IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 34 of 2004 For Approval and Signature: HON'BLE MR.JUSTICE J.N.BHATT and HON'BLE MR.JUSTICE K.A.PUJ ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- PATEL ENGINEERING LTD. Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 34 of 2004 MR MITUL K SHELAT MR SHAKTISINH GOHIL and Mr. Mihir Joshi for Petitioner No. 1-3 Mr.Kamal B.Trivedi, Addl.Adv.General with Ms.Sangeeta Vishen, AGP for Respondent No. 1 MR AS VAKIL with Mr.S.B.Vakil for Respondent No. 2 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE J.N.BHATT and HON'BLE MR.JUSTICE K.A.PUJ Date of decision: 02/04/2004 ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE K.A.PUJ) 1. The petitioner has filed this petition under Article 226 of the Constitution of India praying for a writ of mandamus directing respondent no.1 to grant the contract no. Gujarat State Highway Project 10 for strengthening of State Highway 24-Rajkot-Morvi (KM 1/827 to KM 70/192) and paving of shoulders in favour of the petitioner. The petitioner has also prayed for a declaration that apprehended action of respondent no.1 -State of granting the above work to respondent no.2 as being contrary to the provisions of the tender notice and bidding instructions, settled norms regarding award of the tender contract, and hence, irrational, unreasonable, discriminatory and unconstitutional, 2. Before dealing with the case on hand, and before proceeding with the appreciation, examination and evaluation of rival contentions of the parties, it is necessary to have brief resume of facts of the case and the previous background of the matter, because of which, the present controversy arose before this Court. 3. A Loan Agreement was executed on 18-10-2000 between the Government of India and the International Bank for Reconstruction and Development ("the World Bank" for short) agreeing that the World Bank would lend to the Govt. of India on certain terms and conditions set forth in the Loan agreement, an amount equivalent to 381 million dollars ( $ 381,000,000 ) for the purpose of the Gujarat State Highway Project ("GSHP" for short) provided in Schedule 2 to the said loan agreement. Section 1.02 (h) of the said loan agreement refers "Project Agreement" which means the agreement between the Bank and Gujarat of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement. Section 2.03 refers to the closing date, which shall be December 31, 2005 or such late date as the Bank shall establish. It also says that the Bank shall promptly notify the borrower of such later date. Section 3.02 says that except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the loan shall be governed by the provisions of Schedule 1 to the Project Agreement. Schedule 2 gives description of the Project which consists of Road Widening and Strengthening, Road Maintenance and Institutional Capacity Improvement. 4. On the same date i.e. 18-10-2000 a Project Agreement came to be executed in conjunction with the fulfillment of the terms and conditions of the Loan Agreement between the State of Gujarat and the World Bank. Schedule 1 of this Project Agreement talks about Procurement and Consultants' Services. Goods and works shall be procured in accordance with the provisions of Section 1 of the " Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in January 1995, and revised in January and August 1996, September 1997, and January 1999. This Project Agreement also refers to Employment of Consultants and as per the provisions contained in Part A of Section II, Consultants' services shall be procured in accordance with the provisions of the Introduction and Section IV of the " Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published by the Bank in January 1997 and revised in September 1997 and January 1999. 5. Pursuant to World Bank Guidelines of Selection and Employment of Consultants by the World Bank Borrowers issued in January 1999, respondent no.1-State confirmed the appointment of one L.D. Lea International of Canada to undertake the consultancy services related to GSHP. 6. Respondent no.1-State thereafter issued on 13-2-2002, a Notice Inviting Tender (NIT) inviting bids from eligible contractors for awarding the contract work in question, the estimated cost of which was around Rs.116.7 crores and also for awarding as many as other 5 contracts. In response to the said NIT covering different contracts, respondent no.1-State received as many as 46 bids with voluminous record, each bid containing 5 big volumes, including addendum. A pre-bid meeting was thereafter held on 27-1-2003 between the bidders and respondent no.1-State for seeking proposed changes and/or modification/clarifications with regard to the contract in question. Pursuant to the said meeting and on