*THE HON’BLE Ms. JUSTICE G. ROHINI + WRIT PETITION NO : 10670 of 2009 % 24/08/2009 # 1 NOKIA SIEMENS NETWORKS PRIVATE LIMITED, A company incorporated udner the provisions of the Comapnies Act, 1956 and having its Registered Office at 2nd Floor, Commercial Plaza, Radisson Complex, National Highways-8, Mahipalpur, New Delhi-110037 through its Accounts Director. 2 MR. NARESH PANDEY, Director, Nokia Siemens Networks Private Limited, having its Registered Office at 2nd Floor, Commercial Plaza, Radisson Complex, National Highway-8 Mahipalpur, New Delhi-110037 ..... PETITIONERS Vs. 1 UNION OF INDIA, Through the Secretary, Ministry of Telecommunication Sanchar Bhawan, Ashok Road, New Delhi- 110001 2 Bharat Sanchar Nigam Limited, Through its Chief General Manager, CTO Building, Paradise, Secunderabad. …Respondents $ < Gist > Head Note: ! Counsel for the petitioner : MR.S.RAVI ^ Counsel for the respondents: MR.A.RAJASHEKAR REDDY (ASST SOLICITOR GEN) Cases referred : 1. (1990) 2 SCC 488 2. (1990) 2 SCC 486 3. (2001) 8 SCC 491 4. 1999 (1) SCC 492 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE TWENTY FOURTH DAY OF AUGUST TWO THOUSAND AND NINE PRESENT THE HON'BLE MS JUSTICE G.ROHINI WRIT PETITION NO : 10670 of 2009 Between: 1 NOKIA SIEMENS NETWORKS PRIVATE LIMITED, A company incorporated udner the provisions of the Comapnies Act, 1956 and having its Registered Office at 2nd Floor, Commercial Plaza, Radisson Complex, National Highways-8, Mahipalpur, New Delhi-110037 through its Accounts Director. 2 MR. NARESH PANDEY, Director, Nokia Siemens Networks Private Limited, having its Registered Office at 2nd Floor, Commercial Plaza, Radisson Complex, National Highway-8 Mahipalpur, New Delhi-110037 ..... PETITIONERS AND 1 UNION OF INDIA, Through the Secretary, Ministry of Telecommunication Sanchar Bhawan, Ashok Road, New Delhi- 110001 2 Bharat Sanchar Nigam Limited, Through its Chief General Manager, CTO Building, Paradise, Secunderabad. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ, direction or order especially in the nature of the writ of mandamus setting aside the Respondent No.2's decision of rejecting the Petitioner's technical bids in Tender No.TA/Cellone/SZ/2008/1 dated 01.05.2008 communicated in the letter dated 23.05.2009 at HD bearing No.TA/CellONE/PHASEVI/2009-10 ISSUED BY dgm(RP), BSNL Mobile SErvices, Hyderabad and, consquently, set aside the REspndent No.2's decision of opening of the price bids for the aforesaid tenders on 15th May, 2009 and any decisions taken pursuant thereto and pass Counsel for the Petitioner: MR.S.RAVI Counsel for the Respondent No.: MR.A.RAJASHEKAR REDDY (ASST SOLICITOR GEN) The Court made the following : THE HON’BLE Ms. JUSTICE G. ROHINI WRIT PETITION No.10670 of 2009 ORDER : The 2nd respondent - Bharat Sanchar Nigam Limited (hereinafter referred to as ‘BSNL’) - issued tender notice dated 1.5.2008 inviting sealed tenders on two stage bidding system in four parts from the eligible bidders for planning, engineering, supply, installation, testing and commissioning of GSM/UMTS based cellular mobile and supply, installation, testing & commissioning of infrastructure for network of capacity for twenty five million lines to be rolled out in three phases in the licensed service areas of BSNL in South Zone. Similar tender notices were issued in North Zone, West Zone and East Zone. The tender is divided into four parts. Part-1 covers planning, engineering, supply, installation, testing and commissioning of GSM based cellular network, Part-2 covers the planning, engineering of 3G network and MBMS, Part-3 covers supply, installation, testing and commissioning of infrastructure and associated items for radio sites and Part-4 covers the OSS / BSS. Eligible bidders can participate in one or more of the parts independently subject to fulfillment of the eligibility criteria specified for each part. The present writ petition is concerned with the bid of the 1st petitioner in respect of part-2 of the tender relating to 4.5 million 3G lines in South Zone covering Andhra Pradesh, Karnataka, Kerala and Tamil Nadu Telecom Circles and Chennai Telecom District. Admittedly the tenders were invited in two bid system i.e., (1) Techno Commercial and (2) Financial. The last date of selling the tender document as extended was 13.6.2008 and the last date for submission of the queries by the bidders was 16.6.2008. A pre- bid conference was held on 27.6.2008 and the consolidated response to the queries raised by the bidders was issued on 24.7.2008. The last date for submission of the bids was 10.09.2008. The petitioner No.1 submitted its bid on 10.09.2008 for part-2 in South Zone. Two other bidders namely the 3rd respondent herein and M/s. Z.T.E. India Private Limited also submitted their bids for Part-2 in South Zone. This writ petition is filed initially with a prayer to declare the action of the BSNL in rejecting the 1st petitioner’s technical bid by letter dated 23.5.2009 on the ground that it