IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 31.07.2008 CORAM THE HON'BLE MR.JUSTICE S.NAGAMUTHU W.P.Nos.6425 & 6426 of 2008 & M.P.Nos.2 to 5 of 2008 M/s.MSPL Gases Limited, Represented by its Senior Manger (Sales) Mr.D.Ramesh Babu Baldota Enclave, Abheraj Baldota Road, Hospet-583 203, Karnataka . . Petitioner in both the petitions Vs 1.M/s.Steel Authority of India Limited Through its Executive Director (Operations) ISPAT Bhavan, Lodi Road, New Delhi-110 003. 2.Salem Steel Plant Through its Deputy General Manager, I/C (Materials Management) A Unit of Steel Authority of India Limited, Salem-636 013, Tamil Nadu. 3.Deputy General Manage I/C (Materials Management) Salem Steel Plant, Salem- 636 013, Tamil Nadu. 4. M/s.INOX Air Products Ltd., 7th Floor, Ceejay House, Dr.A.B.Road, Worli, Mumbai- 400 018. 5.M.N.Dastur & Company (P) Ltd., 480, Annasalai, Nandanam, Chennai-600 035. .. Respondents in both the petitions https://hcservices.ecourts.gov.in/hcservices/ W.P.No.6425 of 2008 Writ Petition filed under Article 226 of the Constitution of India to issue a writ of certiorarified mandamus to call for the records from the second respondent, Salem Steel Plant in respect of the impugned tender notice No.E/19 dated 23.02.2008 and quash the same. W.P.No.6426 of 2008 Writ petition filed under Article 226 of the Constitution of India to issue a writ of Mandamus directing the second respondent, Salem Steel Plant to issue the letter of acceptance to the petitioner as the successful bidder under Tender Document No.PU-E 882801R dated 12.11.2007. For Petitioner : Mr.A.L.Somayaji Senior Counsel for for Mrs.Uma Vijayakumar For Respondents : Mr.R.Krishnamoorthi Senior Counsel & Mr.Jagdeep Dhankar Senior Counsel for Mr.A. Ilango for R1 to R3 Mr.K.Harishankar for R4 Mr.Habibullah Badsha Senior Counsel for M/s.C.Mani Shankar for R5 COMMON ORDER By consent, writ petitions are disposed of. "M/s. Steel Authority of India Limited "(in short SAIL)" is a public sector company and is an integrated iron and steel producer in India. The second respondent "Salem Steel Plant" (in short SSP) is a plant of the first respondent SAIL which manufactures steel and allied products. The third respondent is the Deputy General Manager in charge of Materials Management of SSP. The fourth respondent "INOX" Air Products Ltd. is a Company registered under the Indian Companies Act and is a manufacturer of industrial gases such as oxygen, nitrogen, helium, argon, carbon dioxide, hydrogen etc., The 5th respondent "M.N. Dastur and Company (P) Ltd" is a consulting company of the respondents 1 and 2 that provides engineering consultancy services for projects in the metallurgical and allied industries. 2. The petitioner is also a registered Company under the Indian Companies Act and claims to be one of the largest producers of Industrial gases and medical oxygen in India. It is further claimed by the petitioner that, the petitioner Company is the https://hcservices.ecourts.gov.in/hcservices/ first of its kind to set up an air separation plant on "Build Own and Operate" (in short BOO) basis for respondent No.1 SAIL. 3. M/s. Salem Steel Plant evolved an expansion project to set up steel melting and casting facilities to produce stainless steel slabs of about 189,350 tonnes per year and the same was approved by the SAIL Board directors. To achieve the said project, Salem Steel Plant proposed to install in the steel melt shop, an electric arc furnace, ladle furnace, argon oxygen decarburizing (AOD), slab caster and slab grinder among other equipments. According to the petitioner, the estimated requirement of industrial gases for this project was 3500 Nm3/hour of Gaseous oxygen, 1200 Nm3/hour of gaseous nitrogen and 20 tonnes per day (in short TPD) of gaseous argon which was to be out sourced and supplied for the project. 4. It is further stated that in order to meet the above requirement, the respondent Salem Steel Plant proposed that a "New Cryogenic Air Separation Plant" be set up on or near its premises on a "Build, Own and Operate" (BOO) basis for which the respondent Salem Steel Plant issued an invitation for tenders by Tender Document No.PU-E 782801 dated 13.3.2007 (hereinafter referred as the 1st tender). In the tender conditions, it was mentioned that while the requirements of oxygen and nitrogen could be met from the air separation plant, but the requirement of argon would exceed the capability of the air separation plant. Therefore, it was proposed that the balance quantity of argon about 18 TPD should be procured by the bidder from an external source and supplied to the respondent Salem Steel Plant. The last date for receiving tenders was 24.04.2007. According to the tender documents, there were three stages to the bid viz (1) Earnest Money Deposit (EMD); (2) Techno-Commercial bid and (3) Price bid. According to the tender document, after opening of the EMD, the tenderers would be evaluated on the eligibility criteria set out in the tender documents. The technical bids of bidders who were found eligible would be further evaluated and the respondent Salem Steel Plant would hold techno-commercial discussions to bring all the tenderers on common comparison on techno-commercial grounds and freeze the same before the price bids were to be opened. After evaluating the techno-commercial criteria, the price bids of techno-commercially qualified bidders would be opened and the respondent Salem Steel plant would award the contract to the L1 bidder. The bidders were to offer fixed facility charges and a variable cost was to be quoted by the bidders for oxygen, nitrogen and argon. The tender document also specified that any discussions/negotiations, post price bids, would be only with the L1 bidder. 