*THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY + WRIT PETITION No.10150 of 2009 % Dated: 21-07-2009 # M/s. Precision Infratech Ltd., Ahmedabad, Gujarath, rep., by the Authorised Signatory, Amit Vibhakar. … Petitioner VERSUS $ A.P. GENCO Ltd., Vidyut Soudha, Somajiguda, Hyderabad, rep., by its Managing Director & others. … Respondents ! Counsel for the petitioner : Sri E. Manohar Senior counsel representing Sri K. Raghuveer Reddy ^ Counsel for respondents 1-3: Sri K. Chidambaram SC for AP GENCO Counsel for respondent No.4: Sri B. Adinarayana Rao for Sri H. Venugopal <GIST: > HEAD NOTE: ? Cases referred 1. (1979) 3 SCC 489 2. (1993) 1 SCC 445 3. (1994) 6 SCC 651 4. (1999) 1 SCC 492 5. (2000) 2 SCC 617 6. 2006 (11) SCALE 526 7. 2007 (8) SCJ 359 8. 2009 (1) SCJ 634 9. (1997) 1 SCC 738 10. 2005 (1) ALD 545 (DB) IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE TWENTY FIRST DAY OF JULY, TWO THOUSAND NINE ONLY PRESENT: THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.10150 of 2009 Between: M/s. Precision Infratech Ltd., Ahmedabad, Gujarath, rep., by the Authorized Signatory, Amit Vibhakar. … Petitioner AND A.P. GENCO Ltd., Vidyut Soudha, Somajiguda, Hyderabad, rep., by its Managing Director & others. … Respondents Counsel for the petitioner : Sri E. Manohar Senior counsel representing Sri K. Raghuveer Reddy Counsel for respondents 1-3: Sri K. Chidambaram SC for AP GENCO Counsel for respondent No.4: Sri B. Adinarayana Rao for Sri H. Venugopal This Court made the following: THE HON’BLE SRI JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.10150 of 2009 ORDER:- In this writ petition, the petitioner questioned the action of respondent Nos.1 to 3 in qualifying respondent No.4 for award of contract notified under tender notice No.CEC/Hydel/HD- IV/NSTPD/F.HMW/D.No.66/2008, dated 16.06.2008. The petitioner sought for a consequential direction to the said respondents to disqualify respondent No.4 from participating in the tender process and to declare that the petitioner’s bid is the lowest among the responsive bids and award contract in its favour. The facts necessary for the disposal of the case are stated hereunder: The petitioner is a registered special class contractor, specialized in execution of projects relating to Irrigation and Hydro Electric Power generation. Respondent No.2 issued tender notice dated 16.06.2008 calling for sealed tenders from the registered special class contractors or consortium of firms for Nagarjuna Sagar Tail Pond Dam (NSTPD) Hydro Mechanical works for dam and power house at 21.065 km down stream of Nagarjunasagar dam across river Krishna near Satrasala Village of Guntur District. The approximate value of the work is Rs.132 crores. As per the prescribed procedure, the tender is in two parts, namely; (i) Part-I – Pre-qualification and Technical bid and (ii) Part-II – Unconditional Price Bid. As per the schedule fixed in the tender notification, the tenders were to be opened on 11.08.2008 at 3.00 p.m. This date was, however, changed as 04.10.2008 and intimated to all the tenderers. The tender conditions prescribed that the price bids of qualified tenderers in technical bids alone will be opened on the day next to which the pre-qualification bids will be opened. Though in its affidavit, the petitioner raised the plea that respondent No.4 did not specify the pre-qualification criteria, as this plea was not pressed at the hearing, it is not necessary to refer to the pre-qualification criteria prescribed for execution of the work in question. On coming to know that the technical bid of respondent No.4 was accepted and it was qualified for opening of its price bid, the petitioner and three other tenderers, who filed their tenders, addressed letter to the Chief Engineer (Civil Hydel), A.P. GENCO, Vidyut Soudha, Hyderabad, wherein they have pointed out that the tender of respondent No.4 was not in conformity with the prescribed procedure and the same is liable to be rejected by treating it as non-responsive tender. It was inter alia stated that respondent No.4 did not submit its price bid in the envelope meant for submission of price bid, but only a schedule was submitted in the said envelope. It was further pointed out that respondent No.4 deviated from the express provisions and terms and conditions incorporated in the tender documents governing the price schedule in respect of the following aspects: “a) Demand of Interest Free Mobilization Advance to the extent of 10% of contract value on award of work against furnishing of Bank Guarantee of equivalent amount. b) Payment in Foreign Currency for procurement of Hydraulic Hoist Cylinders, Self Lubricating Bushes etc. c) Additional advance payment of the order of 10% on furnishing un-priced copy of the order and balance payment before dispatch.” It was further pointed out that having deviated