had not been found substantially responsive on techno-commercial grounds as arbitrary and illegal and to set aside the same. Subsequently, having regard to the stand taken by the BSNL before this Court on 28.05.2009 that the price bid of the 3rd respondent was accepted on 27.5.2009 and that the BSNL was in the process of finalizing the tender in favour of the 3rd respondent, the petitioners got the prayer in the writ petition amended seeking a further declaration that the decision of the BSNL to select the 3rd respondent is illegal and to set aside the same. The case of the petitioners as pleaded in the affidavit filed in support of the writ petition: The petitioner No.1 is a company duly incorporated under the Companies Act, 1956, and the petitioner No.2 is a Director of the petitioner No.1. It is claimed that the 1st petitioner is a leading vendor of telecommunication equipment to almost all network operators in India and since the inception of BSNL it has been an active supplier of telecom equipment to the BSNL. It is also stated that in the phase-IV GSM procurement of the BSNL the 1st petitioner had supplied network capacity of 6 million, 8 million switching lines for fixed network and 2 million broad band lines to the BSNL. In response to the tender notice dated 1.5.2008, issued by the BSNL, the petitioner No.1 submitted its bid for Part-2 in South Zone on 10.09.2008. While the bids were pending consideration for technical selection, the BSNL by letter dated 21.1.2009 sought various clarifications from the 1st petitioner with regard to its bid. The 1st petitioner by letter dated 13.02.2009 furnished the clarifications sought by the BSNL. Thereafter, by letter dated 26.02.2009 the BSNL invited all the bidders, including the petitioner No.1, to a meeting at Ghaziabad between 3.3.2009 and 5.3.2009 for discussions on the clarifications sought by the bidders with regard to the tender documents. Accordingly, the meeting took place at Ghaziabad and certain queries that had been put by the BSNL were answered by the 1st petitioner by its letter dated 10.03.2009. As no further clarifications were sought by the BSNL, the petitioner was under an impression that its bid was qualified techno-commercially. However, on 11.05.2009 it was published in various newspapers that the 1st petitioner’s bid was technically disqualified and that the 3rd respondent herein and another bidder were short-listed for the next stage of bidding i.e., evaluation of price bids. Though the 1st petitioner’s representatives met the Chairman and Managing Director of the BSNL and sought a clarification as to whether its techno-commercial bid had been rejected, there was no concrete response. On 13.05.2009 the 1st petitioner addressed a letter to the 1st respondent – Secretary of Telecommunications - requesting to constitute an independent committee for reconsideration of the matter since short-listing a single bidder would not result in competitive prices. Again on 15.05.2009 separate letters were addressed by the 1st petitioner to the Secretary, Competition Commission, and Central Vigilance Commission, the Office of the Prime Minister of India and Cabinet Secretary. While so, from the newspaper reports dated 16.05.2009 the petitioners came to know that the price bids of the short-listed bidders for the North, South and East Zones were opened on 15.05.2009 at 7.00 pm. On 20.05.2009 the newspapers carried reports that the Communications Ministry was worried that the networks and hardware vendors of suspect origins like Huawei could install backdoor entries, remote login facilities and also design Trojan horses and may not reveal it when they sell the equipment to BSNL. Though the representatives of the petitioners met the officials of respondents 1 & 2, there was no intimation as to the responsiveness of the techno-commercial bid of the 1st petitioner. In the circumstances, the petitioners filed W.P.(C).No.9182 of 2009 before the High Court of Delhi. However, by order dated 22.5.2009, the said writ petition was dismissed as withdrawn with liberty to approach the Court of appropriate jurisdiction. Thereafter, a letter dated 23.05.2009 was received by the 1st petitioner on e-mail from the DGM (RP), BSNL Mobile Services, Hyderabad, intimating that its technical bid had not been found substantively responsive on techno-commercial grounds and requesting the 1st petitioner to collect the bid security and the unopened financial bid. Aggrieved by the same, the present writ petition is filed contending that the entire decision making process adopted by the BSNL is vitiated by arbitrariness and unreasonableness. It is also contended that the extremely hasty manner in which the technical bids were considered and the price bids were opened casts serious doubts on the transparency and integrity of the tender process. It is also contended that the rejection of the technical bid of the petitioner without assigning any reasons is arbitrary and in