ex-works price, M/s. [ENTITY] quoted total price inclusive of taxes. That resulted into change of individual status of both M/s. [ENTITY] and the petitioner for ex- works prices, on the basis of which the second FBER was sent to funding agency as quoted in these schedules. The funding agency on the basis of re-evaluation report recommended award of aforesaid work in favour of the .
petitioner. Thereafter, the entire case was put up to the Board of Directors of Replying respondent being the competent authority in such cases, in its 33rd meeting held on dated 18th March, 2017. The BOD having consideration to ensure lowest cost to the company, directed to evaluate the bids by segregating the tax component of M/s [ENTITY] in [SECTION], [SECTION] and [SECTION] on the principle of equality and fair play. Accordingly, Replying Respondent sent fresh evaluation on dated 6th April 2017 recommending M/s. [ENTITY] being Lowest-1 for the award of the work. Copy of the Evaluation Report is annexed herewith as Annexure-R/3. The Funding Agency vide fax massage dated 9th May 2017, however declined to give no objection for award of work in favour of M/s. [ENTITY]. Copy of the Fax message is annexed herewith as Annexure-R/4.
The Replying Respondent in light of the facts and circumstances mentioned hereinabove again put up the entire case before the BOD for appraisal through circulation. The Board finally approved cancellation of the tender on 27.5.2017. It is further submitted that all bids received in this case were found responsive after technical evaluation."
Primarily on these grounds, respondent-Corporation has justified its decision, which stands impugned by way of present writ petition.
8. By way of rejoinder, the petitioner has reiterated the averments made in the writ petition, while denying the contentions so raised by the replying respondent in the reply.
9. On 19.09.2017, this Court passed the following order:
"Respondent is directed to file the supplementary affidavit within two weeks. List on 10th October, 2017."
10. In response thereof, a supplementary affidavit was filed on behalf of respondent-Corporation through its Deputy General Manager (C &M), Himachal Pradesh Transmission Corporation Limited, [ENTITY]. Paras 3 to 7 of the same are quoted hereinbelow:
"3. That at the time of opening of price bids in the presence of bidder(s)/their representative(s), the apparent status of the bidder at a glance, pronounced on the basis of total price quoted by the bidder in the Schedule-6 'Grand Summery'+ loading of Transformer guarantee losses, which status was shown in table given in para-6 of the First Financial Bid Evaluation Report (FBER) wherein the rank of the petitioner was put at L1 as against M/s. [ENTITY] at L 2. However, in Para-7 of the same report, the TEC after detailed scrutiny when it found that the price quoted by M/s [ENTITY] in Grand Summery includes component of taxes and duties, which ought to have not been included as per evaluation criteria, came to the conclusion that M/s. [ENTITY] has submitted the lowest evaluated substantially responsive bid. Accordingly, the first FBER was prepared and sent to ADB by the aforesaid committee in February, 2017. Copy of the Complete First FBER is attached herewith as Annexure-R/7. It is also clearly evident from para-8 (Conclusions and Recommendations) of the aforesaid first report that the bid submitted by petitioner was higher than that of M/s [ENTITY] by Rs.83,40,211/-. The .
First FBER by the TEC although declared M/s. [ENTITY] as L 1 but choose to recommend Petitioner L2 for award of the work having consideration to facts not germane to the tender in question. It is pertinent to mention here that previously ADB had given no objection to the Joint Venture agreement made by M/s [ENTITY] with M/s [ENTITY] because no case for blacklisting/debarment of the said firm under anti corruption policy of the bank existed. The TEC in its wisdom also recommended negotiations with Petitioner L2 to bring their quoted price at par with that of M/s [ENTITY] (L1).
4. That First FBER was sent to ADB in February 2017 for their approval. ADB through their e-mail dated 24th February, 2017 raised certain observations qua first report, wherein vide para-7 of e-mail dated 24.2.2017 with reference to [SECTION] Volume-1 of the Bid Document it was pointed out that "All the [ENTITY] are required to furnish Breakup of Prices quoted indicating the CIF, Ex-works prices, Taxes and duties as well as Freight & Insurance separately so that evaluation can be done without considering the Taxes and Duties. In the event of non-furnishing of Break-up, the Bid shall be evaluated on the basis of Toral Furnished Price, which shall be considered as CIF, Ex-works Price for evaluation purpose".