from the prescribed terms and conditions, respondent No.4 failed to indicate the financial implications of such deviations as required to be stated as per the tender conditions and that if the employer decides to consider the tender of respondent No.4, all other bidders may be allowed to stipulate the same conditions with uniform financial implications. An alternative request was made by the petitioner and other bidders in the said letter that the tender of respondent No.4 can be considered subject to its unconditional withdrawal of the conditions, which are in deviation from the stipulated tender conditions. Respondent Nos.1 to 3, however, qualified respondent No.4 for opening the price bid and accordingly the price bid of all the five tenderers including that of the petitioner and respondent No.4 were evaluated on 04.02.2009. Before a final decision was taken on the award of contract by respondent Nos.1 to 3, the petitioner sent another letter dated 14.02.2009 to the Chief Engineer (Civil Hydel), wherein it pointed out that under Clause 24 of the tender notice, the employer will not accept any condition at variance from those specified in the tender and if the tenderer wishes to introduce any condition, he must invariably indicate definite financial implication of each condition and if the tenderer submits conditional tender without indicating the definite financial implication, such tender will not be considered and the tender will be deemed to be incomplete and is to be rejected. It was stated therein that respondent No.4 failed to indicate financial implications in respect of the conditions stipulated by it in deviation of the original tender conditions relating to interest free advance, payment terms and offer of rebate. The petitioner urged that as respondent No.4 failed to follow the mandatory procedure of indicating the financial implications, its tender is liable to be treated as unresponsive tender and respondent Nos.1 to 3 shall consider the remaining four tenders, which alone are responsive and that the petitioner’s tender for Rs.155.62 crores should be treated as the lowest responsive tender and needs to be evaluated accordingly. This letter was followed up by another similar representation made by the petitioner on 24.03.2009 to the Managing Director of respondent No.1. Through letter dated 03.04.2009, the Chief Engineer (Civil Hydel) replied stating that respondent No.4 has put-forth certain commercial deviations, which were analyzed as per clause 24 of Part-II price bid detailed tender notice, duly indicating maximum financial implication in the form of reduction in the overall price in case their respective deviations are accepted and that therefore no correspondence from the petitioner would be entertained in the matter. Feeling aggrieved, the petitioner filed the present writ petition. On 20.05.2009, this Court granted interim stay of all further proceedings in pursuance of the impugned tender notice, provided an agreement was not already entered into. Separate counter-affidavits have been filed on behalf of respondent Nos.1 to 3 and 4. A vacate stay petition was also filed on behalf of respondent Nos.1 to 3 and at the stage of hearing the said application, the writ petition is taken up for hearing at the request of the learned counsel for the parties in view of the urgency involved in the case. Before proceeding further, it requires tobe noticed that the petitioner raised five grounds for questioning the acceptance of the tender of respondent No.4. They are: (i) Respondent No.4 did not specify the eligibility criteria to the prequalification bid and that therefore its price bid should not have been opened. (ii) As per clause 10 of G.O.Ms.No.94, dated 01.07.2003, the experience should be that of a prime contractor, but not that of a sub-contractor and hence respondent No.4 cannot be said to have fulfilled the eligibility criteria. (iii) Respondent No.4 did not submit the tender in the prescribed format and hence, the award of contract in its favour is illegal. (iv) Respondent No.4 has submitted conditional bid without showing the requisite financial implications, as required by the conditions of the tender and therefore, the bid is liable to be rejected, and (v) Respondent Nos.1 to 3 have deviated from the tender conditions by accepting the conditions stipulated by respondent No.4 regarding payment of 10% of the value of the works towards mobilization advance by holding negotiations with it without giving a similar opportunity to the petitioner and other responsive bidders and such a procedure is arbitrary. However, at the hearing, the petitioner did not pursue ground Nos.1 and 2. Sri E. Manohar, learned Senior counsel for the petitioner while urging ground Nos.3, 4 and 5 referred to above, made the following submissions: (i) Respondent No.4 mentioned