violation of principles of natural justice. It is further contended that considering the price bid of the 3rd respondent which is a Chinese company and finalizing the tender in its favour ignoring the apprehensions expressed by the 1st respondent with regard to the National security is arbitrary and illegal. While pointing out that the 3rd respondent was disqualified from the tenders issued by the BSNL in the West, East and North Zones having regard to the apprehensions of threats to National security expressed by the security agencies of the country, it is contended by the petitioner that the action of the BSNL in short-listing the 3rd respondent in the South Zone despite the said disqualification of the 3rd respondent is totally unjustified and against the public policy. Counter-affidavit dated 2.6.2009 filed by BSNL : In the counter-affidavit, dated 2.6.2009, filed on behalf of BSNL, it is stated that in response to the impugned tender notice three bidders i.e., the 1st petitioner, the 3rd respondent and M/s. ZTE India Private Limited submitted their bids for Part-2. Subsequent to the opening of the techno-commercial bids, the Tender Opening Committee (TOC) recommended for techno-commercial evaluation of all the three bids as they were found to be generally in order in terms of bid security, number of copies, bid form and etc. Thereafter the bids were handed over to the Committee for Evaluation of the Tender (CET) constituted for evaluation of the bids. A presentation from the bidders was conducted in Hyderabad on 10th and 11th November, 2008. Subsequently, clarifications were asked from all the bidders on 21.01.2009 followed by a meeting at Ghaziabad on 3-5th March, 2009. Thereafter, the CET finalized its report on the techno- commercial evaluation and the same was submitted to the competent authority. So far as the bid of the petitioner No.1 is concerned, it is stated that the 1st petitioner failed to comply with the tender requirements as per Clause 4.3 of Section I of the Tender Conditions as it had filed a self-certified document on the provenness of its equipment. Filing of a self-certified document being in violation of the Tender Conditions prescribed under Clause 4.3 of Section I, Clauses 10.1 & 10.3 of Section II and Clauses 5.1 & 5.2 of Section IV, the Techno- Commercial Bid of the 1st petitioner was found to be substantively non-responsive under Clauses 26 & 31 of Section II. Since the Techno-Commercial bid of the 3rd respondent was the only one found substantially responsive, the financial bid of the 3rd respondent alone was opened on 15.05.2009. Thereafter by letter dated 23.05.2009 the other bidders, whose techno-commercial bids were found to be substantially non-responsive, were requested to collect their unopened financial bids in terms of Clause 21.6 of Section II. It is further explained that the Committee for Evaluation of Tender (CET) recommended to open the financial bid of the 3rd respondent only as their techno-commercial bids alone were substantially responsive. The recommendation was accepted by the competent authority (2nd respondent) on 22.4.2009 itself. However, the opening of the financial bid was kept pending for want of clearance from the Department of Telecommunications. Immediately on receipt of the clearance from the Department of Telecommunications, the financial bids of the 3rd respondent were opened on 15.05.2009, well within the office working hours. It is also explained that the 1st petitioner was afforded two chances vide letters dated 21.01.2009 and on 04.03.2009 through the meeting at Ghaziabad to identify the requisite document in the bid. However, the 1st petitioner could not avail the opportunity afforded and did not identify the User Certificates for RNC in its original bid to substantiate the provenness as it has not filed any such documents originally. In the absence of any User Certificates the bid of the petitioners submitted along with a mere self-certificate, which is expressly prohibited by Clause 4.3 of Section I, remained invalid. It is also stated that the vital deficiency in the petitioner’s techno- commercial bid was always known to the petitioners not only at the time of submission of the bid but also at the later stages of the clarifications and evaluation. It is also contended that there is no express clause in the tender that requires any intimation to the bidders regarding their rejection of the bid and as per Clause 21.6 of Section II the unopened financial bids of the bidders, whose technical and commercial bids have been found substantively non-responsive, shall be returned to the respective bidders unopened. Accordingly the intimation was given to the 1st petitioner by letter dated 23.5.2009. So far as the National security is concerned, it is stated that the 2nd respondent had proceeded with consideration of the tenders of various bidders only after obtaining an absolute clearance from the Department of Telecommunications. Both the