W.P.(C) No. 3231/2010 Page 1 of 32 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) No. 3231/2010 % Reserved on: 26th August, 2010 Pronounced on: 8th September, 2010 LARSEN & TOUBRO LIMITED & ANR. ...... Petitioners Through: Mr. S. Ganesh, Senior Advocate with Mr. Pratap Venugopal, Advocate. VERSUS UNION OF INDIA & ORS. ....Respondents Through: Mr. A.S. Chandhiok, ASG with Ms. Maneesha Dhir, Mr. Ritesh Kumar, and Ms. Preeti Dalal, Advocates for the respondent Nos.1 to 3. Mr. Raju Ramchandran, Senior Advocate with Mr. Ritin Rai, Mr. Siddhartha Jha, Mr.Shankar, and Ms. Akriti Gandotra, Advocates for the respondent No.4. CORAM: HON‟BLE MR. JUSTICE SANJAY KISHAN KAUL HON‟BLE MR. JUSTICE VALMIKI J.MEHTA 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes W.P.(C) No. 3231/2010 Page 2 of 32 JUDGMENT VALMIKI J. MEHTA, J. 1. The petitioner No.1 (hereinafter ‗petitioner‘) has filed this writ petition seeking the following relief:- ―(a) For an appropriate writ, order or direction to the Respondents 1 to 3 herein to consider the bids submitted by the Petitioner No.1 being the lowest bidder, in response to RFP No. TM (M)/0025/CG/FPV dated 17th June, 2009 and to invite the Petitioner No.1 for discussions/negotiations and acceptance of the bids as per the terms of the said RFP.‖ 2. The facts of the case are that the respondent No.1 floated a Request for Proposal (RFP) for 20 Fast Patrol Vessels (FPVs) for the Indian Coast Guard (ICG) on 17.6.2009 from the petitioner. Similar requests for proposals were also issued to certain other entities. As per the procedure, normally adopted, the request for proposal to be submitted by the bidders was to be in two parts. i.e. a technical proposal and a commercial proposal. The need for this RFP arose because the ICG was formed in 1978 as an armed force of the union for the security of maritime zones of India. The ICG is responsible for maintaining surveillance along the coast line of 7516km and an Exclusive Economic Zone(EEZ) of 2.013 m Sq. Km. The 26/11 Mumbai Terrorist attack in the year 2008 revealed that India‘s long coastline and Sea areas have become more vulnerable to terrorists and other anti-social activities and the responsibility for Coastal Surveillance by W.P.(C) No. 3231/2010 Page 3 of 32 ICG has increased manifold. To meet the growing maritime challenges, to overcome the gaps in the coastal surveillance and to sanitise the vast sea area, additional vessels were sanctioned for acquisition for ICG by the Government. 3. The petitioner submitted its bid on 19.10.2009 in the afore- stated two parts; a technical proposal and the commercial proposal. The petitioner had indicated in its commercial offer that it intended to avail of the exchange rate variation benefit. The petitioner and four other entities, including the Respondent No.4, were successful in the technical bid and they were subsequently called upon to submit their commercial offers. The commercial bids were opened thereafter on 11.1.2010. The bids were opened in the presence of the bidders/their representatives. 4. Though, the petitioner‘s offer was for the lowest price (L-1) its bid was found to be non-responsive, because, as per the tender conditions, though the price was to be firm and fixed for the entire duration of the contract and was not subject to escalation yet the petitioner claimed foreign exchange rate variation (FERV). Respondent No.4 herein M/s Cochin Shipyard Ltd., a public sector undertaking (PSU) was found to be the second lowest bidder (L-2). 5. On receipt of Techno Commercial Offers from five bidders a Technical Evaluation Committee (TEC) was constituted on 21.10.2009. The estimated cost of the project was more than Rs.300 crores and W.P.(C) No. 3231/2010 Page 4 of 32 therefore, a Technical Oversight Committee (TOC) was constituted by the Ministry of Defence to ensure that there was no oversight in the conduct of the technical evaluation process. A Contract Negotiation Committee (CNC) was constituted in accordance with the Defence Procurement Procedure-08 (DPP). When the commercial bids were opened in a CNC meeting held on 11.1.2010, it was observed, as already stated, that the price quoted by the petitioner had a variable foreign exchange content because the commercial bid specified that the cost of FPVs included a maximum Foreign Exchange (FE) content of Rs.432 crores and any revision in the foreign exchange content after 15.10.2009 was claimed at actuals. To determine the FE content, the petitioner had attached a copy of the SBI rate card with the commercial bid which rate card contained various