Admittedly, this observation of ADB was not properly construed by the TEC while preparing and sending the Second FBER as has been explained in para-5 herein under. Copy of the observations of ADB dated 24.2.2017 is attached herewith as Annexure R/8.
5. Pursuant to observations of ADB as .
mentioned in preceding para, the TEC, again prepared and sent Second FBER to ADB on 1st March 2017 for its approval. Copy already attached as Annexure P-20 alongwith Rejoinder filed by the petitioner. In the second report sent by TEC, the bid of petitioner was declare as Lowest Evaluated Substantially Responsive Bid and recommended for award of work. This recommendation of TEC in view of its failure to consider and construe the provisions of Clause 36.1 Correction of Arithmetical Errors, under heading E-Evaluation and Comparison of Bids, Section-1 ITB Vol-1 Commercial Conditions of the bidding Document, which vide Sub-clause (B) clearly provides, "where there are errors between the total of amounts of Schedules 1 to 4 and the amount given in [SECTION], the former shall prevail and the latter will be corrected accordingly:, was incorrect. The TEC due to un-balanced comparison of bid price of M/s [ENTITY] (with taxes & duties) vis vis M/s Technofab, the petitioner herein (without taxes & duties) resulted in erroneous recommendations in Second FBER. Based upon these recommendations, ADB conveyed its NOC vide e-
mail dated 07.03.2017 for award of the work in favour of the petitioner.
6. That pursuant to grant of NOC by ADB, the Memorandum for consideration was put up to the Board of Directors of the Respondent Corporation. The BOD in its meeting held on 18.3.2017, took note of the fact that M/s [ENTITY] has quoted separate price for ex-works and taxes in [SECTION] and therefore only ex-works price should be considered for evaluation of bids. The BOD desired that the financial bids be re-evaluated and sent to .
ADB to ensure lowest cost to the Company i.e. Respondent Corporation. Copy of Memorandum and decision of the BOD vide Minutes of Meeting dated 18.3.2017 are attached herewith as Annexure R/9 (Colly.).
7. In accordance with the decision of the BOD being competent Authority in this case, third FBER was sent to ADB on 6th April, 2017 wherein revised final status of the bidders in para-6, M/s [ENTITY] was placed at L 1 and petitioner was L2 and M/s [ENTITY] L1 was recommended for award of the work. Copy of third FBER is already attached alongwith reply filed by the Respondent as Annexure R/3. ADB raised certain observations with regard to the Third FBER and the matter remained under deliberations and the issues could not be resolved. ADB finally gave NOC vide e-mail dated 9th June, 2017 for cancellation of the tender and desired that the process of rebidding may be expedited. Copy of e-
mail dated 9.06.2017 is already annexed with reply filed by Respondent as Annexure R/5. Accordingly the re-
tendering for the aforesaid work has been initiated and fresh bids are likely to open on 6th October, 2017."
11. In its response so filed to the supplementary affidavit on behalf of the petitioner, it stands stated by the petitioner as under:
"(1) (iii) That alongwith present supplementary affidavit the respondent has annexed the extract of minutes of 33rd meeting to establish that Board of Directors had asked to re-evaluate the Financial Bid on ex-works price quoted instead of considering the same with service tax. It is humbly submitted that the bare perusal of internal page-16 of the supplementary affidavit .
would make it clear that the Respondent in order to make M/s [ENTITY] as L-1 Bidder at their own had included the component of sales tax amounting to Rs.93,14,253/- to the bid amount of Rs.74,86,94,347/- to make the same at Rs.75,80,08,600/- whereas different standards were adopted while making calculation of Bid amount pertaining to the petitioner. In the bid amount of the petitioner which was calculated at Rs.74,78,46,921/- the Respondent not only added the component of Sales Tax amounting r to Rs.74,08,506/- and service tax amounting to Rs.1,10,93,384/- to make the figure of Rs.76,63,48,811/-. Even after doing so, the Respondent itself while submitting such calculations in the conclusions and calculations pertaining to the petitioner and M/s [ENTITY] have also intimated the Funding Agency i.e. ADB in its FBER itself the reasons for not awarding the work in question to M/s [ENTITY]. Even otherwise, without admitting or conceding the decision of BOD in its 33rd meeting for re-evaluating the Financial Bid after excluding the component of taxes in that eventuality also the internal page-16 of the supplementary affidavit makes it clear that the petitioner's bid was calculated at Rs.74,78,46,921/- whereas that of M/s [ENTITY] was calculated and arrived at Rs. 74,86,94,347/- which clearly shows that the petitioner was the lowest bidder in terms of evaluation of Bids done by the Respondent."