Union of India and BSNL had taken into consideration the security of the Nation as of paramount importance and there is no basis for the apprehension that the security interests of the country are at stake. Reply affidavit filed on behalf of the petitioners dated 9.6.2009: While contending that non-supply of reasons in the letter of rejection dated 23.05.2009 cannot be supplanted in the counter- affidavit, it is claimed that even the reasons stated in the counter- affidavit are irrelevant and immaterial and cannot render the bid of the 1st petitioner substantially non-responsive. It is further alleged that the statements in para 3(b) and 3(f) of the counter-affidavit with regard to the user certificates submitted by the 1st petitioner to establish the provenness of the Radio Network Controller (RNC) were self- contradictory and the alleged shortcoming of the bid of the 1st petitioner was not clear. Since the BSNL never raised any queries with regard to the clarifications and documents submitted by the petitioner on 11.03.2009, there could be no reason to suspect that the BSNL was in any manner dissatisfied with the documents and explanation submitted by the petitioners. The reason now stated in the counter-affidavit is apparently an after-thought to justify the ouster of the petitioner. At any rate, if only the BSNL had complied with the principles of natural justice and called upon the petitioners to explain the true and correct position, the same would have been clarified by the petitioners. Though as per Clause 5.2 of Section IV necessary certificates from the user shall be submitted by the bidder to establish the provenness of the product offered, either Clause 5.2 or any other clause of the Tender does not prescribe any format or proforma for the certificate mentioned in the said clause. Therefore, the “necessary certificate” required under Clause 5.2 must be such that it reasonably satisfies the BSNL that the deployment required against each network element in Clause 5.1 is met. While claiming that for the purpose of the provenness of the Network element - Node B, under Clause 5.1 of Section IV of the tender the certificates supplied by the petitioner were found to be adequate and satisfactory even though the same were not original, it is contended that the BSNL cannot take a contradictory stand insofar as the Network element - RNC is concerned. It is also contended that it is illogical and impossible for an original certificate to be submitted as part of each bid in each zone and the BSNL had been accepting photo copies of the certificates insofar as the deployment criterion against Node B and VGW & SS is concerned. As a matter of fact, the BSNL had never insisted on the submission of the original certificates from the bidders and even though the petitioner had not submitted the original certificates in the North Zone tender, the BSNL did not raise any objection. It is further contended that the assurance given by the BSNL in its counter-affidavit that it had obtained an absolute clearance from Department of Telecommunications and that they have taken into consideration the security of the Nation as of paramount is irrelevant as Department of Telecommunications is not a security agency of the Central Government. The Ministry of Defence and Home being the Ministries responsible for the external and internal security of the country, the mere clearance by the Department of Telecommunications is not sufficient and the omission to take approval from the Ministries of Defence and Home is fatal to the process adopted by the BSNL. Rejoinder Affidavit and Reply Affidavit:- In reply to the above Reply Affidavit of the petitioners, dated 9.6.2009 the BSNL filed a Rejoinder Affidavit dated 15.6.2009 and in response to the said rejoinder affidavit, the writ petitioners filed another Reply affidavit dated 22.6.2009. Both the parties have not sought leave of this Court for filing the said additional pleadings. At any rate, the said Rejoinder Affidavit dated 9.6.2009 and Reply Affidavit dated 22.6.2009 being in the nature of written arguments without covering any additional factual aspects, instead of burdening this judgment by extracting the said additional pleadings, I propose to consider the respective contentions of the parties in the said additional pleadings, to the extent they are relevant, at appropriate stage. Counter-affidavit filed on behalf of the 1st respondent (Union of India): The Ministry of Home Affairs, in October, 2008, raised security concern over the participation of foreign companies, especially by the companies operating from or controlled by China in the tender in question floated by the BSNL. A committee was constituted to examine the above said issue after identifying the specific concerns stemming from participation of foreign companies in BSNL tender. The Committee submitted its report on 4.5.2009. The report was examined in the Department of Telecommunications and security