(-1-) MGN IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION LODGING NO.2002 OF 2008 1. M/s.Uttam Sucrotech ) International Pvt. Ltd., ) a Company incorporated under ) the provisions of the India ) Companies Act, 1956 and ) having its registered office ) at B-231, D- Second Floor, ) Greater Kailash-I, New Delhi ) -110 048. )..PETITIOENRS 2. Mr. Sanjiv Gulati, ) Director and Shareholder ) of M/s.Uttam Sucrotech ) International Pvt. Ltd., ) B-231, D- Second Floor, ) Greater Kailash-I, New Delhi ) -110 048. ) Versus 1. The Export Import Bank of ) India, Established under the ) Export Import Bank of India ) Act, 1981 having its head ) (-2-) office at Centre 1 Building, ) Word Trade Centre, Cuffe ) Parade, Mumbai-400 005. ) 2.Tendaho Sugar Factory Project ) through the Government of ) Federal Democratic Republic ) of Ethiopia, PO Box 2574, ) Salfaz Building, Cape Verde ) Road, Adis Ababba, Ethiopia ) 3.Overseas Infrastructure ) Aliance (I) Pvt. Ltd., ) a Company incorporated under ) the provisions of the India ) Companies Act, 1956 and having) its registered office at ) 402, Shubham Centre 1, 4, 91 ) Cardinal Gracious Road, ) Andheri (East), Mumbai-400 099)..RESPONDENTS Mr. Aspi Chinoy, Seniolr Counsel with Mr. Sandeep Marne, for the Petitioners. Mr. Virag V. Tulzapurkar, Senior Counsel with Mr. S.G. Gosh i/b. Paras Kuhad & Associate for Respondent No.1. Mr. Rohit Kapadia, Senior Counsel with Mr. Dhitendra Samba, Senior Counsel, Mr. Y. Kapadia (-3-) and Mr. Atul G. Damle, for Respondent No.3. CORAM: F.I. CORAM: F.I. CORAM: F.I. REBELLO REBELLO REBELLO & A.A.KUMBHAKONI,JJ. A.A.KUMBHAKONI,JJ. A.A.KUMBHAKONI,JJ. DATED: 7th October, 2008 DATED: 7th October, 2008 DATED: 7th October, 2008 ORAL JUDGMENT (PER F.I.REBELLO, J.): . Rule. By consent of parties, heard forthwith. 2. The petitioners by the present petition have approached this Court to restrain the respondent No.1-The Export Import Bank of India (Exim Bank) from disbursing any funds in the Line of Credit opened by it from the Government of Ethiopia and for setting aside the approval dated 21st April, 208 granted by the Exim Bank to Respondent No.3-Overseas Infrastructure Alliance (I) Pvt. Ltd. The contention being that the contract awarded to Respondent No.3 is arbitrary, illegal and has been granted with complete non-application of mind. Respondent No.2 has awarded the contract for setting up sugar industries to respondent No.3 after inviting bids. The other reliefs sought for is a writ by way of mandamus directing the respondent No.1 to take all the necessary steps and actions to (-4-) ensure that (i) the contract for Power Generation Package be awarded to the petitioner No.1 being the lowest eligible bidder and (ii) the respondent No.3 be removed as the single EPC Contractor. At this juncture itself we may point out that the respondent No.2 is an entity of the Government of Federal Democratic Republic of Ethiopia. There are no pleadings that they have their office within the jurisdiction of this Court or carry out any activities trade or business within the jurisdiction of this Court. 3. Respondent No.2 had invited bids for various projects. In terms of the tender conditions any tender being declared successful for two or more of the tenders was to act as the EPC contractor and the other tenderer would act as Sub Contractor. The respondent No.3 has been awarded two of the contracts and consequently has been appointed as EPC Contractor. The petitioner No.1 was awarded one contract and has to act as a Sub Contractor. There is a dispute between the petitioner and respondent No.3 on that account and in respect of that dispute, the petitioner has filed a Civil Suit which is pending before the Delhi High Court. The petitioner’s contention is that in respect of the three tenders which were in issue, in respect of bid for Juice Extraction Package the respondent No.3 had (-5-) not quoted and in so far as the Power Generation Package the petitioner after the disqualification of the lowest bidder became the lowest bidder, yet the respondent No.3 was awarded the contract. 4. A few other relevant facts may be set out. The Government of India offers Lines of Credit (LOCs) to India’s trading partners in the developing countries to import Indian equipment, technology, projects, goods and services, on differed credit terms. These LOCs enable the recipient countries to set up developmental projects in variety of sectors including agriculture, power generation and also setting up of sugar factories. To facilitate this process, the Government of India/Exim Bank of India provides LOCs on attractive credit terms. The credit, carries interest at 1.75% only. The money is made available in Dollars. The Government of Ethiopia intended to establish new sugar factories and expansion of existing sugar factories. For three sugar projects, it approached the Government of India for opening an LOC. One of such LOCs opened by the Exim Bank in pursuance of the request of the Ethiopian Government. In pursuance thereof, a Dollar Credit Line Agreement dated 4th October, 2007 was entered into. It was agreed to provide the Government of Ethiopia with a sum of 122 million Dollars as the first tranche of the total of 640 (-6-) million US Dollars LOC to be disbursed over a period of 4 years. This was to finance projects for the development of sugar industry in Ethiopia. The Agreement contained the terms and also provided for the modalities and manner in which the said Line of Credit was to be operationalized. 