12. We have heard the learned counsel for the parties and have also gone through the records of the case.
13. To be precise, whereas as per the petitioner, the act of the .
respondent-Corporation of annulling the bid in which the petitioner was L-1 is an arbitrary act, as per the respondent-Corporation, the annulling of bid and inviting fresh bid was well within rights conferred upon it as per notice inviting tender and further, petitioner was not L-1 in the earlier bid, which was so invited by the respondent-Corporation, which subsequently stands annulled.
14. In [PRECEDENT], the Hon'ble Supreme Court has held that the scope of judicial review in matters relating to award of contracts by the State and its instrumentalities is settled by a long line of decisions of Hon'ble the Supreme Court and while these decisions clearly recognize that power exercised by the Government and its instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, however, submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. It has further been held by the Hon'ble Supreme Court that in the matter of award of contracts, the Government and its agencies have to act reasonably and fairly at all points of time. In paras 10 and 11 of the said judgment, the Hon'ble Supreme Court has held as under:
"10. The scope of judicial review in contractual .
matters was further examined by this Court in [PRECEDENT], Raunaq International Ltd.'s case (supra) and in [PRECEDENT]. [PRECEDENT] besides several other decisions to which we need not refer.
11. In [PRECEDENT] the legal position on the subject was summed up after a comprehensive review and principles of law applicable to the process for judicial review identified in the following words:
"23. From the above decisions, the following principles emerge:
(a) the basic requirement of [SECTION] is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those .
circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very restrictive since no person can claim fundamental right to carry on business with the Government.
24. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; and
(ii) Whether the public interest is affected.
If the answers to the above questions are in negative, .
then there should be no interference under [SECTION]."
(emphasis supplied)"
15. In [PRECEDENT], the Hon'ble Supreme Court has held as under:
It is also well to remember the admonition given by this Court in [PRECEDENT] in cases like the present, as under:- "21. In [PRECEDENT], the following conclusion is relevant:
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.
The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached'; (ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article
226. Cases involving blacklisting or imposition of penal consequences on a tenderer/ contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree .
of fairness in action."
16. In [PRECEDENT], the Hon'ble Supreme Court has held as under:
"19. In [PRECEDENT], the Court has held that under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. It has also been observed that by way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry.
20. In Tata Cellular (supra) a three-Judge Bench after referring to earlier decisions culled out certain principles, namely, (a) the modern trend points to judicial restraint in administrative action, (b) the court does not sit as a court of appeal but merely reviews the manner in which the decision was made,
(c) the court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible, and (d) the Government must have freedom of contract and that permits a fair play in the joints as a necessary .
concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. Hence, the Court has laid down that the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
21. In [PRECEDENT] the Court has held that a contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.
22. In Master Marine Services (P) Ltd. v.
Metcalfe & Hodgkinson (P) Ltd and Anr[5], it has been ruled that the State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It has been further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under[SECTION] with great caution and should exercise it only in .
furtherance of public interest and not merely on the making out of a legal point.
23. In [PRECEDENT] a two-Judge Bench, after referring to series of judgments has culled out certain principles which include the one that where a decision has been taken purely on public interest, the court ordinarily should apply judicial restraint.
24. In Michigan Rubber (India) Ltd. (supra) the Court referred to the earlier judgments and opined that before a court interferes in tender or contractual matters, in exercise of power of judicial review should pose to itself the question whether the process adopted or decision made by the authority is mala fide or intended to favour someone or whether the process adopted or decision made is so arbitrary and irrational that the judicial conscience cannot countenance. Emphasis was laid on the test, that is, whether award of contract is against public interest.
