HIGH COURT OF ORISSA: CUTTACK W.P.(C). No. 9446 of 2010 In the matter of an application under Articles 226 and 227 of the Constitution of India. -------- M/s. Jagadamba Packaging Pvt. Ltd. … Petitioner -Versus- Union of India & Others … Opp. Parties. For Petitioner : Sri A.K. Mohanty, Senior Advocate M/s Manoj Kumar Mishra, P.K. Das & S.Senapati For Opp. Parties : Mr.S.D.Das, Asst. Solicitor General (for opp.party Nos. 1 to 3) M/s. Subash Ch. Lal, S.Lal, Sujit Lal & M.R. Samal (for opp.party Nos. 4 & 5) ---------- P R E S E N T: THE HONOURABLE SHRI JUSTICE B.P.DAS AND THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of hearing: 20.07.2010: Date of judgment: 17.08.2010 B.N.MAHAPATRA, J This writ petition has been filed with a prayer to quash the tender No.MM/09100465 dated 28.01.2010 floated for supply of 45874 numbers of ammunition container 39 A/L which was awarded in favour of opposite party Nos. 4 and 5 and to give a further direction to opposite parties authorities to award the said tender in favour of the petitioner. 2. Bereft of unnecessary details, the facts and circumstances giving rise to the present writ petition are that the opposite party No.3- Indian Ordnance Factory, Badmal, Bolangir, Orissa, through its General Manager, floated an advertisement in the website for supply of Nos.45874 AMMN container 39 A/L. The said tender paper was supplied to the petitioner by opposite party No.3. The petitioner submitted the tender paper which was opened on 05.03.2010. On that date, opposite parties- authorities rejected the technical bid of the petitioner and consequently its financial bid was not opened. The said tender work was awarded in the ratio of 50:50 in favour of both opposite party No.4-Bhawani Industries and opposite party No.5-Meghnani Industries. Being aggrieved by such action of the opposite parties-authorities, the petitioner has filed this writ petition. 3. Mr. A.K. Mohanty, learned Senior Advocate appearing on behalf of the petitioner vehemently argued that the grounds of rejection of the petitioner’s technical bid have not been communicated to the petitioner. The petitioner came to know about the grounds of rejection only after the counter affidavit was filed by the opposite parties in this Court. The three grounds on which the petitioner’s technical bid was rejected are (i) Non-production of blue print of factory layout showing machine position, (ii) Non-production of purchase invoice of machinery, and (iii) Non-confirmation as regards PSD, Arbitration and penalty clause. It was submitted that all the tender processes are governed and guided by the Material Management & Procurement Manual (in short MMPM). As per 2 clause 6.17 of the said manual, the three grounds on which the technical bid of the petitioner was rejected are not classified as essentials of tender. Therefore, rejection of the technical bid without seeking any further information from the petitioner is not sustainable. In support of such contention, reliance was placed on the decision of the apex Court in B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors, (2006) 11 SCC 548. It was further contended that earlier on 14.09.2008, a tender was floated for the same container 39 A/L in respect of 78,300 numbers in which the present quantity of 45,874 numbers was included and the petitioner-Company also submitted its tender paper for the same. In January 2009, the capacity verification of the petitioner’s firm was conducted by a team of officers of Ordinance Factory, Chanda, who confirmed and recommended for opening of the price bid. Hence, the petitioner’s tender ought not to have been rejected at the time of opening of technical bid. The PSD, Arbitration and Penalty clauses have been confirmed by the petitioner by signing the tender paper which specifically contains these clauses. Apart from this, in the tender notice, there is no requirement for confirmation of the above clauses separately. Confirmation of PSD is also not required at the stage of submitting tender paper because Clause-10 of the general instructions of the tender provides that the firm has to deposit PSD within one month of placement of supply order. 