exchange rates of different foreign currencies. It would be interesting to note, and as adverted to later, the petitioner however did not specify as to which foreign currency was the basis of the foreign exchange component in the commercial bid. Since the commercial offers had to be firm and fixed, and since the petitioner had claimed the FERV component, CNC concluded that the commercial offer of the petitioner was non- responsive. The petitioner on account of its bid being non-responsive subsequently to opening as the commercial bids, vide its letter dated 15.1.2010 withdrew its earlier offer and offered the quoted price without FERV content. The object of this letter therefore was to make a non-responsive bid as responsive i.e. an offer which was not firm W.P.(C) No. 3231/2010 Page 5 of 32 and fixed and which contained an escalation clause depending upon Foreign Exchange Variation, was sought to be made firm and fixed by removing the FERV condition. The CNC, therefore, consequently declared bid of the petitioner as non-responsive and the respondent No.4 was consequently declared as L-1 bidder on 18.1.2010 and was subsequently awarded the contract. The petitioner therefore filed the present petition seeking the relief already stated above. 6. It is relevant to note that while processing the case for approval of the CNC report by the Competent Financial Authority, the Ministry of Defence referred the case to the Central Vigilance Commission (CVC) for consultation whether the rejection of offer of the petitioner by CNC was valid or not. CVC in its Office Memorandum dated 9.4.2010 observed as under:- “The observations made by CNC in Para 6(a) & (b) in the minutes of meeting held on 13.01.2010 appears to be logical and in line with tender terms. A perusal of the CNC Report clearly indicates that offer of L&T was not complaint to tender requirements of a firm and fixed price and it had further anomalies as discussed by the CNC. Hence offer of L&T could not have been considered by the CNC as recorded by them.” 7. When the writ petition came up before this court for admission on 14.5.2010, the following order was passed:- ―Learned ASG appearing for R-1 to R-3 submits that the bid of the petitioners has been treated as non-responsive in view of a provision of Foreign Exchange Rate Variation (‗FERV‘ for W.P.(C) No. 3231/2010 Page 6 of 32 short) which was subsequently withdrawn by the petitioners. It is submitted that the subsequent withdrawal cannot affect the bid of the petitioners and that an opinion of the CVC has also been obtained in this behalf. Learned senior counsel for the petitioner, however, contends that this FERV condition was present even in the case of R-4. Let notice issue as to why rule nisi be not issued, returnable on 27.07.2010. Xxxxxxx‖ 8. The following issues arise for consideration in the present petition: (i) Whether a bidder can amend its bid by withdrawing a condition/term of a bid document, and, by virtue of which condition/term which is sought to be withdrawn, the bid was non- responsive? (ii) Whether a bidder is entitled to contend that a non-responsive bid be treated as responsive because the term/condition stood withdrawn immediately after opening of the bid documents? (iii) Whether the bid of respondent No.4- Cochin Shipyard Limited is non-responsive inasmuch as its bid price was to be determined on the basis of foreign exchange rate as prevalent on the date of opening of the bid; putting it differently can the price of respondent No.4 be not said to be firm and fixed because the price contains a foreign W.P.(C) No. 3231/2010 Page 7 of 32 exchange component and which is to be taken at a particular rate as applicable on the future date of opening of the bid? (iv) Assuming the bid of the petitioner not to be non-responsive, whether the petitioner has locus standi to challenge the grant of award to a successful bidder although the petitioner was not the next lower bidder (L-2) who would be entitled to the contract if the bid of the lowest bidder (L-1) is treated as non-responsive, and more so because of the fact that this argument is pressed on the supposition that the respondent No.1 may scrap the tender process on the eventuality of the L-1 bid being treated as non-responsive. (v) Whether the respondent No.1 was bound to apply the Discounted Cash Flow (DCF) method in arriving at the final price of each bidder or that this requirement of applying the DCF method was an only option available to the respondent No.1 and hence not mandatory. (vi) Whether the petitioner would be entitled to the discretionary relief under Article 226 of the Constitution of India inasmuch as even assuming the petitioner was entitled to put the FERV condition, yet, the petitioner did not specify any one particular foreign currency but simply attached an SBI rate card for various rates of different foreign currencies and thereby entitling it in case of an award of contract for claiming foreign exchange rate variation by choosing the currency at its convenience? W.P.