25. Recently in [PRECEDENT] a two-Judge Bench eloquently exposited the test which is to the following effect:-
"We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to .
this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given."
26. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated 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."
17. It is evident from the law discussed above that in exercise of its powers of judicial review in a matter pertaining to tender, this Court has to ensure that such power of judicial review is exercised only to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Accordingly, we will now scrutinize as to whether the power of .
annulling the contract in issue so exercised by the respondent-
Corporation was exercised in a bonafide manner or was it an act of arbitrariness, irrationality, unreasonableness, bias and mala fides.
18. On record alongwith the supplementary affidavit appended at page No. 348 of the paper-book, there is a communication, dated 7th March, 2017, addressed by the Officer-In-Charge of Ashian Development Bank to the Managing Director of the respondent-Corporation on the subject "Loan 3001-IND: Himachal Pradesh Clean Energy Transmission Investment Program (Tranche 2)-Financial Bid Evaluation Report (FBER) of Bid No. 23-SS/ADB/HPPTCL/220kV Sunda", which reads as under:
"1. We refer to your email of 2 March 2017, submitting the revised Financial Bid Evaluation Report (FBER) of the captioned package for ADB review and approval.
2. We have reviewed the FBER and have no objection to your recommendation to award the contract to the lowest evaluated and substantially responsive bidder, M/s. [ENTITY]
JV with M/s [ENTITY], New Delhi, India amounting to $3,857,266.4 and Rs.508,833,081 (Rs. 490,331,191 as Ex-work supply, Rs. 7, 408, 506 as sales tax on bought out items, and Rs.11,093,384 as service tax).
3. Please send us the signed contract agreement alongwith necessary attachments to enable us to process Procurement Contract Summary .
Sheet (PCSS)."
19. We also find on record a communication again addressed by the Country Director of Ashian Development Bank to the Managing Director, H.P. Power Transmission Corporation Limited (HPPTCL), Shimla, dated 7th December, 2016, on the subject "Loan 3001-IND:
Himachal Pradesh Clean Energy Transmission Investment Program (Tranche 2)-Technical Bid Evaluation Report (TBER) of Bid No.: 23- SS/ADB/HPPTCL/220kV GIS SUNDA Sub-Station", which reads as under:
"1. We refer to your email of 1st December 2016, submitting the Technical Bid Evaluation Report (TBER) of the captioned package for ADB review and approval.
2. We have reviewed your TBER and clarification sent through email of 6th December 2016 to our query of 5 December 2016.
3. We have no objection for your recommendation to consider the technical bids of (i) M/s Kanohar Electricals Ltd. JV with M/s. Chung Hsin Electric and Machinery Mfg. Corp., (ii) M/s [ENTITY] Power Solution JV with M/s Taian Taishan High- Voltage Co. Ltd. (iii) M/s GE T&D India Ltd., (iv) M/s [ENTITY] JV with M/s [ENTITY], (v) M/s [ENTITY] in Consortium with M/s Shongdong Taikal High-Vol Switchgear Company Ltd. and M/s Voltage Infra Pvt. Ltd., and (vi) M/s Toshiba Transmission & Distribution System (India) Pvt. Ltd. as responsive .
and to proceed with opening of their financial bid."
20. Thus, records demonstrate that as on 7th March, 2017, the bank in issue had given its no objection for award of contract to the "lowest evaluated and substantially responsive bidder, M/s [ENTITY] JV with M/s [ENTITY], New Delhi, India amounting to $3,857,266.4 and Rs.508,833,081 (Rs. 490,331,191 as Ex-
work supply, Rs. 7, 408, 506 as sales tax on bought out items, and Rs.11,093,384 as service tax).
21. Decision to annul the contract is dated 31.05.2017. This is apparent from Annexure P-10 appended with the writ petition. The same reads as under:
"To M/s [ENTITY]
507, EROS Apartments, 56, Nehru Place, New Delhi India.
Subject: "Design, Engineering, Manufacture, Fabrication, Testing at Manufactures Works, Transportation to Site, Insurance, Loading/Unloading, Storate, Erection, Testing, and Commissioning of 132/220 kV GIS Sub Station having 132 kV and 220 kV GIS Equipments, 7x26.66/33.33 MVA, 22/132/220 kV. Single Phase Auto Transformers and other Sub Station Equipments and Associated Civil Works at Sunda in Shimla District of Himachal Pradesh on Turnkey Basis" Cancellation of Tender thereof."