guidelines/circular was issued on 14.5.2009 to BSNL. In addition to other security related observations, it was especially intimated to BSNL in the above said security guideline that resources should not be procured from Chinese vendors for deployment in sensitive regions. The sensitive regions are defined as States having international border with China, Bangladesh, Myanmar and Pakistan. Nothing special was intimated in the above said security guidelines regarding non-selection of the 3rd respondent who was the selective bidder for South Zone. It is further stated the letter of the petitioner No.1 dated 13.05.2009 was received in the Department of Telecommunications and accordingly comments of BSNL were sought on the said letter. BSNL being a Central Public Sector Enterprises working under the administrative control of Department of Telecommunications, it is fully empowered to take decisions on minute basis in respect of tenders floated by them and Department of Telecommunications cannot interview in day-to-day functioning of the Central Public Sector Enterprises. The 3rd respondent in whose favour the tender is finalized did not choose to file any counter-affidavit. I have heard the learned counsel for both the parties in detail. As could be seen from the pleadings narrated above, the present writ petition pertains only to the bids received for Part-2 of the Tender relating to 4.5 million 3G lines in South Zone. It is also clear that out of the three bids received, the techno-commercial bid of the petitioner No.1 was rejected by the BSNL on the ground that it failed to demonstrate the provenness of the product (RNC element) offered by it by producing the necessary certificates from the user as required in Clause 5.2 of Section IV read with Clause 4.3 of Section I of Tender Conditions. Thus the techno-commercial bid of the petitioner No.1 was found to be substantially non-responsive. The techno-commercial bid of another bidder by name M/s. ZTE India Private Limited was also rejected on the ground that it was substantially non-responsive and the third respondent’s techno- commercial bid alone was found to be substantially responsive. Consequently, the 3rd respondent alone remained in the fray and its price bid was opened on 15.5.2009 and it was decided by the BSNL to finalize the tender in its favour. The said action of the BSNL is assailed in this writ petition. The contentions raised on behalf of the petitioners may be summed up as under : (1) The rejection of techno-commercial bid of the 1st petitioner is arbitrary and illegal since the alleged failure of the 1st petitioner to establish its provenness of the product (RNC element) offered by it is factually incorrect and without any basis. (2) The rejection of the 1st petitioner’s bid without any intimation assigning reasons for such rejection is arbitrary and in violation of the principles of natural justice. (3) The action of the BSNL in opening the price bids on 15.5.2009 without even informing the petitioners that their techno-commercial bid had been rejected is arbitrary and illegal. (4) Even the subsequent order of rejection dated 23.5.2009 is only an after-thought to non-suit the petitioners and scuttle any enquiry into the arbitrary rejection of the 1st petitioner’s technical bid. (5) At any rate non-supply of reasons in the rejection letter dated 23.5.2009 amounts to arbitrary exercise of power vitiating the entire tender process and the same cannot be condoned by supply of reasons in the counter-affidavit in this writ petition. (6) The action of the BSNL in short-listing the 3rd respondent alone and in deciding to finalize the tender in its favour is palpably wrong and without application of mind to the apprehensions of threats to the National security expressed by security agencies of the country. (7) The entire decision making process adopted by the BSNL is vitiated on account of the unholy haste in which the BSNL had finalized the tender in favour of the 3rd respondent within a short period of the rejection of the 1st petitioner’s technical bid. (8) The conduct of the BSNL in opening the price bids in an extremely hasty and predetermined manner casts doubts on the transparency and integrity of the tender process. (9) The decision making process is also vitiated inasmuch as the price bids were opened on 15.5.2009 at a time when the Model Code of Conduct due to the National Elections was in force. This unholy haste is demonstrative of the bad faith and legal malice on the part of the BSNL and invalidates the impugned action. (10) Rejection of technical bids of all bidders except the 3rd respondent has led to a monopolistic situation which is against the spirit of healthy competition and fair opportunity to all bidders to participate in tender process and against public interest. The contentions urged on behalf of the 2nd respondent/BSNL: (The same were adopted by the respondents 1 & 3) (1) The 1st petitioner who failed to submit any user