(C) No. 3231/2010 Page 8 of 32 Issues Nos. (i) and (ii) 9. We take up the first two issues as to whether a bidder is entitled to alter and amend a bid condition. The price of the FPVs to be purchased under the subject RFP could contain a foreign currency component. Since the conversion rate of foreign currency qua the Indian rupee varies, the respondent No.1 could have faced a situation that in case the Indian rupee was weaker as compared to the quoted foreign currency/exchange component the respondent No.1 would have been subjected to a higher cost price. To avoid any escalation in the price, the bid document made it more than abundantly clear that no escalation will be permitted and the prices will be firm and fixed. The contract was to be performed over a period of six and half years and over which period the 20 FPVs had to be supplied. There is a schedule laid out over this period of six and half years for construction and supply of FPVs and the payment during such period. Being a long period, fluctuation in the foreign exchange would ordinarily have taken place and therefore the respondent No.1 was careful to make clear and insert a term in the bid documents that the price shall remain firm and fixed and no escalation will be permitted. Clearly, therefore, when the petitioner asked not only for a fixed price in Indian rupees but additionally for an additional cost on account of foreign exchange subject to future variation, the quoted price would obviously not be firm and fixed. In fact, it is not even disputed by the learned senior counsel for the petitioner that inclusion of the term of W.P.(C) No. 3231/2010 Page 9 of 32 seeking foreign exchange rate variation made the price quotation of the petitioner to be not firm and fixed. Since the term and condition of the price to be firm and fixed is extremely important to the terms and conditions of the tender, submission of a bid which violates this condition clearly makes the bid in our opinion a non-responsive one. This is not a case where a certain clerical alteration or amendment of a very minor and administrative nature was sought to be made in the bid documents by the petitioner subsequent to the opening of the commercial offers. The importance of a price, in a contract running into hundreds of crores, cannot be over emphasised. Invariably, anything touching upon the price is a fundamental part of a bid document. It is impermissible in law to make such a non-responsive bid as responsive by withdrawing the condition after opening of the bid documents. See W.B.State Electricity Board Vs. Patel Engineering Company, 2001 (2) SCC 451. In our opinion, once the petitioner‘s bid is non-responsive in view of what is discussed above, the writ petition is liable to be thrown out by this court on this ground alone as there does not arise any question of the petitioner seeking the relief in such circumstances of it being called for negotiations for award of the contract to it. A non-responsive bid cannot be made responsive by seeking to withdraw the condition after opening of the bid documents. Even assuming that bid documents of other bidders are non-responsive (as alleged to be so of respondent No.4) and the petitioner in view of such non-responsive bids seeks to W.P.(C) No. 3231/2010 Page 10 of 32 make his bid documents comparative/competitive, the same is impermissible in law. A non-responsive bid of another bidder will make such other bidders‘ bid non-responsive and liable to rejection, but, the same cannot give a valid legal basis to the petitioner to argue that it is entitled to withdraw the FERV condition so as to make its non-responsive bid as responsive. We, therefore, hold that the petitioner‘s bid was non-responsive and hence rightly rejected. The petitioner is not entitled to make a non-responsive bid as responsive after submission of the same, and much less after opening of the bids. Issue Nos. (iii) & (iv) 10. Respondent No.4 while submitting its bid specified that its price will be in Indian rupees with a foreign exchange component which will be converted into Indian rupees as on the date of opening of its bid. The issue is that can it be said that by making such a bid, the respondent No.4 has violated the condition of its price not being firm and fixed. In order to appreciate this issue, one would have to go to the intent of such a clause which requires the price to be firm and fixed. A natural and logical meaning of a term in a contract of the price being firm and fixed and not subject to escalation, in a contract of the present type, obviously means that the price will be firm and fixed during the period of performance of the contract i.e no additional amount towards price will be payable for any reason W.P.