Dear Sir, It is to intimate that the subject cited Tender No. 23-SS/ADB/HPPTCL/220 kV GIS SUNDA has been cancelled. EMD will be refunded. We wish your kind participation with HPPTCL in future tendering."
22. Now, this Court has to see as to what has transpired between 7th March, 2017 and 31st May, 2017, which led to the issuance of Annexure P-10.
23. Appended with the petition as Annexure P-20 is the Bid Evaluation Report so prepared by the respondent-Corporation. Clause-3 of the same, which deals with Evaluation and Comparison of Price Proposals, demonstrates that the following findings were returned in the said report vis vis the petitioner and M/s. [ENTITY] Power Solution, New Delhi:
"3.1.2 M/s [ENTITY] Power Solution, New Delhi-(Bidder-2)
(i) There were no deviations to payment terms, liquidated damages provisions and performance security. Thus, no price adjustments were required in this respect.
(ii) In case of Transformers, the capitalization charges are required to be taken into account for Price Bid comparison as per Cl. No. 1,2, 8 (Performance Guarantees) [SECTION] and [SECTION]. Accordingly, the bid of the firm has been loaded with the capitalization charges for the losses quoted by the firm in their technical proposal. The amount of capitalization charges has been indicated in Table-9.
(iii) The bidder has quoted prices inclusive of Service Tax in SCH-4 (Installation & other Services), SCH-[SECTION] (Training charges to be imparted in abroad) and SCH.-[SECTION] (Training charges to be imparted in .
India) respectively. And the service tax is not reflected in [SECTION] (Taxes and Duties not included in Bid Price.) The bidder has changed the Performa of Schedule No.-4, Sch-[SECTION], and Sch-[SECTION], as issued in bidding document of his own. And has given breakup of service tax item wise in above said Schedules.
Therefore the Total amount along with Service tax in Sch-4, Sch-[SECTION] & Sch-[SECTION] is considered as EXW Price, and is taken for evaluation as EXW as per the "Evaluation Guidelines of ADB" and further as per the Observation No. 7 from ADB dated 25.02.2017.
Therefore the same price as EXW is reflected in grand summery TABLE-1 and again in TABLE-10 (Total Evaluated Bid Price); The amount of service tax given in these Schedules, is not taken into consideration for [SECTION] (Taxes and Duties not included in Bid Price) as bidder has not quoted service tax in Sch-8 in the price bid.
3.1.4. M/s [ENTITY] New Delhi-(Bidder-4)
(i) There were no deviations to payment terms, liquidated damages provisions and performance security. Thus, no price adjustments were required in this respect.
(ii) In case of Transformers, the capitalization charges are required to be taken into account for Price Bid Comparison as per Cl. No. 1.2.8 (Performance Guarantees) Section-3 Evaluation and Qualification Criteria) Vol.-I of III. Accordingly, the bid of the firm has been loaded with the capitalization charges for .
the losses quoted by the firm in their technical proposal. The amount of capitalization charges has been indicated in Table-9."
24. In its supplementary affidavit, so filed pursuant to the orders passed by this Court, relevant portion of which we have already reproduced hereinabove, reference is made to a copy of Memorandum and decision of the Board of Directors vide Minutes of Meeting, dated 18.03.2017, which stands appended with the supplementary affidavit as Annexure R/9. Relevant portion of the said Minutes is quoted hereinbelow:
"POINTS FOR CONSIDERATION:
The Board of Directors may kindly consider and accord approval on the following points:
(i) Award the Work for Design, Engineering, Manufacture, Fabrication, Testing at Manufacturers Works, Transportation to Site, Insurance, Loading/Unloading, Storage, Erection, Testing and Commissioning of 132/220kV GIS Sub Station having 132 kV and 220 kV GIS Equipments, 7x26.66/33.33 MVA 22/132/220 kV Single Phase Auto Transformers and other Sub Station Equipments and Associated Civil Works at Sunda in Shimla District of Himachal Pradesh on Turnkey Basis (Complete Package)," at Price of USD 38.57.266 and INR 49.03.31.191.00 Only (USD Thirty Eight Lac, Fifty Seven Thousand, Two hundred sixty six and INR forty nine Crore, Three Lac, Thirty one Thousand, One hundred ninety one only) in favour of M/s Technofab .