5. In pursuance of the said tender invitation dated 13.3.2007, there were four tenderers namely, the petitioner, the respondent https://hcservices.ecourts.gov.in/hcservices/ "INOX", "M/s. BOC India Ltd." and "M/s Goyal MG Gases Ltd." During the evaluation of the technical bids, the bid of M/s. Goyal MG Gases Ltd., was rejected based on their previous track record. After the technical bids were opened, the revised price bids were called for. Thereafter, when the price bids were opened "M/s. BOC India Limited" was found as L 1 bidder and as a result, the 5th respondent Consultant "M.N. Dastur and Company India Ltd." recommended to Salem Steel Plant who in turn forwarded the same to the respondent SAIL. It is further alleged by the petitioner that though the respondent DGM Salem Steel Plant was obliged to declare "M/s. BOC India Limited" as L 1, with the intention to accommodate the respondent "INOX," the DGM changed the tender conditions by increasing the requirement of oxygen from 100 to 120 TPD and argon from 18 to 20 TPD and consequently, called for re- tender. However, "M/s. BOC India Limited" did not challenge the decision of the respondent Salem Steel Plant calling for a re- tender. 6. Pursuant to the above decision, the second respondent issued tender notice No.E/14 dated 14.11.2007 inviting fresh tenders (hereinafter called as 2nd tender). The last date for reception of tenders was 12.12.2007. In this 2nd tender notice, certain revised terms and conditions were incorporated. As per this, the delivery period of the ASP plant was revised as 23 months instead of 18 months as stipulated in the 1st tender with a view to synchronize the functions of Steel Melting Shop after due completion of other works. This time, four companies submitted their tenders namely, "Goyal MG Gases", "MSPL Gases Ltd.", "Inox Air Products" and "PRAX AIR". Out of the four tenderers, "Goyal MG Gases" was rejected on the ground of unsatisfactory performance and adverse report from Alloy Steel Plant, Durgapur which is an unit of SAIL. The remaining three companies namely "MSPL Gases Ltd"., "Inox Air Products" and "PRAX AIR" were found to be eligible. It should be noted that "PRAX AIR" did not participate in the 1st tender. 7. The fifth respondent, who is a consulting company, requested the second respondent to call the tenderers for techno commercial discussion. According to the fifth respondent, there were certain deviations found in the tender documents submitted by "Inox Air Products" and "PRAX AIR". Admittedly, discussion was held on 17.12.2007, in which representatives of all the three companies participated. During the said discussion, it was made clear to all the tenderers that deviations were not permitted in view of the nature of the project. Admittedly, "Inox" and "PRAX AIR" withdrew their deviations from the tender conditions and thereafter "Inox" and "PRAX AIR" wanted to submit their revised price bids in view of withdrawal of their deviations. Thereafter, the technical evaluation committee and the commercial evaluation committee recommended on 10.01.2008 that all the three parties are techno https://hcservices.ecourts.gov.in/hcservices/ commercially eligible. In view of the withdrawal of the deviations made by "Inox" and "PRAX AIR", the commercial evaluation committee suggested to seek revised price bids from all the three bidders. Accordingly, all the three tenderers were given option to submit their revised price bids. This, according to the respondents, was made under Clause 15 and Clause 21.5 of Section III of instructions to tenderers of the tender document. The Plant Level Tender Committee (PLTC) also recommended to obtain revised price bids from all the three techno commercially acceptable parties. Admittedly, the second respondent issued a letter dated 11.01.2008 requesting all the three tenderers to submit their revised price bids on or before 14.01.2008. In response to the same, all the three tenderers submitted their revised price bids. However, the petitioner sent a letter dated 12.01.2008 opposing the action of the second respondent to call for revised price bids stating that it was unwarranted. According to the petitioner, instead of revised price bids supplementary price bids should have been called for. 8. On 14.01.2008, in the presence of the representatives of all the three tenderers, the price bids were handed over to the fifth respondent for the purpose of evaluation to arrive at "Net Present Value" (NPV) and consequently to calculate the total cost for the contract period of 15 years as contemplated in Annexure-I Section V of tender document (Tendering and Evaluation Procedure) in instruction to tenderer. 