the basis of the queries received, an addendum came to be issued by respondent no.1-State in the above referred tender documents and the Bill of Quantities (BOQ) was changed by issuance of the said addendum. All the 46 bids in respect of 6 contracts, including 7 bids for the contract in question were opened in the presence of the bidders and on preliminary scrutiny and announcement in respect of Summary Bill of Quantity ( BOQ), modifications, bid security, bid validity etc, was made whereupon, the bidders in case of the contract in question came to know about their order of ranking. Respondent no.2 was found the lowest bidder and the petitioner-JV was found L-2. The total bid price of respondent no.2 after discount and/or modification came to Rs.99,40,36,488/- whereas that of the petitioner came to Rs.99,69,63,682/-. After preliminary scrutiny of the tender documents on coming across the addendum a different position was found in case of the petitioner where total bid sum after applying modifications was coming to the tune of Rs.98,53,12,381/-. Respondent no.1 -State, therefore, wrote a letter on 19-6-2003 requesting the petitioner to agree with the details of error explained in the said letter with the rider that other aspects of the bid are under detailed examination and verifications. The petitioner immediately gave its concurrence vide letter dated 24-6-2003. In view of the further scrutiny of the bid documents and, more particularly, of form of bid, the petitioner was again requested vide letter dated 23-6-2003 by respondent no.1 -State to provide various information including confirmation that the requirements of addendum no.1 have been taken into account by the petitioner in its bid. The petitioner vide its letter dated 2-7-2003 confirmed that all the requirements of addendum no.1 have been taken into account in their bid. 7. During the detailed examination and scrutiny, it was found by respondent no.1-State that the petitioner had quoted two different rates for the very items - one in the original bid documents, and the other in the addendum and that it had filled in, both original pages of the bid documents as well as addendum and quoted rates in original BOQ by making hand-made modifications as per the addendum, and in certain units of quantities in original BOQ. The consultant of respondent no.1-State after taking into account all the aspects of the matter including responsiveness of the bid came to the conclusion that the bid of the petitioner was not substantially responsive, and therefore, the consultant recommended that the bid of respondent no.2 was the lowest substantially responsive bid. Respondent no.1 -State thereafter, furnished all the requisite documents to the World Bank on 10-12-2003. Several correspondence, e-mails etc. were exchanged between the World Bank and respondent no.1 -State and ultimately, the World Bank has given its no objection on 31-12-2003 for the award of the contract in favour of respondent no.2. Respondent no.1-State thereafter issued a letter of acceptance on 2-1-2004 awarding the contract in favour of respondent no.2. 8. Since the petitioner was of the view that its bid was the lowest one it was awaiting formal communication for acceptance of offer and execution of agreement. However, respondent no.1-State did not invite the petitioner for acceptance nor sought any clarification especially when all the other contracts in respect of which the process was undertaken simultaneously were awarded in favour of the lowest number qualified bidder. In respect of the contract in question, the respondent sought extention of the bid validity date, initially on 8-9-2003, and thereafter, on 7-11-2003 and the last date as extended was 10-1-2004. The petitioner was apprehending that the delay in the acceptance of the offer was only with a view to favour respondent no.2 who was the second lowest bidder and the petitioner also came to know about the initiation of the process for awarding the contract in favour of respondent no.2, and hence, the present petition was filed before this Court. 