Engineering Limited New Delhi in JV with M/s [ENTITY]
(ii) Allow HPPTCL to further negotiate price with M/s. [ENTITY] to arrive at a most competitive offer.
(iii) Allow variation in the quantities of various items (Supply, Erection and Civil Works), if any, after Detailed Engineering.
"Resolved further that the Managing Director/Director (P & C) be and is hereby authorized to do all acts and deeds in this regard."
25. From the above, it is apparent that whereas according to the petitioner, it was L-1, the said fact stands disputed by the respondent-
Corporation, as per whom, it was M/s. [ENTITY] Power Solution, New Delhi, who was L-1, but because of certain arithmetical errors, the said bidder was treated as L-2 bidder. We do not dwell on this issue any further for the simple reason that it is not the grievance of the petitioner that despite the fact that petitioner was L-1, the contract stood awarded in favour of M/s. [ENTITY] Power Solution, New Delhi, which bidder incidentally even is not a party respondent in the present petition.
Otherwise also, whether it was the petitioner-Company or someone else who was L-1, in our considered view, is a disputed question of fact, which cannot be gone into by this Court in exercise of its jurisdiction under [SECTION] of the [ACT]. Be that as it may, the fact remains that it is in these circumstances that respondent-Corporation took a decision, which stands approved by the Financer, i.e., Ashian .
Development Bank, whereby it cancelled the earlier bid and invited fresh tenders. Fresh tender, which so stands invited by the respondent-
Corporation, is also not a subject matter of the present writ petition.
26. It is not in dispute that as per the terms of the tender document, respondent-Corporation was having the right to annul the tenders. Records demonstrate that decision that financial bids be re-
evaluated and sent to ADB for its re-examination was taken by the Board of Directors in its meeting held on 18th March, 2017, relevant extract of which is reproduced hereinblow:
"Item No. 32.05 Memorandum for the Approval in respect of Award of Work for "Design, Engineering, Manufacture, fabrication, Testing at Manufacturers Works, Transportation to Site, Insurance, Loading/Unloading, Storage, Erection, Testing and Commissioning of 132/220 KV GIS Sub Station having 132 KV and 220 KV GIS Equipments, 7x26.66/33.33 MVA22/132/220 KV Single Phase Auto Transformers and other Sub Station Equipments and Associated Civil Works at Sunda in Shimla District of Himachal Pradesh on Turnkey Basis (complete package).
The proposal contained in the captioned Memorandum was explained by the Managing Director and Director (P &C). The BOD discussed the proposal in detail and opined that in view of the Service Tax having been explicitly included in [SECTION] "Installation and Other Services" in the original bid of M/s [ENTITY] Power Solutions Ltd. and the ex-works prices quoted separately therein, the ex-works prices should be considered .
for evaluation instead of considering the same with Service Tax. The BOD desired that the financial bids be re-evaluated accordingly and sent to ADB for their re-examination.
The BOD was also apprised about various complaints and grievances being made by different bidders. The BOD took note of these complaints and desired that HPPTCL should evaluate the bids for technically suitable equipments and ensure lowest cost to the Company.
r The Managing Director/Director (P & C) was authorized to take further necessary action in this regard.
Item No. 32.06 Approval for Construction of Dedicated Transmission Lines of the Generators.
The proposal as per Memorandum was considered. The necessity to construct joint dedicated line of the generators with funding sourced from various developers on Pro rata basis was explained by the Director (Planning & Contracts).
After detailed deliberations, the Board agreed to the proposal subject to the condition that the funds for these projects are made available by the parties and are backed by their commitments in the shape of connectivity and long term Open Access Applications. Options for considering such joint dedicated lines through Green Energy Corridor or any other Scheme funded by GOI may also be .
explored by HPPTCL.
The Managing Director/Director (P & C) was authorized to take further necessary action in this regard."