5. According to the petitioners the regular manner in which these LOCs operate is that Sellers are sought from India through the process of open and competitive bidding for providing services and exporting equipments, etc., to the borrowing country. In terms of Clause 4.1 of the said Agreement, the respondent No.1 could open letters of credit and disburse funds only after the relative contract is approved by the Respondent No.1. Respondent No.1, according to the petitioners, was therefore, granted with complete authority and discretion to refuse approval in case it did not find the same to be adhering to the prescribed guidelines or procedure. Apart from the Agreement there are certain General Guidelines of Government of India for approval of Export Lines of Credit routed through Export Import (Exim) Bank of India (under Team 9 and NEPAD Initiatives). These Guidelines have to be mandatorily followed by the Exim Bank while opening the Lines of Credit and the failure to do so would create an illegality. One of (-7-) the fundamental preconditions prescribed under the guidelines is that of ’transparency’ in the selection process of Indian Companies. 6. Respondent No.2-Tendaho Sugar Factory Project floated a tender in Ethiopia inviting bids to design, manufacture, supply, delivery of Port of Djibouti,transport locally to the project site, store, erection of mechanical and electrical equipment, train employer’s personnel, commission, test and handover under single turnkey contract for five packages. The petitioner No.1 was found successful for Process House Package and was issued Letter of Intent by Respondent No.2. The petitioners state that though the respondent No.3 had not bid for Juice Extraction Package and though the respondent No.3 was L-3 in Power Generation Package, they were declared successful for the said two packages. The petitioner No.1 had bid for both the packages and was L-2 in respect of Power Generation Package. The bidder who was L-1 for Power Generation Package was disqualified on technical grounds and, therefore, the petitioner No.1 ought to have been awarded the said package in place of respondent No.3. It is in that context that the present petition and the reliefs as prayed for. (-8-) 7. The respondent No.1 has filed affidavit through Prabhakar R. Dalal. It is contended that the petition apart from being frivolous is not maintainable. The petition, according to the respondent No.1, has been filed as the petitioner is aggrieved by the action of the respondent No.3, which is a private party. The respondent No.3 which was declared as EPC has asked the petitioner to reduce its prices by 15% which would be required to be paid over to the respondent No.3 to discharge its obligations of single EPC Contractor. The petitioners, it is contended, has not challenged the bidding process. The respondent No.1 was not involved in the bidding process which is the sole prerogative of the Government of Ethiopia and or its nominated agencies. The present petition is nothing but a private dispute between the petitioners and Respondent No.3. Respondent it is contended, approved the contracts after satisfying itself that they complied with the terms of the LOCs Agreement viz. whether the contract is for the same purpose for which the LOC is extended, value of the contract falls within the amount of LOC, Indian content is minimum 85% of the contract value, the Seller/Exporters/Contractor is an Indian entity, etc. The approval of the contract was based on satisfaction of the eligibility criteria mentioned in Clause 3.1 of the LOC Agreement. As the (-9-) conditions in Clause 3.1 of the LOC Agreement were satisfied, the Respondent No.1 accorded its approval for the contract referred to it by ESDA. The approval of Respondent No.1 is not to intermeddle with the bidding process which is to be conducted by respondent No.2. The general guidelines relied upon by the petitioner are applicable to Government of India approved LOC routed through respondent No.1 only under Team-9 and NEPAD initiatives and the said guidelines are not applicable to the LOC extended to the Government of Ethiopia. The Government of India, it is contended, has not notified the LOC to the Government of Ethiopia either under the NEPAD or under the Team-9 initiatives. In the alternative and without prejudice, it is submitted that these guidelines are advisory in nature and meant for the borrower Government and are not mandatory in nature. The Agreement signed between the respondent No.1 and the Government of Ethiopia is a contract within the meaning of Indian Contract Act. As per the LOC Agreement, Exim Bank takes up request for approval of a contract only when such request is received from the LOC recipient borrower Government or its nominated agency. It is for the borrower i.e. Government of Ethiopia to decide from which companies in India they should import projects/goods/services. Respondent No.1 is required, under the LOC Agreement, to approve the (-10-) contract, if the terms of the contract conform to the terms of the LOC Agreement. Therefore, the role of the Respondent No.1 is to grant approval to the contract when the same is referred to it by the LOC Recipient Government/nominated agency, subsequent to the award of the contract to the Indian Exporter, if the same is complying with the terms of the LOC. The respondent No.1, it is set out, does not involve itself in the process of selecting the exporter nor sanction the bidding process to be conducted by the foreign entity. 