3 Attacking the action of opposite party No.3 in awarding tender in favour of opposite party Nos. 4 and 5, it was argued that as per the tender notice, bidders were required to submit the Earnest Money Deposit (EMD). Opposite party Nos. 4 and 5 do not come under Clause-5.1.2 of MMPM and, therefore, cannot be exempted from EMD. Since the opposite party Nos.4 and 5 have not deposited EMD, their tender papers are liable to be rejected in terms of Clause 5.1.4 of MMPM. The quality system of the opp. parties 4 and 5 was verified by a team of authorities. The report dated 09.04.2010 submitted by them reveals that the owner of the firm made a commitment, if development order is given to develop 39 A/L container, the deficient facility will be established, if any, as per satisfaction of the customer. It is argued that in spite of the said deficiency, opposite party No.3 has illegally awarded the tender in favour of opposite party Nos. 4 and 5. Moreover, opposite party Nos. 4 and 5 are one and the same person as reveals from the address and fax number. Opposite party No.5 is the son of the person who has sworn the affidavit for opposite party No.4. The two firms namely M/s. Meghnani Industries and M/s. Bhawani Industries belong to two members of one family. Opposite party Nos.4 and 5, do not have industrial electricity connection and they have only commercial connection. It shows that they do not have any industry. The ground taken by the opposite parties that the petitioner’s firm has formed a cartel, is not taken as a ground in the order of rejection of the bid. The stand taken in the counter affidavit that on the request of some tenderers including the 4 petitioner, the opening date of tender was extended from 26.02.2010 to 05.03.2010 is not correct as the petitioner Company never asked for any extension of time. Concluding his argument Mr. Mohanty submitted that rejection of the petitioner’s technical bid and award of the contract in favour of opposite party Nos.4 and 5 are illegal, arbitrary, unfair and violative of Article 14 of the Constitution. 4. Mr S.D. Das, learned Asst. Solicitor General of India appearing for opposite parties 1 to 3 submitted that so far as ordnance factory is concerned, the supplies were received from various suppliers. Eighty per cent of the supplies are received through established registered suppliers by way of limited tender and the rest twenty per cent of the supplies are received through new companies/firms/organizations by way of open tender. The selected tenderers from amongst these tenderers are ultimately treated as registered suppliers after execution of the orders. In the instant case, tender was given due publicity. The tender was invited as per Annexure-1 to the writ application, but the petitioner has not filed the complete copy of Annexure-1. Being a new entrant, the tenderer has to satisfy the requirement and the conditions under Clauses 1 and 2 of the technical terms and conditions for manufacturing of container 39 A/L to be confirmed by bidder item-wise in writing against each point. As per Clauses, the firms who fail to submit the necessary documents are treated as ineligible firms and their offers are rejected without further correspondence. The committee found non-submission of various requirements as per Clauses 1 and 2 and 5 came to the conclusion that the petitioner failed to supply blue print of the factory layout showing machine position and purchase invoices of machinery. The petitioner-Company has also not confirmed regarding PSD, Arbitration and penalty clause. The petitioner failed to qualify in the technical bid and as such its price bid was not opened. On 2.5.2010, the petitioner was intimated about rejection of its tender as per Clause 6.28 of MMPM. Opposite parties are not required to give detailed reason for rejection as per Clause 6.28 of the MMPM. M/s. The petitioner-Company is owned and financed by M/s. Packwell Paper Tube Industries who is an established supplier for this item with Shri Neeraj Raizada having common ownership and signatories for both the companies. The petitioner having participated in the process without reservation cannot question the process after having failed to qualify in the technical bid. Since the petitioner’s price bid was not opened, opposite parties had no knowledge about its price. Petitioner’s registration otherwise with any factory does not confer any right to ignore T.E. requirements. The submission that the petitioner was found suitable by the factory at Chanda is no ground at all as it failed to produce the required papers. SSI containing details of plant and machinery cannot be substituted for invoices showing purchaser, make, model and machine number. The report of the Addl. Comptroller and the Auditor General of India reveals that the petitioner was indulged in cartel formation. In the meantime, the authorities concerned have placed order with opposite parties 4 and 5. Award of tender to opposite parties 4 and 5 has been done as per the 6 standard norms and procedures followed by the OFBL. The tender has been processed and awarded in a fair and transparent manner with equal and similar treatment. The production unit of opposite party nos.4 and 5 was physically checked and verified by a team of officers. The ownership of land, plant and machinery have been examined. The valuation reports clearly confirm the capability of opposite party Nos. 4 and 5. Placing reliance on the judgment of the apex Court in Meerut Development Authority Vs. Association of Management Studies & Anr., (2009) 6 SCC 171, Mr. Das argued that a tender is an offer. It is something which invites and is communicated to notify acceptance. It must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. 