9. Initially, the Court issued a notice on 6-1-2004 and observed that since the notice has been issued, it was expected that the Government would stay its hands till the next date. On the first returnable date i.e. 12-1-2004, the Court was informed that the letter of acceptance has already been issued by respondent no.1 -State in favour of respondent no.2 on 2nd January, 2004. However, hope was again expressed by the Court that no further action would be taken by respondent no.1 -State, and in view thereof, the matter has rested with the issue of letter of acceptance dated 2-1-2004. Respondent no.1-State thereafter filed its affidavit-in-reply on 27-1-2004. The petitioner had submitted a draft amendment dated 29-1-2004 which was partly objected by respondent no.2. The petitioner sought production of the Project Agreement, the Loan Agreement, the World Bank Guidelines, the Bid Evaluation Report, the letter of respondent no.2 dated 23-6-2003 to the State Government, the reply dated 27-6-2003 of the Government of Gujarat to respondent no.2, e-mail dated 30-12-2003 from the Government of Gujarat to the World Bank and the fax message dated 31-12-2003 from the World Bank to the Gujarat State conveying no objection to the award of the contract to respondent no.2. All these documents were produced by respondent no.1 alongwith an affidavit dated 3-2-2004. The petitioner had filed its affidavit-in-reply dated 6-2-2004 to respondent no.1's further affidavit dated 5-2-2004 and rejoinder to the affidavit-in-reply dated 5-2-2004. Respondent no.1-State filed its rejoinder dated 7-2-2004 and respondent no.2 filed its reply dated 10-2-2004. The petitioner had filed further affidavit dated 11-2-2004 in rejoinder to the second reply dated 10-2-2004. The matter was heard at length for several days and it was agreed between the parties that the hearing be treated as final hearing of the matter and the written submissions and/or written arguments on behalf of the respective parties were taken on record. 10. Mr. Mihir Joshi, learned Advocate appearing for the petitioner has raised the first and foremost contention to the effect that the petitioner-JV has offered the lowest evaluated bid price and there was no legal or justifiable reason not to award the contract to the petitioner. He has further submitted that the evaluated bid price of the petitioner was Rs.98,53,12,381/- as per the letters dated 19-6-2003 and 24-6-2003, while the similarly evaluated bid price of the successful bidder i.e. respondent no.2 is Rs.99,38,37,989/- on which amount the contract has been awarded to respondent no.2 by respondent no.1-State vide letter dated 2-1-2004. He has further submitted that it is not even the case of respondent no.1 -State that despite being the lowest bidder, it was thought fit or proper to award the contract to respondent no.2 for any reason whatsoever. He has further submitted that the issue as to whether the State can in its discretion ignore the lowest bid for awarding contract does not arise. He has invited the attention of the Court to Clause 33 of ITB which emphasizes that the contract would be awarded to the bidder whose bid is substantially responsive and who has offered the lowest evaluated bid price. He has also invited the Court's attention to Clause 2.58 of the Guidelines which emphasizes the very same aspect. Moreover, in other contracts which were part of the same tender notice, contracts have been awarded to the lowest bidders. He has further submitted that Clause 34 of ITB which reserves a right to the employer to reject or accept any bid cannot be read as giving an absolute discretion to the employer. Similarly, item 7 of form of bid in Section 7 of the bid documents does not reserve the absolute right on the employer to reject the bid; nor does it preclude a bidder from challenging an arbitrary action of the employer regarding rejection or acceptance of bid. He has further submitted that respondent no.1-State could not have ignored the letter to the petitioner dated 24-6-2003 confirming the evaluation bid price, or in any case, respondent no.1-State ought to have asked for clarification under Clause 27 of ITB to clarify any purported ambiguity about such price, before awarding the contract to respondent no.2. 11. Mr. Joshi has further submitted that the decision of respondent no.1 to reject the bid of the petitioner initially on the ground that it was not substantially responsive on account of multiple bid, then on the ground that the petitioner had resorted to unfair practice and finally also on the ground that there was material deviation in the bid of the petitioner whose rectification would have unfairly affected the competitive position of other bidders is absolutely unreasonable since it ignores the very nature of the error and it is contrary to conditions of the ITB, and therefore, invalid and illegal. As far as the allegation regarding multiple bidding is concerned, Mr. Joshi has submitted that in the evaluation report, respondent no.1 no.1-State has submitted that filling up the original pages of the bid documents and the addendum pages was a case of multiple bidding. This is, however, not correct. Clause 6 of ITB prescribes that there should be one bid per bidder and a bidder who submits or participates in more than one bid will cause all the proposals in which the bidder has participated to be disqualified. The form of bid is in Section 7 of Volume II of ITB. Admittedly, the petitioner has