(C) No. 3231/2010 Page 11 of 32 whether for foreign exchange variation or otherwise during the payment of amounts towards tranches of price over the elongated performance period of the contract. The intent of the price being firm is with respect to the period or performance of the contract and the same does not have any bearing or co-relation with respect to a bid document stating that the foreign exchange conversion rate for the foreign exchange component in the bid documents will be taken as the conversion rate on the date of opening of the bid. It is indeed stretching it too far to contend and argue that such a bid of the respondent No.4 should be treated as non-responsive merely because the same contains a foreign exchange component at a rate which is to be the one as prevalent on the date of opening of the bid. We cannot agree that such an interpretation should be put as argued by the learned senior counsel for the petitioner that the price of respondent No.4 should be held not to be firm and fixed merely because a bid contains a foreign exchange component conversion as per a rate as prevalent on the date of opening of the bid. This in our opinion would not make a bid non-responsive allegedly on the ground that accordingly the price is not firm and fixed. In any case, this is one plausible interpretation of the term of the contract that the firm and fixed price is an issue pertaining and relating to the period of the performance of the contract and not the date of opening of the bid. By taking such an interpretation, we do not think that the respondent No.1 has at all or in any manner acted perversely justifying the W.P.(C) No. 3231/2010 Page 12 of 32 interference of this court in the exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India. 11. Learned senior counsel for the petitioner relied upon the following Clause 31 in the Part III Section of the RFP to support his argument that price had to be firm even during the bid validity period:- ―31. The Commercial Offer will be opened only of those Shipyards/Ship Builders, whose vessel is short listed after technical evaluation. The Commercial Offer must be firm and fixed and should be valid for at least 18 months from the date of submission of offer.‖ Relying upon the aforesaid Para 31 of the RFP, it was contended that commercial offer of the respondent No.4 ought to have been firm and fixed for the entire period of 18 months—the bid validity period. It was contended that the commercial offer of the respondent No.4 was not firm and fixed for this 18 months period because foreign exchange rate would fluctuate for the foreign exchange component during this period of 18 months leading to an uncertain price figure. It was contended that therefore, Clause 31 stood violated and the price as offered by respondent No.4 would therefore be not firm and fixed and consequently the bid of the respondent no.4 would be non-responsive. In our opinion, the argument as advanced on behalf of the petitioner arises from a mis-reading of Para 31 of Section III of the RFP. The period of 18 months as mentioned in the said Para 31 of the RFP is W.P.(C) No. 3231/2010 Page 13 of 32 the bid validity period in months and this Para 31 does not deal with the aspect that the bid should be firm and fixed for the 18 months bid validity period. We have already stated, a firm and fixed aspect of the price i.e. price not being subject to escalation is an issue with respect to the price being fixed during the contract performance period and not the bid validity period. 12. In addition to para 31, the aspect of the price having to be firm and fixed is contained in para 1 of Annexure II to Appendix E and the relevant portion of which reads as under:- ―1. Terms of Payment. The basic price is on firm and fixed basis and shall not be subject to escalation. The basic price of the FPV shall be paid as per the following stages, subject to completion of works: xxxxxx‖ The expression ‗basic price‘ in the aforesaid paragraph is important because the basic price will be the price which will be demanded on the date of the opening of the bid. It is this basic price which has to be firm and fixed. 