5. Mr. S.C. Lal, learned Senior Advocate appearing on behalf of opposite party Nos. 4 and 5 submitted that opposite party No.4- Shree Bhawani Industries and opposite party No.5-Meghnani Industries are separate legal entities having separate sales tax registration numbers, DIC registration numbers and different places of business. Opposite party No.3 had deputed a team of officers to the factory premises of opposite party Nos.4 and 5 who made physical verification of the land, plant, machinery and capacity of the said opposite parties to produce 39 A/L containers which are the subject matter of the tender. Opposite party Nos. 4 and 5 have adequate experience and financial capability to execute the tender and had deposited the Performance Security Deposit (PSD) after the supply 7 order was placed by opposite party No.3. Petitioner’s tender has been rightly rejected by opposite party No.3 for non-fulfillment of the standard conditions attached to the tender notice under Annexure-1 for forming a cartel, which practice has been prohibited under Section 3(3)(a) and (d) of the Competition Act, 2002. The use of letter head of M/s. Packwell Paper Tube Industries clearly shows that the petitioner has formed a cartel with M/s. Packwell Paper Tube Industries. From the audit report dated 07.01.2010 of the Additional Comptroller and Auditor General of India, it is evident that M/s. Packwell Paper Tube Industries had formed and indulged in cartel and, therefore, the petitioner’s tender has been rightly rejected. Since the tenders of other parties including the petitioner were rejected as they could not qualify in the technical bid, there is no question of considering the price bid of the petitioner. Soon after receipt of the tender notice, opposite parties 4 and 5 have made substantial investment in raw materials for effective supply of 39A/L containers. 6. On the rival contentions, the questions that fall for consideration by this Court are as follows: (i) Whether opposite party No.3-Indian Ordnance Factory, Badmal, Dist. Bolangir, Orissa represented through its General Manager, is justified in rejecting the technical bid of the petitioner without giving any opportunity to it to rectify the alleged defects/deficiencies found in the technical bid? (ii) Whether opposite party no.3 has illegally and in unfair manner accepted the tenders of opposite party Nos.4 and 5 ignoring the requirements provided in MMPM? 8 7. To deal with question No.(i) it is necessary to have an idea about the tender in question. The tender document is in two parts: (a) technical bid; and (b) financial bid. Further, the requirements in the tender notice are classified into two categories: those which lay down the essential conditions of eligibility and the other which are merely ancillary and subsidiary to the main object. The essential tender conditions must have been adhered to. If a party fails, and/or neglects to comply with the requisite conditions, which are essential for consideration of its bid, it cannot supply the details at a later stage. However, in case of conditions, which are not essential conditions but merely ancillary and subsidiary they can be complied with at a later stage. 8. In the instant case, opposite party-authorities rejected the technical bid of the petitioner and consequently did not open the financial bid. As reveals from paragraph-3 of the Comparison Chart (Annexure-B/1 to the counter affidavit filed on behalf of opposite party nos.1, 2 & 3), the technical bid of the petitioner was rejected on the following grounds i.e. (i) Non-production of blue print of factory layout showing machine position, (ii) Non-production of purchase invoice of machinery, and (iii) Non- confirmation as regards PSD, Arbitration and penalty. 