submitted only one bid and has not directly or indirectly participated in more than one bid. Therefore, there was no disqualification incurred under the said clause. Mr. Joshi has further submitted that the error of petitioner in filling up the original pages in the bid documents and the substituted pages in the addendum does not amount to multiple bidding as contemplated under Clause 6 of ITB. Making the correction would merely change the amount in the form of bid which cannot be true in every case of correction including that in the bid of respondent no.2 whose bid was corrected from Rs.99,40, 36, 488/- to Rs.99,38, 36, 989/- without considering it as multiple bidding. Mr. Joshi has further submitted that, in any case, in view of Clause 9, 11 and 19.4 of ITB an addendum modifies the bid document and the original pages are deleted, and therefore, redundant for all purposes, and there is no question of considering amounts filled in in the original pages while evaluating the bids. Mr. Joshi has further submitted that the bid of the petitioner could not have been determined to be not substantially responsive on account of multiple bidding since it is an extraneous consideration to such determination as the parameters of responsiveness are defined in Clause 28.2 of the ITB which do not include multiple bidding. Mr. Joshi has further submitted that as per Clause 6 multiple bids are to be rejected at the first stage itself and admittedly respondent no.1 who was aware of the error in the bid had not rejected the bid of the petitioner which establishes that this was an after thought. 12. As far as the allegation of unfair practice is concerned, Mr. Joshi has submitted that in the evaluation report, respondent no.1-State has stated that by filling up both the original bid pages and the addendum pages, the petitioner could take undue advantage of post opening of tender since it knew the price of other bidders and had the advantage of agreeing or disagreeing with arithmetic corrections under Clause 29.2 of ITB. Mr. Joshi has submitted that this conclusion of respondent no.1-State is absolutely irrational inasmuch as on account of Clauses 9,11, and 19.4 of the ITB, the original pages of the bid document stood substituted and the bid documents stood modified by the addendum, and therefore, the pages of the original bid document became redundant for all purposes, and there was no option to a bidder to refer to the pages of the original bid documents for any purpose. Mr. Joshi has further submitted that under Clause 29.2 of ITB, there is no option to the bidder to agree or disagree with the corrections made by respondent no.1 and in case it is not accepted, the bid of such bidder would be rejected, and therefore, the entire hypothesis of respondent no.1 regarding unfair practice was baseless and irrational. Mr. Joshi has further submitted that this ground of unfair practice was admitted to be improved upon in the additional affidavit by stating that the confirmation of price was not binding on respondent no.1-State and that the petitioner had confirmed by letter dated 2-7-2003 that its bid has taken into consideration the figures mentioned in the addendum. He has, therefore, submitted that the stand of respondent no.1 that corrections were not binding on respondent no.1 did not support the allegation that the petitioner had sought to take undue advantage as alleged earlier, and it is therefore self defeating. The confirmation of addendum was a routine communication addressed to a number of other bidders and the letter dated 2-7-2003 was after confirmation of corrected price after taking into consideration the addendum given by the petitioner vide letter dated 24-6--2003, and therefore, not unfair or misleading at all. Mr. Joshi has further submitted that the term unfair practice is very vague and ambiguous and devised by the defendant no.1-State to cover its ipse dixit under Clause 39 of the ITB which refers to corrupt or fraudulent practices and which can invite rejection of the bid. It is not the case of respondent no.1-State that the petitioner has adopted any of such practices. The tender of the petitioner, therefore, could not have been rejected on such a vague ground which is not even contemplated under the ITB. 13. As far as the allegation of material deviation is concerned, Mr. Joshi has submitted that it was an improvement made in the affidavit over the reasons assigned in the evaluation report considering filling of the original and substituted pages by the petitioner as a material deviation whose rectification would unfairly affect the competitive position of other bidders. He submitted that this reason is not indicated in the contemporaneous record being the evaluation report and the bid of the petitioner has