9. On opening the price bids, according to the petitioner, he emerged as the lowest bidder (L1). It is further claimed by the petitioner that as soon as it was found that the petitioner was the L1, the representatives of the fifth respondent told that the fifth respondent would soon send a letter to the second respondent making a recommendation for award of contract in favour of the petitioner as the petitioner had emerged as the L1 bidder. But, this version of the petitioner is denied by the fifth respondent. 10. On 16.01.2008, the petitioner sent a representative to the second respondent requesting for issuance of letter of acceptance as the petitioner was the lowest bidder. Another letter was sent on 18.01.2008 by the petitioner, once again claiming himself to be the lowest bidder, according to its own calculation. A third similar letter was sent on 19.01.2008. Yet another letter dated 21.01.2008 and a last letter dated 22.10.2008 were also sent by the petitioner with the same request for award of contract. 11. Similarly, "Inox" namely, the fourth respondent, also sent letters on 16.01.2008, 23.01.2008 and 30.01.2008 claiming that "Inox" is the lowest bidder on the basis of hourly average flow rate (i.e.)NM3/hr. https://hcservices.ecourts.gov.in/hcservices/ 12. "Prax Air India Private Limited" also sent similar letters on 14.01.2008, 15.01.2008, 19.01.2008 and 21.01.2008, wherein "Prax Air India Private Limited" had claimed that there was lack of clarity for considering the evaluation of price bids and further claimed that price bids should be evaluated only on the basis of daily average flow rate required (i.e.) NM3/day for all the gases. "Prax Air India Private Limited" claimed that it was the lowest bidder. 13. From the above pleadings it is seen that the petitioner company, the fourth respondent and the "Prax Air India Private Limited" claimed that each one of them was the lowest bidder. According to the respondents, each tenderer interpreted the tender conditions in their own way and calculated the price bids for the purpose of arriving at NPV in their own method. 14. The following are the evaluation methods adopted by each tenderer, which could be culled out from the representations of the tenderers. 1) the petitioner claimed that Oxygen, Nitrogen have to be calculated on the basis of average hourly flow rate (i.e. NM3/hr) basis and for Argon gas, the average flow rate per day (i.e.NM3/day) is to be considered; 2)Prax Air India Private Limited claimed that the evaluation has to be made on the basis of average flow rate per day (i.e.NM3/day) for all the three gases namely Oxygen, Nitrogen and Argon; 3)Inox, in the letter dated 16.01.2008 claimed that evaluation is to be done either on the basis of average hourly flow rate or on the basis of average flow rate per day (i.e.NM3/hr. Or NM3/day) for all the three gases. 15. Subsequently, by letter dated 23.01.2008, "Inox" claimed that evaluation has to be made only on the basis of average hourly flow rate (i.e.NM3/hr) for all the three gases. 16. It is the case of the petitioner that on 30.01.2008 itself, the fifth respondent made a final recommendation to the second respondent wherein, the fifth respondent is alleged to have stated as follows; "Based on the above results of NPV it is found that MSPL Gases Limited is the lowest bidder and the prices quoted by them are considered reasonable. Therefore, it is https://hcservices.ecourts.gov.in/hcservices/ recommended to consider M/s. MSPL Gases Limited for establishment of New Cryogenic Air Separation Plant on BOO basis for supply of stipulated Gases to SSP. It is however suggested that SSP may try and negotiate with MSPL for any possible reduction in supply price of Argon as it is their bought out item." Stopping for a moment here, it should be mentioned that the second respondent in his counter has made a denial of having received any such letter dated 30.01.2008 from the fifth respondent. 17. Back to narration, on 01.02.2008, the fifth respondent sent a letter to the second respondent stating that the tenderers have not clearly understood the tender requirement/evaluation criteria as stipulated in the tender documents and have interpreted the tender documents differently, to the extent that all of them claiming themselves as the successful bidder according to their own individual interpretation in a way which suits them for evaluation purpose in arriving at NPV. The fifth respondent therefore, suggested to the second respondent to seek "fresh price bid" once again from all the three eligible bidders, defining once again the evaluation criteria. 