9. According to the petitioner, the above three grounds on which its technical bid was rejected are not classified as the essentials of the tender under Clause 6.17 of MMPM. Therefore, in terms of para 6.17, the opposite 9 parties-authorities could have given opportunity to the petitioner to remove the defects and asked for documents from the petitioner before rejecting the technical bid. At this juncture, it is necessary to know what is contemplated in para 6.17 of the MMPM, which deals with initial analysis of tenders received. Para 6.17 “The Purchase Officer will scrutinize the tenders received to find out whether these are complete in all respects and binding on the tenderers. There may be some offers which are not complete. Such incomplete offers can be broadly classified into two groups: (A) Where the offer is complete with regard to the essentials of the tender though some other details may be missing. (B) Where the offer is not complete with regard to essentials. As regards incomplete tenders falling under Group (A) these may be considered, provided the offer is specific with regard to the following basis requirements: (i) Description and specifications. (ii) Rates, Duties and Taxes. (iii) Delivery terms. In other words, there should be no ambiguity regarding the items being offered, the prices quoted and the terms of delivery. Where with regard to these basic requirements, the offers contain vague and ambiguous stipulations or avoid specific replies to the queries in the tender documents, like whether the store conform to technical particulars/specifications, drawings as specified in the schedule to tender, such offers will not be considered complete with regard to the essentials. If some other details are missing from such an offer, for example, list of plant and machinery, details of NSIC registration etc. which do not affect financial terms and conditions, the Purchase Officer may make a reference to the firm seeking further information, provided soliciting of such information will not amount to revision of the offer. Such references and clarifications must be made quickly with a target date for reply to that finalization of the tender is not delayed. For making such references or accepting a clarification from the firms for such details, the Purchase Officer will not require approval from any superior authority. It is, however, reiterated that no clarifications shall be obtained or accepted from the firm, (even if submitted unilaterally by the firm) which have an effect of changing the 10 essentials of the tender or its inter se position or would give an unintended benefit to the tenderer. As regards tenders falling under Group (B), such offers should be ignored and rejected straightway and no reference should be made to the firm or clarifications accepted, if submitted by the tenderer unilaterally. For the guidance of the purchase officers, an illustrative and no exhaustive list of the instances in which the tenders may be ignored and rejected straightway is given below: (a) Received after due date and time of tender opening (late tenders): (b) Unsolicited offer i.e. offer from tenderer other than those asked to quote against the tender. (c) In the form of Letter Head/Fax/Telex/Telegram not followed up by formal tenders in time. (within 7 days of opening of T.E.) (d) Not accompanied with Earnest Money asked for incase the firm responded is not registered with NSIC. (e) Does not indicate delivery period by which supplies can be made or delivery offered is vague. (f) Does not indicate the terms of delivery. (g) Ambiguous with regards to any of the essentials i.e. the items being offered, prices quoted, and the terms of delivery. (h) Tender samples as required in the enquiry conditions have not been submitted by the due date.” (underlined for emphasis) 10. A conjoint reading of groups (A) & (B) of para 6.17 makes it clear that an incomplete tender falling under Group (A) may be considered provided the offer is specific with regard to the basic requirements such as (i) Description and Specification (ii) Rates, Duties and Taxes (iii) Delivery of terms. In other words, there shall not be any ambiguity with regard to items being offered, the price quoted and the terms of delivery. In the instant case it is nobody’s case that the offer of the petitioner is not specific with regard to (i) Description and Specification (ii) Rates, Duties 11 and Taxes (iii) Delivery terms or there is any ambiguity regarding the items offered, price quoted and terms of delivery. Therefore, the grounds on which the technical bid of the petitioner is rejected are not the essentials of the tender. The conditions are merely ancillary and subsidiary, which are covered under group (A) of para 6.17. Our above view is further strengthened by the illustrations given in para 6.17 for guidance of the Purchase Officer under which the tenders may be ignored and rejected straightway. The grounds on which the technical bid has been rejected are not coming under the said illustrations. Para 6.17 further reveals that if some other details are missing from an offer, e.g., list of plants and machinery, details of NSIC registration etc. which don’t affect financial terms and conditions, the Purchase Officer may make a reference to the firm seeking further information provided soliciting of such information will not amount to revision of the offer. 