deviations in respect of certain financial aspects without indicating definite financial implications thereof. Under clause 4 of Part-I prequalification bid such a tender of respondent No.4 was liable to be rejected at the threshold, as the same shall be deemed to be incomplete. (ii) Clause 24 of the detailed tender notice, Part-II price bid, reiterates the obligation of the tenderers to indicate the definite financial effect of each of the conditions introduced by the tenderers, which are not specified in the tender documents and it also provided for the consequences of non-compliance with the said requirement by stipulating that such a tender will be deemed to be incomplete, will not be considered and liable to be rejected. As respondent No.4 failed to comply with these two mandatory clauses, its tender ought to have been rejected. (iii) Acceptance of price bid of respondent No.4 is contrary to the stand taken by respondent No.2 in his letter dated 11.09.2008. (iv) Respondent No.4 failed to submit the price bid in the prescribed cover, but submitted the same in another cover contrary to the prescribed procedure. While respondent No.4 sought to explain the said departure from the tender procedure, respondent Nos.1 to 3 have not even offered any explanation. As respondent No.4 admittedly failed to submit his bids in accordance with the prescribed procedure, its tender ought to have been rejected, and (v) As the tender of respondent No.4 was not responsive and liable for rejection, the petitioner’s bid becomes the lowest among the responsive bids and hence, the contract work should be awarded to the petitioner. Sri B. Adinarayana Rao, learned counsel for respondent No.4 led the arguments for the respondents and Sri K.Chidambaram, learned Standing counsel for respondent Nos.1 to 3 supported his contentions. The following submissions are advanced on behalf of the respondents. (i) The petitioner’s plea that definite financial implications of the deviated conditions were not indicated by respondent No.4 is not correct. While the factum of such deviations was mentioned in Part-I pre- qualification bid, the details of financial implications were specifically referred to in Schedule VIII submitted with Part-II price bid. A proper analysis of Clause 4 of Part-I pre-qualification bid and Clause 24 of Part-II price bid would reveal that the tenderers should indicate the definite financial effect of each condition/deviation in Part-II price bid and therefore there was no necessity of specifying such financial implications in Part-I pre-qualification bid. Respondent No.4 was therefore rightly qualified for opening the price bid. (ii) As the space provided in the price bid was not sufficient, a prototype of Part-II price bid was generated with more space through the computer and the price bid of respondent No.4 was submitted in a separate sealed cover. The deviation, if any, is purely procedural and technical, which did not cause prejudice to the interest of either the employer or the other bidders. (iii) As respondent No.4 was undisputedly the lowest tenderer, it was called for negotiations during which it offered a rebate of Rs.2,49,60,000/- if 10% mobilization advance was released and accordingly its price bid was accepted at Rs.153,98,34,242/- as against the quoted bid amount of Rs.154,52,42,591/-. The petitioner’s bid was higher than even the original price bid of respondent No.4 as admittedly it quoted Rs.155,62,35,000/-. There was therefore no illegality or arbitrariness in the Corporation inviting respondent No.4 alone for negotiations, acceptance of its price bid and award of contract in its favour. To appreciate the contentions advanced on behalf of the petitioner, it is necessary to refer to and deal with Clause 4 of Part-I pre-qualification bid and Clause 24 of detailed tender notice Part-II price bid. These two clauses read as under: “Clause 4:- Normally, the tenderer should not differ from the terms, conditions and technical specifications incorporated in the tender documents of APGENCO for this work. In case these are departed in the tender, the same should be specified in Part-I i.e., Pre-qualification bid, and the tenderer must invariably indicate the definite financial effect of each condition/deviation. The financial effect so indicated will be taken into account in evaluating his tender, and if the actual expenditure during execution is found to be more than that indicated by the tenderer, the excess expenditure will be to the account of the tenderer. Conditions/deviations stipulated by the tenderer without financial assessment will not be accepted and the tender will be deemed to be incomplete and is liable to be rejected.” “Clause 24:- Normally, APGENCO will not accept any condition at variance from those specified in this specification. However, for any reason, if