27. There is also on original record of the file a communication, dated 06.04.2017, addressed by the respondent-Corporation to the Country Director, India of the ADB alongwith which, we find a Revised Bid Evaluation Report, dated April 2017, concluding para of which is reproduced hereinbelow:
"8 CONCLUSIONS: On the basis of the revised evaluation and as per the Minutes of 33rd Meeting of BOD held on dated 18.03.2017 and further endorsed vide Letter No. HPPTCL/BOD-Vol- III/2017-33rd-10672-83 (copy attached as annexure-5), M/s. [ENTITY] Power Solution Pvt. Ltd. New Delhi-(Bidder-2), has been found to be successful bidder and the Contract for the Construction of 132/220 kV, GIS Sub Station at Sunda in Shimla District of Himachal Pradesh, India, be awarded to M/s. [ENTITY] Power Solution Pvt. Ltd. New Delhi-(Bidder-2) at the Bid Price of USD 2,643,064 and INR 58,15,54,471 (INR 55,94,42,682 +Sales Tax on B-OUT items amounting to INR 93,14,253 +Service Tax amounting to INR 1,27,97,536)."
28. There is also on original record of the file a communication, dated 2nd May, 2017, addressed by the Country Director to the Managing Director, H.P. Power Transmission, Corporation Limited, .
relevant extract of which is quoted hereinbelow:
"1. We refer to your letter No. 940 attached in your email of 24 April 2017, submitting response to our letter of 18 April 2017 on the captioned matter.
2. We have noted that [SECTION], [SECTION] and [SECTION] from the bid of M/s [ENTITY] Power Ltd.
have been evaluated exclusive of tax pursuant to [SECTION] (Volume 1 of III), clause 1.2.6 of the Bidding Document which stipulates that " Sales Tax/VAT, Service Tax and other Levies and Duties legally payable on the Goods and Services, shall not be taken into account for Bid Evaluation ".
3. The revised FBER submitted to ADB on 6 April 2017 indicates that the above approach has not been applied uniformly across the all bids, as all other bids have been evaluated inclusive of tax.
Therefore, to maintain consistency in evaluation, all these bids shall also be evaluated exclusive of tax.
4. We note that [SECTION], [SECTION] and [SECTION] of the bid form of the as-issued Bid Document will not allow tax information to be separately identified for consistent bid evaluation exclusive of tax. We would therefor appreciate further clarification on how this issue could have been resolved during the bid evaluation as it is not clearly indicated in the revised FBER."
29. Records further demonstrate that in these circumstances, .
a Memorandum, dated 26.05.2017, was placed by way of circulation before the Board of Directors, relevant extract of which reads as under:
"SUBJECT: MEMORANDUM BY CIRCULATION UNDER [SECTION] OF THE [ACT], FOR THE APPROVAL OF THE BOARD OF DIRECTORS OF THE COMPANY WITH RESPECT TO -CANCELLATION OF TENDER FOR 'CONSTRUCTION OF 132/220 Kv, GIS SUB STATION AT SUNDA IN SHIMLA DISTRICT OF H.P.' BACKGROUND:
The Memorandum for Tender for Award-
'CONSTRUCTION OF 132/220 kV GIS SUB STATION AT SUNDA IN SHIMLA DISTRICT OF H.P ' was placed in 33rd meeting of the Board of Directors of the Corporation held on 18.03.2017 (Annexure-A). The BOD discussed the proposal in detail and opined that in view of the Service Tax having been explicitly included in [SECTION] "Installation and Other Services" in the original bid of M/S [ENTITY] Power Solution Ltd. and the ex-works prices quoted separately therein, the Ex-works prices should be considered for evaluation instead of considering the same with Service Tax. The BOD desired that the financial bids be re-evaluated accordingly and sent to ADB for their re-examination.
The BOD was also apprised about various complaints and grievances being made by different bidders. The BOD took note of these .
complaints and desired that HPPTCL should evaluate the bids for technically suitable equipments and ensure lowest cost to the company. The Minutes of Meeting are annexed as (Annexure -B).
Accordingly the FBER was revised and submitted to ADB on dated 06.04.,2017. ADB after taking some clarifications and reviewing the FBER intimated vide Fax letter dated 09.05.2017 (Annexure -C) that, the treatment of tax was not consistently applied across all bids, hence ADB has shown his inability to issue No objection to the revised FBER submitted on 6 April 2017.