8. Reply has also been filed by respondent No.3. It is set out that the petitioners cannot call into question or seek to put into dispute the Exim LOC as the same is protected being signed with another country. The decision to grant Exim LOC was purely at the Government level and the primary cause behind the same was to give the loan facility through Exim LOC which helps to promote relations between the two countries and to promote export from India. The petitioner is seeking to raise a dispute only in respect of TSFP. The petitioner is the successful bidder for the Wonji Shoa Sugar Factory project. In terms of the contract entered into between the parties the contract shall be governed by and interpreted in accordance with laws of the country specified in the SCC. There was a clause (-11-) providing that the employer reserves the right to divide, consolidate the award partially or into groups, if deemed necessary. The TSPF reserved the right to accept or reject any or all bids. The contract is to be interpreted in accordance with the laws of the employer’s country and the arbitrating agency is Ethiopian Chamber of Commerce. 9. Under Clause 31.2 the unsuccessful bidder is given an opportunity to write to TSFP (Respondent No.2), for an explanation for the grounds on which their bids were not selected. According to respondent No.3 the petitioner did not resort or invoke the same. Clause 31.2 reads as under:- "31.2. After getting information on the notification of the award,unsuccessful bidders may request in writing to the employer for a debriefing seeking explanations on the grounds on which their bids were not selected.The Employer shall promptly respond in writing to any unsuccessful Bidder who, after notification of contract award, requests a debriefing." The respondent No.2 had informed that in order to able to execute the project effectively, and also as per the requirement of Respondent No.1 Bank (-12-) disbursement schedule they had decided to proceed with the contract agreement through a single EPC Contract. In the letter of 7th December, 2007 it was stated that the criteria to become eligible to act as a Single EPC Contractor was if a bidder won two or more packages among the four major bids. Since the respondent No.3 had won two bids, therefore, it was appointed the Single EPC Contractor. The respondent No.3 have dealt with the various provisions of the contract. 10. In our opinion it is not necessary to refer the other contentions except the limited contention of respondent No.3 that the project in question is a sovereign understanding between two countries. The petitioners by the present petition it is contended are seeking to challenge the tender process of another Sovereign Country or its nominee without invoking the judicial process of that country or without first seeking remedy through the procedure given in the bid document issued by that country. The bid document and the main contract dated 10th January, 2008 and the contract dated 20th February, 2008 clearly provides for all disputes to be covered by the laws of Ethiopia. The petition also it is submitted does not disclose any violation of Articles 14, 19 and 21 of the Constitution of India. The issues raised are not in public interest but are (-13-) purely beneficial to the petitioner and only in its self interest. 11. Rejoinder has been filed on behalf of the petitioners. Considering the various contentions raised by respondent No.1 that the guidelines do not cover the Ethiopian contract it is submitted that NEPAD guidelines are applicable. 12. The issue for our consideration is whether the approval of the contract awarded by respondent No.2 in favour of respondent No.3 can be interfered with by this Court in the exercise of its extra ordinary jurisdiction. The contract between the respondent Nos. 2 and 3 had been entered into in Ethiopia. The approval of the contract entered into between respondent Nos.2 and 3 by respondent No.1,is sought to be made the subject matter of the present petition on the ground that there was no transparency in the process and that respondent No.3 could not have been awarded the two contracts which it had been awarded and as such it could not have been appointed as EPC contractor. 13. The petitioners in support of their contention contend that the Government of India extends LOC in Millions of Dollars and that too at the rate of interest which is only 1.75% per annum. In these (-14-) circumstances Clause 3.1A(g) requires that the borrower has to send to Exim Bank for its approval, the brief details of the contract and other documentary information as Exim Bank may require and that in turn Exim Bank in writing has to approve that the contract is eligible indicates that the Exim Bank has to consider eligibility of the applicant. . The clause which requires Exim Bank to approve the contract requires that Exim Bank must consider whether the approved contract has become eligible and indicating the eligible value thereof. For the purpose of considering the eligibility what the respondent No.1 must consider as set out in their affidavit in reply and the contract terms is to examine, whether the terms of the contract conform to the terms of the LOC Agreement. In this exercise it only satisfies itself that the terms of the contract viz. such as Eligible Goods, Seller, Eligible Value,Terminal Date for Opening Letters of Credit and Terminal Date for Disbursement conform to the terms of the