13 Further, this issue is also answered by a term in the bid documents itself which is Clause 5 (b) of amended Appendix ‗E‘ to the bid documents which reads as under:- ―(b) Structuring Cash Flows for Tenders/Bids Received in Different Currency. W.P.(C) No. 3231/2010 Page 14 of 32 (i) Where bids are received in different currencies/combination of currencies, the cash outflow may be brought to a common denomination in rupees by adopting a Base Exchange rate as on the day of opening of price bids. Thereafter, the procedure as described above in the case of tender bids received in the same currency should be applied to arrive at NPV. Conversion of foreign currency bids into rupee is to be done by taking into account the BC selling rate of Parliament Street Branch of State Bank of India, New Delhi on the date of the opening of price bids.‖ A reading of the aforesaid clause makes it clear that the date of opening of the price bid is the relevant date for the conversion rate to be applied for the foreign exchange component of the price. Therefore, the bid which has been submitted by the respondent No.4 seeking a conversion rate on the date of opening of the bid is in fact in accordance with the intent of the contract and so made clear from the extracted portion of Para 5(b) above. Once, a bidder can submit a bid containing a foreign exchange component, the price payable in Indian rupees as on the date of opening of the bid can surely and only be calculated on the basis of the conversion rate on the date of opening of the bid. When this is so done, the action of applying of a conversion rate is in terms of the bid documents and surely not in violation of the same. In our opinion, it is stretching it too far for the petitioner to canvass that the respondent No.4‘s bid should be treated as non-responsive because it has given a conversion rate for a foreign exchange component as on the date of opening of the bid. We have not been referred to any clause in the RFP that the bid to be submitted will only be in rupees. That such argument has no legs to stand upon becomes clear from the fact that the petitioner‘s bid also W.P.(C) No. 3231/2010 Page 15 of 32 contained foreign currency component and thus its claim for FERV. Also, the fact that FPVs could have an import content up to a maximum of 70% makes it abundantly clear that the bids would naturally have a foreign currency component. Therefore, on both the counts that the requirement of the price being firm and fixed relating to the period of performance of the contract and not with respect to the date of opening of the bid and also because the contract itself clearly specifies in Para 5(b) of the conversion rate to be applicable on the date of opening of the bid, it is quite clear that it cannot be held that the bid of the respondent No.4 should be treated as non-responsive. We, therefore, reject this contention as raised on behalf of the petitioner. Further, in our opinion, the petitioner has no locus standi to question the responsive or non-responsiveness of the bid as submitted by respondent No.4. The bid of the respondent No.4 has been treated as responsive by respondent No.1 and which bid has been accepted. Since the petitioner is not L-2, it has no locus standi to seek any determination on alleged non-responsiveness of the respondent No.4 because, assuming, the bid of respondent No.4 was to be rejected, even then, the petitioner would not be successful as its bid was non-responsive. It is really ambitious on the part of the petitioner to contend that it has locus standi to challenge the issue of non-responsiveness of the bid of the respondent No.4 because the W.P.(C) No. 3231/2010 Page 16 of 32 petitioner has an assumptive ―feeling/idea‖ that if the bid of the respondent No.4 is rejected, then the entire tender process will be scrapped and therefore bids will be invited. We have not been given the benefit of the basis of formation of such presumptive ―feeling/idea‖ of the petitioner. Obviously, having no locus standi, to thereafter stand upon this speculative assumption for pleading existence of locus is clearly mis-conceived and we thus hold that the petitioner has no locus standi to challenge the alleged responsiveness or the non-responsiveness of the bid as submitted by respondent No.4 and which has been accepted by respondent No.1 after due scrutiny and after taking the opinion of CVC. Issue Nos. (v) & (vi) 14 (i). It