11. The apex court in Poddar Steel Corpn. vs. Ganesh Engg. Works & Ors., (1991) 3 SCC 273, held as follows: “It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank clause 6 of the tender notice was not obeyed literally, but the question is as to whether the said non-compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories – those which lay down the essential conditions of eligibility and the others which are 12 merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases” (Also see B.S.N.Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors., (2006) 11 SCC 548) In Union of India & Others vs. Hindustan Development Corporation and Others, (1993) 3 SCC 499, the apex court held that the Government while entering into contracts or issuing quotas is expected not to act like a private individual but should act in conformity with certain healthy standards and norms. Such actions should not be arbitrary, irrational or irrelevant. In the matter of awarding contracts inviting tenders is considered to be one of the fair ways. If there are any reservations or restrictions then they should not be arbitrary and must be justifiable on the basis of some policy or valid principles which by themselves are reasonable and not discriminatory. In a case where validity of the conditions in a tender as such are not questioned, the Government has the right to either accept or reject the lowest offer but that of course, if done on a policy, should be on some rational and reasonable grounds. The test of reasonableness, which pervades the constitutional scheme particularly in the context of Arts. 14, 19 and 21, finds its positive manifestation and expression in the lofty ideal of social and economic justice which inspires and animates the Directive Principles and Article 14 strikes at arbitrariness in State action. 13 12. In view of the above, we have no hesitation to hold that the grounds on which the technical bid of the petitioner was rejected are not the essentials of the tender in terms of para 6.17 of the MMPM and the opposite parties authorities are not justified in rejecting the technical bid of the petitioner without making any reference to the petitioner seeking those information in terms of para 6.17 of the MMPM. 13. The other stand of the petitioner that needs consideration in the present context is regarding capacity verification of the petitioner’s firm which was conducted by a team of officers of the Ordnance Factory, Chanda, pursuant to an earlier tender floated for the same container 39 A/L, who confirmed and recommended the petitioner’s tender for price bid. According to the petitioner, pursuant to an earlier tender notice floated for container 39 A/L for quantity of 78300 for Ordnance Factory, Chanda, Ordnance Factory Bolangir and Ordnance Factory Dehuroad, the petitioner- Company submitted its tender. In June, 2009 the capacity verification of the petitioner’s Company was conducted by a team of officers of Ordnance Factory, Chanda who confirmed and recommended for price bid. Our attention was drawn to the correspondence dated May 14, 2010 (Annexure-13) made by the Joint General Manager for General Manager, Ordnance Factory, Badmal, Dist: Bolangir, Orissa with a copy to the petitioner, which reads as follows :- “Sub: Confirmation of CV done for Container 39 A/L regarding Source of development advertise tender 14 inquiry No.200800399/A dated 14-09-2008 opened on 07-11-2008 for a qty of 78,300 for O.F.Chanda, O.F.Bolangir and O.F. Dehuroad. Ref : M/s Jagadamba Packaging Ind Pvt. Ltd. Sonipat Ltr. No.CV/SPI/S/2 dated 14-05-2010. Vide letter quoted above, M/s. Jagadamba Packaging Ind Pvt. Ltd. Sonipat has requested to confirm CV (capacity verification) done by O.F. Chanda for Container 39 A/L which is required in connection with O.F.BL Advt. T.E. No.MM/09/100385 dated 03-12-2009. Capacity verification of M/s. Jagadamba Packaging Ind Pvt. Ltd., Sonipat was carried out by Team of Officers of O.F. Chanda in June 2009 for subject item against Source Generation Advt. TE No.200800399/A dated 14.09.2008, Technical bid opened on 07-11-2008 and recommended for opening of Price Bid of the said TE.” This shows that a team of officers of Ordnance Factory, Chanda conducted the capacity verification of the petitioner for three Ordnance Factories including Ordnance Factories, Bolangir and recommended for opening of price bid. However, as the work was delayed due to the authorities, the petitioner requested not to open the price bid as it was not possible to supply the materials at the quoted price. Further, since all