Moreover there is an inconsistency between the [SECTION]Instructions to [ENTITY]) and [SECTION]Evaluation and Qualification Criteria) of the Tender Document. Clause No. 18.4 (d) stipulates that:-
"Installation and other Services ([SECTION]) shall be quoted separately and shall include rates or prices for local transportation, insurance and other services incidental to delivery of the Plant, all labour, Contractor's equipment, temporary works, materials, consumables and all matters and things of whatsoever nature, including operations and maintenance services, the provision of operations and maintenance manuals, training, etc. etc. where identified in the Bidding Document, as necessary for the proper execution of the installation and other services, .
including all taxes, duties, levies and charges payable in the Employer's country as of twenty- eight (28) days prior to the deadline for submission of Bids."
Whereas [SECTION] inter-alia is read as:-
"The following shall not be taken into account for Bid Evaluation:
i) Sales Tax/VAT, Service Tax and other Levies and Duties legally payable on the Goods and Services."
The inconsistency can lead to problems in evaluation as well as issues relating to consistency in evaluation in case the difference in the bids are in the range of Installation and other service changes (schedule-4) as in the present case. In case the differences are substantial this inconsistency in clauses does not affect the final evaluation, but it is not so in the present case where the difference in the bids is very narrow.
Recommendations:
In view of the inconsistency in above said clauses in our Tender documents and various subsequent correspondences including the ADB's inability to issue NOC to revised FBER submitted on 06.04.2017 as per direction of BOD, it is recommended that the Tender for 'Construction of 132/220 kV, GIS Sub Station At Sunda in Shimla District of H.P.' may please be cancelled and .
rebidding process may be allowed to initiate with the modification in the Tender document by specifying inclusion of taxes and duties in the evaluation."
POINTS FOR CONSIDERATION:
The Board of Directors may kindly approve the above recommendations and pass the necessary resolution thereof:
"RESOLVED THAT the approval be and is hereby accorded to:-
1. Cancel the Tender for Construction of 1321/220 k V, GIS-Station at Sunda in Shimla District of H.P."
2. "RESOLVED FURTHER THAT the NIT for the above be floated afresh on priority."
3. "RESOLVED FURTHER THAT the Managing Director/Director (P & C) be and is authorized to do all acts and deeds in this regard.
DIRECTOR (P&C) The agenda has been perused by me and is submitted for the consideration and approval of the BOD by circulation.
MANAGING DIRECTOR"
30. The same was approved by way of circulation and this was followed by communication, dated 29.05.2017, which reads as under:
The Board is informed that the circular Resolution with respect to " CANCELLATION OF TENDER FOR CONSTRUCTION OF 132/220 .
KV, GIS SUB STATION AT SUNDA IN SHIMLA DISTRICT OF HIMACHAL PRADESH ON TURNKEY BASIS" was placed before the Board of Directors on 26.05.2017, which was approved by the majority of the Directors.
After the approval of the Directors the action for Cancellation of the Tender for Construction of 132/220 kV, GIS Sub-Station at Sunda in Shimla District of H.P. has to be taken and fresh NIT for the above shall be floated afresh on priority.
The Board may take note of and confirm the memorandum by circulation which is attached herewith as annexure-A."
31. The above discussion demonstrates that the decision which was taken by the Board of Directors to cancel the tender was not an arbitrary or motivated decision, but it was taken in the peculiar facts and circumstances of the case, in the best interest of the Corporation, which is apparent from the documents, relevant contents of which we have already quoted above.
32. In exercise of our power of judicial review, we are satisfied with the process which was adopted by the respondent-Corporation in the cancellation of the tender and the same in our considered view, is neither irrational nor unreasonable, nor a result of bias or malafide.
The decision appears to have been taken by the respondent-Corporation in the best interest of the Corporation and that too, as per the .
Resolution passed by the Board of Directors of the respondent-
Corporation, which consisted of responsible officers of the State Government also.
Accordingly, as there is no merit in the present petition, the same is dismissed, so also miscellaneous application(s), if any. No order as to costs.
([ENTITY]) Acting Chief Justice ([ENTITY]) Judge December 20, 2017 (bhupender)