18. According to the respondents 1 to 3, the suggestion of the fifth respondent dated 01.02.2008, was placed before the tender Committee on the same day itself and it was decided that the suggestion made by the fifth respondent for obtaining fresh price bid after opening of price bid, is not in accordance with the terms and conditions of the tender as the same would be in violation of existing procedure contemplated under Clause 7.17 of PCP–06. Therefore, according to the respondents 1 to 3, the tender Committee recommended that the proposed course of action could be decided after getting necessary clearance from Chief Vigilance Officer on the suggestion made by the fifth respondent. 19. According to the respondents 1 to 3, the subject matter was placed before the Executive Director (Vigilance) and the Chief Vigilance Officer of SAIL and the General Manager (Law) and the Principal Law Officer of SAIL at Corporate Office, New Delhi. The discussion culminated in a decision that, asking for fresh revised price bids after opening of price bids would amount to clear deviation from PCP-06 and so, it was decided not to go for the said auction. The respondents 1 to 3 would further state that it was decided the case can be re-tendered with necessary clarification, correction as suggested by the consultant, the fifth respondent herein. https://hcservices.ecourts.gov.in/hcservices/ 20. The above said course of action for re-tendering with necessary clarification, correction as suggested by the Executive Director of the second respondent was communicated to the third respondent herein over phone and based on the same, a proposal for re-tender for ASP was initiated on 02.02.2008, it is contended by the respondents 1 to 3. 21. It is further stated by the respondents 1 to 3 that in the mean while, the fifth respondent also sent another letter dated 02.02.2008, suggesting the points which are required to be kept in mind while seeking proposal for fresh revised prices as suggested by them in the earlier letter dated 01.02.2008. But, the said evaluation method suggested by the fifth respondent was not acceptable. It is further stated by the respondents 1 to 3 that, because of the above confusion and lack of clarity in the tender document, in the matter of evaluation criteria, the view of the fifth respondent’s suggested course of action for getting revised price bid in his letter dated 01.02.2008, which was elaborated in his another letter dated 02.02.2008 and the tentative decision of the third respondent, were all placed before the tender committee again on 02.02.2008 along with the suggestion made by the Executive Director (Operation) of the first respondent to go for re-tender of ASP. 22. It is the further case of respondents 1 to 3 that the plant level tender committee found that seeking revised prices would not be in accordance with the existing Purchase Contract Procedure (PCP-06) and as such, the fifth respondent’s proposal for seeking fresh revised price bid is not acceptable. Further, the plant level tender committee recommended on 02.02.2008, that the case may as well be re-tendered on open tender basis after incorporating all the necessary clarifications and corrections in the tender document including the suggestions made by the fifth respondent. The said decision of the tender committee, according to the respondents 1 to 3, was placed before the Executive Director of the second respondent on 04.02.2008, who in turn approved the decision of the tender Committee for re-tender. It is further stated that, the second respondent placed the said re-tender proposal before the Executive Director (Operation) of the first respondent SAIL, New Delhi. The Executive Director of the Corporate Office sought the opinion from the General Manager and the Principal Law Officer who have opined that revised tender seems to be the "better alternative". After taking the opinion from the Principal Law Officer of the first respondent, the Executive Director (Operation) of the first respondent SAIL, New Delhi approved the recommendation of the plant level committee for re- tendering on 22.02.2008, it is contended by R1 to R3. https://hcservices.ecourts.gov.in/hcservices/ 23. Thereafter, for re-tendering of ASP as approved by the first respondent, after due clearance from the Principal Law Officer of the first respondent, for which decision was taken on 22.02.2008 to go for re-tender, the second respondent placed the proposal for issue of fresh tender of Air Separation Plant before the approving authority on 22.02.2008, itself with necessary modification in respect of technical specification as suggested by the fifth respondent and in respect of evaluation criteria in the tender document. The competent authority approved the said re- tender as ASP package on 22.02.2008 itself. As the Executive Director of the second respondent was camping at New Delhi on that day (i.e.) on 22.02.2008, the recommendation was faxed to the Executive Director, the second respondent, who approved the recommendation and as such, the approval was informed to the third respondent through fax on 22.02.2008 itself; it is contended. 