a tenderer wishes to introduce any condition not specified in the tender documents, the tenderer must submit the conditions in the bid. The tenderer must invariably indicate the definite financial effect of each of the condition. The financial effect so indicated will be taken into account in evaluating the tender and if the actual expenditure during execution is found to be more than that indicated by him, the excess expenditure will be to his account i.e., it will be adjusted in the bills to be paid to him. Conditions stipulated by the tenderers, without indicating corresponding financial assessment, will not be considered and the tender will be deemed to be incomplete and is liable to be rejected.” Though the language of the above two clauses is not ipsi seema verba with each other and an element of conflict between the two clauses appears at the first blush, a closer reading of these two clauses would reveal that they are intended to serve common purpose. While clause 4 used the words ‘departed’ and ‘deviation’, clause 24 refers to new conditions not specified in the tender documents, but the substance of these two clauses is that if a tenderer departs from the prescribed tender conditions and stipulates his own conditions, he has to invariably indicate the definite financial effect of such conditions/deviations. Thus, whether a tenderer seeks variation in the existing tender condition or stipulates a new condition, which is not provided for in the tender, he is bound to indicate the definite financial effect of such conditions/deviations. The purpose of this stipulation is explained in both the clauses i.e., if such financial effect is indicated, the same will be taken into account in evaluating his tender. Further, the extra expenditure, if any incurred in the execution over and above the extra financial burden arising on account of such conditions/deviations will be charged to the tenderer. Thus, having regard to the twin purposes, these two clauses are intended to achieve, every tenderer is bound to submit his tender in conformity with the said clauses. While it is the plea of the petitioner that respondent No.4 failed to comply with clause 4 of Part-I pre-qualification bid, which rendered its pre-qualification bid ineligible, respondent Nos.1 to 3 have taken the stand that while respondent No.4 has specified the condition/deviation in Part-I pre-qualification bid, its definite financial effect is indicated in Part-II price bid. The fact that respondent No.4 specified the deviations in Part-I is not disputed by the petitioner. During hearing, I have summoned the records from respondent Nos.1 to 3. The learned Standing Counsel for respondent No.1 produced the record containing the pre- qualification and financial bids of respondent No.4. a perusal of the record reveals that respondent No.4 filled up Schedule-I of the pre-qualification bid supplied to it. Against Sl.No.6 “All deviations brought out in the schedule of deviations i.e., Schedule-VIII” it mentioned ‘Yes’. Schedule-VIII pertains to schedule of deviations from commercial and technical specifications. It contains a table with five columns, viz., Sl.No., Section, Clause No., Deviation and Maximum Financial Implication (in Rs.). In the space above the table, it is mentioned “All deviations from the specification shall be filled in by the bidder, clause by clause, in this schedule. Unless specifically mentioned in this Schedule, the bid shall be deemed to be (sic not) conformed to the AP GENCO’s specification”. Respondent No.4 mentioned 4 items under the column ‘deviation’ against Sl.Nos.1, 2a, 2b and 3. Item 1 pertains to payment of mobilization advance to the extent of 10% of the contract value to be paid against the submission of bank guarantee of the equal amount, items 2a, 2b and 3 pertain to the amendment in the payment terms for supply, fabrication and erection etc. In column “maximum financial implication” it is stated “financial implication in case this deviation is accepted is mentioned in the Schedule-VIII submitted with Part-II, price bid”. I have perused Part-II price bid submitted by respondent No.4. Schedule-VIII was enclosed to the price bid. In respect of each of the 4 items, namely; Sl.Nos.1, 2a, 2b and 3, respondent No.4 indicated the maximum financial implication on account of deviations. A careful perusal of the tender documents shows that Schedule-VIII is part of Part-I pre-qualification bid and every tenderer is bound to not only specify the deviation under column 3, but also the maximum financial implication under column 4. But interestingly, respondent No.4 while not indicating the details of financial implication while submitting his pre-qualification bid, mentioned in column 4 that these implications are mentioned in Schedule-VIII submitted with Part-II price bid. Sri B. Adinarayana