LOC Agreement entered into between the respondent No.1 and the Government of Ethiopia. The stand of Respondent No.1 that it does not involve itself in the process of selecting the exporter, neither does it sanction the bidding process which will be conducted in our opinion is (-15-) right. This is as it should be. The contracts are invited by the Government of Ethiopia and/or its agency, in the present case the respondent No.2. Neither the respondent No.1 nor the respondent No.3 has any control over the said bidding process. Apart from that as now noted in case a bid is rejected the unsuccessful bidder has a remedy by way of Clause 31.2. This clause could have been invoked by the petitioner if it was its case that the respondent No.3 was ineligible or could not have been awarded the two contracts which had been awarded. Failure by the petitioner to invoke Clause 31.2 must result in holding that in so far as the challenge to the tender process is concerned the challenge by the petitioner herein is not sustainable. Once the petitioner who had a right to challenge the awarding of the bid choose not to invoke Clause 31.2 in our opinion it will not be possible for this Court to examine the issue in the context of what the petitioner has argued, namely that in case of one tender the respondent No.3 had not bid ought not to have case of other tender considering that the petitioners tender was lowest bid ought not to have rejected and that they had become the eligible tenderer and not the respondent No.3. 14. The other aspect which we have to consider is (-16-) of the role of respondent No.1, to the extent the lines of Credit are extended. This is based upon the agreement entered into between two sovereign nations. The Lines of Credit is not merely in the nature of loans advanced, but nation to nation agreements for which tenders are to be invited by the Government to whom the Lines of Credit is to be extended and it is that Government and/or its agency which has to decide to whom to award the contract. The contention of the petitioners that it must be transparent in the instant case has been met by the fact that the bids were invited and apart from the petitioners and respondent No.3 there were also other bidders. In other words it can be said that this was a transparent process. 15. In so far as the contention of the respondent No.1 that contracts with Ethiopia are not covered by Team 9 and NEPAD initiatives, in our opinion would be a misconstruction of the General guidelines. Under Section III are the projects contracts already approved. This does not mean that these are exhaustive of the guide-lines in so far as Team 9 and NEPAD Initiatives. Though Ethiopia is not is not a member of Team 9 it will still be covered by the NEPAD Initiatives. The role of Respondent No.1 is limited to examine the contract in terms of the Borrower Agreement dated 4th October, 2007. In (-17-) terms of the Agreement the Borrower must comply with the requirement of clause 3 of that Agreement. Once the borrower complies with the said requirements it is not open to respondent No.1 to examine whether the bidding process was transparent or fair. That would clearly be interference in the tender process which is exclusively within the domain of the recipient country and/or its nominee, in the instant case Respondent No.2. 16. In our opinion, therefore, apart from the fact that this is an international contract which contract was entered into in another country and the tender terms itself provided for a remedy this Court ought to be slow in interfering in such matters more so when they involve friendly relations with foreign countries and in respect of the partnership which the Government of India seeks to enter into with, friendly foreign countries. The challenge to the tender process or to the award of the tender must be governed by law of the country where the tenders were invited and before their judicial forum. On facts here it cannot be said that the tender process was not transparent. The very fact that Clause 31.2 was available to a non-successful bidder would indicate that the person aggrieved could approach that Government or its nominee to find out the reasons for their bids not being accepted. The (-18-) petitioners having not invoked the said clause cannot now approach this Court to challenge the entire process on the ground that there is no transparency. This Court even otherwise considering that respondent No.2 is not carrying on business within the jurisdiction of the Court or having its office would have no jurisdiction to entertain a challenge to the contract in so far as the issue of the tender process and award of the contract. 17. In our opinion the present petition seems to be an offshoot of a dispute between the petitioner and respondent No.3 in the matter of petitioner acting as sub-contractor and the terms demanded by the respondent No.3 from respondent No.1. 18. In our opinion the petitioners even otherwise have not made out the case that the respondent No.1 by granting approval to the contract entered into between respondent Nos. 2 and 3 have acted arbitrarily. The respondent No.1 has acted within the scope of its powers in terms of the guidelines of the Government of India and the contract with the borrower. 19. There is no merit in this petition. Rule discharged. There shall be no order as to costs. (-19-) (A.A.KUMBHAKONI, J.) (A.A.KUMBHAKONI, J.) (A.A.KUMBHAKONI, J.) (F.I.REBELLO, J.) (F.I.REBELLO, J.) (F.I.REBELLO, J.)