24. Thereafter, the second respondent sent letter dated 23.02.2008 to all the three tenderers including the petitioner herein informing the cancellation of the previous tender dated 13.11.2007 and the return of the EMD was being arranged and requested to participate in the proposed re-tender. On 23.02.2008 itself, notice inviting fresh tender(hereinafter called as 3rd tender) for establishment of Air Separation Plant was issued indicating the last date for submitting and opening of the tender as 15.03.2008, which was subsequently extended to 22.03.2008 and further extended to 31.03.2008. 25. In the meanwhile, the petitioner sent a letter dated 01.02.2008 to the Chairman, SAIL, stating as if the fifth respondent had recommended him as the lowest bidder and requested him to issue letter of acceptance. Subsequently, a letter dated 04.02.2008, was sent by the petitioner to the second respondent herein claiming that the fifth respondent had recommended in his letter dated 30.01.2008, that the petitioner was L1. There were several letters sent by the petitioner to the first respondent requesting the respondents 1 to 3 to give letter of acceptance on the basis of the alleged recommendation made by the fifth respondent by his letter dated 30.01.2008. 26. The re-tender notification No.PU-E 882802 dated 23.02.2008 was issued under Tender Notice No.E/19 dated 23.02.2008. After the said tender notification, the petitioner has approached this Court by filing W.P.No.6425 of 2008 seeking to quash the said tender notice N.E/19 dated 23.02.2008. On the same day, the petitioner filed another writ petition in W.P.No.6426 of 2008 for a writ of mandamus to direct the respondents to issue letter of acceptance to the petitioner as the successful bidder in the 2nd tender and to award the contract to him. That is how these two writ petitions are now before this Court for disposal. Since common https://hcservices.ecourts.gov.in/hcservices/ issues are involved in these writ petitions, they are disposed off by means of a common order. 27. In W.P.No.6425 of 2008, as many as 21 grounds have been raised. In the other writ petition namely in W.P.No.6426 of 2008, as many as 26 grounds have been raised. Almost all the grounds raised in both the writ petitions are common. The respondents 1 to 3 have filed a detailed counter affidavit. 28. The main ground raised in both the writ petitions is that the decision to go for fresh tender (3rd tender) is arbitrary, discriminatory and malafide. The said decision has been taken only with a view to favour the fourth respondent M/s.INOX Air Products Ltd., to see that ultimately contract is awarded to the said company. 29. The said contention of the petitioner is stoutly denied by the respondents 1 to 3. According to them, at the outset, the petitioner has no locus standi to maintain the writ petitions. Secondly, according to the respondents 1 to 3, the issues involved in these writ petitions cannot be subjected to judicial review as these issues do not fall within the scope of judicial review under Article 226 of the Constitution of India. It is further contended that there was neither unreasonableness, nor arbitrariness nor malafides in the action of R1 to R3. 30. Now, let me first consider the preliminary objection raised by the respondents on the ground of locus standi of the petitioner to maintain these writ petitions. As I have extracted above, the objection is, having either failed or avoided to participate in the 3rd tender floated by the respondents 1 to 3, it is not open for the petitioner to question the said tender notice. 31. In general, a person who had participated in the tender process and whose tender was rejected can very well complain that his tender had been wrongly rejected and the tender of someone else had been wrongly accepted. Admittedly, in this case, the petitioner has not participated in the 3rd tender. While so, is it permissible for him under law to question the said tender process? In answer to this question, the learned counsel for the petitioner would place reliance on a judgment of the Honourable Supreme Court in RAMANA DAYARAM SHETTY v. THE INTERNATIONAL AIRPORT AUTHORITY OF INDIA (AIR 1979 SC 1628). In the said case, the question of locus standi was raised on the ground that a person who did not participate in a tender process cannot question the acceptance of the tender of a participant. The Honourable Supreme Court rejected the said argument as misconceived. In the said judgment, the Honourable Supreme Court has held as follows; https://hcservices.ecourts.gov.in/hcservices/ "The grievance of the appellant, it may be noted, was not that his tender was rejected as a result of improper acceptance of the tender of the 4th respondent, but that he was differentially