Rao sought to justify this method adopted by respondent No.4 by stating that clause 4 of Part-I pre- qualification bid should be construed to mean that while the tenderer is required to specify the factum of departure from the tender conditions while submitting the pre-qualification bid, it will suffice if he specifies the definite financial effect of each conditions/deviations in Part-II price bid. According to the learned counsel, the financial effect of departure from the prescribed tender conditions is not a relevant factor to be considered at the time of evaluating Part-I pre-qualification bid, which pertains only to the qualifications of the tenderers in respect of possessing previous experience, technical knowledge, machinery and equipment, manpower and financial capacity and that the said part has nothing to do with the financial implications on account of the deviations in tender conditions, which pertain only to Part-II price bid. The learned counsel urged that the sentence in clause 4 “In case these are departed in the tender, the same should be specified in Part-I i.e., Pre-qualification bid, and the tenderer must invariably indicate the definite financial effect of each condition/deviation” (emphasis added) should be read disjunctively by ignoring the word ‘and’ in the said sentence and the financial implications need not be indicated in Part-I technical bid. Though this argument of the learned counsel looks impressive at the first instance, on a detailed consideration of the clause along with the standard forms contained in Part-I, this contention does not merit acceptance. Had it been the intention of the employer that the details of financial effect should be mentioned only in Part-II price bid, it would not have provided the column “maximum financial implication (in Rs.)” in Schedule-VIII, which forms part of Part-I pre-qualification bid. As noticed by me while perusing the standard part of Part-II price bid, it does not provide any form for the tenderers to mention the financial implications in it. As a fact, respondent No.4 enclosed Schedule-VIII forming part of Part-I pre-qualification bid in its Part-II price bid, even though there is no such provision in the price bid part. I have therefore no doubt in my mind that clause 4 envisaged that the tenderers should not only specify the departed/deviated conditions in Schedule-VIII forming part of Part-I pre-qualification bid, but also indicate the definite financial effect of each condition/deviation in Part-I pre-qualification bid itself. To facilitate the tenderers to specify the definite financial effect, Schedule-VIII, which forms part of Part-I pre-qualification bid, provided for column 4 “maximum financial implication (in Rs.)”. Admittedly, respondent No.4 has not indicated the definite financial effect in column 4. In the light of the above finding, the question that requires to be considered is whether the action of respondent Nos.1 to 3 in qualifying respondent No.4 in the pre-qualification bid and opening its price bid is sustainable in law? The scope of judicial review in matters concerning award of contracts is well crystallized by a plethora of judgments of the Apex Court. Post Ramana Dayaram Shetty vs. International Airport Authority of India[1], an element of judicial restraint is apparent in the judgments of the superior Courts while under taking judicial review. This trend is reflected in many a judgment of the Supreme Court, reference to a few may be necessary in this context. I n Sterling Computers Limited vs. M/s. M & N Publications Limited and others[2] the Supreme Court held that while exercising the power of judicial review in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the decision making process and the Courts can certainly examine whether decision making process was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution of India. In Tata Cellular vs. Union of India[3] the Supreme Court culled out the following principles: “(1) The modern trend points to judicial restraint in administrative action. (2) The COURT does not sit as a Court of appeal but merely reviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative action. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract ……. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facets pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” In Raunaq International Limited vs. I.V.R. Construction Limited[4] it was held that award of contract whether it is by a private party or by a public body or the State, is essentially a commercial transaction; the considerations which are of paramount importance are commercial considerations. They are: “(1) The price at which the other side is willing to do the work; (2 ) Whether the goods or services offered are of the requisite specifications; (3) Whether the person tendering has