not in fact been rejected on this ground at all. He has further submitted that the interpretation of respondent no.1-State is rather mischievous and incorrect to its knowledge. Material deviation is a known term in commercial parlance. What Clause 28.2 contemplates is a deviation which if accepted would either (a) affect substantially the scope, quality or performance of the work or (b) limit substantially the employers' rights or bidders obligations under the contract or (c) whose rectification would unfairly affect competitive position of other bidders. The rectification contemplated is only after the deviations were hypothetically to be accepted and not any rectification prior to evaluation since that would bring the correct picture to the forefront and certainly not unfairly affect the competitive position of other bidders. He has further submitted that the error in the bid is arithmetical as confirmed by respondent no.1 in letters dated 19-6-2003 and 10-12-2003, and therefore, cannot be considered to be material deviation at all. 14. Mr. Joshi has further submitted that the decision to reject the bid of the petitioner as not being substantially responsive on account of having filled up prices both in the original pages of the bid document and the substituted pages in the addendum is not bona fide, got up subsequently, as an afterthought and with a view to favour respondent no.2. In support of this proposition he has submitted that respondent no.1 has contended that substantial responsiveness of the bid had not been determined at the time of issuance of letter dated 19-6-2003 and as stated in the affidavit-in-reply paragraphs 3.12, 3.14 and 3.15 that initially the letter was written, but thereafter on microscopic scrutiny of tender documents the filling of price in the original documents by making hand-made modification and also in the addendum was noticed. Similar averment is made in paragraphs 4.4 and 9 of the further affidavit. Mr. Joshi has submitted that the contention of respondent no.1 that it was not aware of the exact error at the time of issuance of letter dated 19-6-2003 and that it had only proceeded on the summary BoQ is false because the said letter itself refers to corrections in item no.6.026 and item no.6.458 which are errors of multiplication and not reflected in the summary BoQ, meaning thereby, that respondent no.1 has gone through every line of the summary BoQ and thereafter, issued the letter dated 19-6-2003. Moreover, each page of the original bid is stamped by the Superintending Engineer on 17-5-2003. Mr. Joshi has further submitted that in the bid valuation report submitted by respondent no.1, in paragraph 7 regarding substantially responsive bid, it is stated that for substantially responsive bid a thorough check was carried out upon the price BoQs and check for arithmetical errors, and the bidders whose bids contained errors were requested to confirm the correct amounts as per ITB Clause 29.2. He submitted that admittedly such letters were written to the bidders on or immediately around 19-6-2003. Respondent no.1 has suppressed the fact that similar letter was addressed to the petitioner also and confirmation was obtained. This confirms that when the said letter was written to the petitioner and others substantial responsiveness of all the bids had already been determined. That such determination for the bidders was taken up at any time after 19-6-2003 and contentions to the contrary are not borne out from the record. Mr. Joshi has further submitted that there is a presumption that respondent no.1 would have acted in accordance with the ITB conditions. It is only after bids are determined to be substantially responsive under Clause 28 of ITB that correction of errors is undertaken in terms of Clause 29 thereof. The contention of respondent no.1 that it had not adhered to this is self serving and unbelievable since respondent no.1 has not produced any record or made any averment as to when bids of all the bidders were taken up for examination and determination of responsiveness under Clause 28 of ITB. 15. Mr. Joshi has further submitted that favouritism shown to respondent no.2 is evident from the letter dated 23-6-2003 of respondent no.2 indicating beyond doubt that it has interfered with the evaluation of bids and has been permitted to examine the bid of the petitioner and note down prices of all items and total the amount with individual calculation for each item in the presence of the Superintending Engineer and make personal representations to respondent no.1, which is finally borne out. Mr. Joshi has further submitted that the decision of respondent no.1 to award the contract to respondent no.2 is not saved from the vice of irrationality and illegality merely because it