ssp 1 WP(L) 2198 of 2011 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO.2198 OF 2011 Hyundai Heavy Industries Co. Ltd. .....Petitioners versus Oil and Natural Gas Corporation Ltd. and Ors. ..... Respondents Mr.Aspi Chinoy, Senior Advocate a/w Mr.M.P.Rao, Senior Advocate, Mr.Pradeep Sancheti, Senior Advocate with Mr.H.K.Sudhakara i/by Khaitan and Co., for the petitioner. Mr.D.A.Khambata, Additional Solicitor General a/w Mr.Nishit Dhruva, Mr.Prakash Shinde Mr.Aditya Mehta and Ms.Swati Deshpande and Mr.Avinash Singh Gautama i/by MDP Partners, for respondent No.1. Mr.Janak Dwarkadas, Senior Advocate a/w Mr.Sanjay Jain i/by Nivit Srivastava, for the respondent No.3. CORAM: P.B.MAJMUDAR & MRS.MRIDULA BHATKAR, JJ. DATE: 18 th NOVEMBER, 2011 P.C. 1. By way of this petition which is filed under Article 226 of the Constitution of India, the petitioner who is a Foreign Company, has challenged the tender process adopted by the respondent No.1. The petitioner has prayed for appropriate writ directions and orders that the respondent Nos.1 and 2 may be directed to investigate and to take appropriate steps in the matter of award of tender to the respondent No.3. The respondent No.1 invited tenders for the installation of pipeline project ssp 2 WP(L) 2198 of 2011 and accordingly, various bids were invited. The petitioner’s tender was lowest at L-1. However, since the petitioner being a foreign company, as per the policy of the respondent No.1, 10% price preference is given to the Indian company. In view of the same, the respondent No.3, who was the lowest bidder No.2 and since it was coming within 10% criteria, come up as L-1 in view of the 10% price concession policy. The petitioner has challenged the said decision treating the respondent No.3 as L-1 on the ground that even though it is true that it comes within 10% price preference, but since it has given more than 50% subcontracts to foreign contractors, the respondent No.3 is not eligible to get the benefit of said 10% price concession. The above petition is therefore, filed challenging the said decision on the aforesaid ground. 2. At the time of arguing the petition, Mr.Chinoy strenuously contended that the respondent No.1 has committed an error in coming to the conclusion that the aforesaid respondent No.3 has not given more than 50% sub-contract to foreign contractors and according to him, in view of the clear documentary evidence on record, it is crystal clear that the respondent No.3 has given more than 50% sub-contract to foreign entities and therefore, the said respondent No.3 was not eligible to get 10% price concession. 3. The petition has been resisted on behalf of the respondents. ssp 3 WP(L) 2198 of 2011 The learned Additional Solicitor General on behalf of the respondent No.1 submits that the Tender Committee after evaluating appropriate documents and considering the certificate of the Chartered Accountant, has reached the factual conclusion that the respondent No.3 has not given subcontract for more than 50% to the foreign contractors and that the grievance of the petitioner in this behalf, is without any basis, substance and foundation. In order to substantiate his contentions, he has relied upon the report of the Tender Committee as well as the factual aspects by pointing out that the said respondent is merely trying to procure raw materials and that too in the range of less than 50% and therefore, it cannot be said that it has given subcontracts to foreign contractors which exceeds 50%. The learned Additional Solicitor General further submits that the Tender Committee after considering the appropriate documentary evidence, has taken the said decision and ultimately found that the said respondent No.3 can be given benefit of 10% price concession being the Indian company. It is submitted that the Tender Committee has not taken any arbitrary decision and this Court may not interfere with the tender process, especially when it cannot be said that there is no error in reaching the conclusion of accepting the tender of respondent No.3 and that there is no fault which can be found in the process taken by the respondent No.1. 4. Mr.Dwarkadas, who is appearing for the respondent No.3, ssp 4 WP(L) 2198 of 2011 whose bid is considered to be the lowest one, has supported the arguments advanced by the learned Additional Solicitor General. He submits that by no stretch of imagination, it can be said that the respondent No.3 has given more than 50% subcontract to foreign contractors. 5. We have heard the learned counsel for the parties and have gone through the documents forming part of the compilation. In order to examine as to whether the respondent No.3 has engaged sub-contract for more than 50% to the foreign contractors, it would be expedient to have a reference to the Certificate of the Chartered Accountant, which is at page No.427 in the compilation. Upon perusal of the said certificate, it appears that the percentage of the subcontract to the foreign contractors in US Dollars is mentioned, which is 1.57%. The said certificate is attacked by Mr.Chinoy by submitting that the above certificate, on the face of it, is not believable and it is incorrect. However, there is a report of the Independent External Monitors, which is at page 441. The said Committee has gone into the aspect about the sub-contract whether it exceeds 50% sub-contracts to foreign contractor. The Committee has observed as under : - “The case was explained to us in detail by Offshore Engineering Services Group (OESG), Mumbai (ONGC Work Centre who have floated the tender). Of the 10(ten) offers, those price bids were opened on 16-09-2011. HHI emerged as the lowest bidder on the quoted basis with a lump sum ssp 5 WP(L) 2198 of 2011 price of US $ 97.3 million. According to the provisions of the tender document, which are in accordance with the guidelines issued by Ministry of Petroleum and Natural Gas vide their letters dated 2-12-1994 and 13-01-1995, domestic bidders are entitled to price preference of upto 10% over the lowest acceptable foreign bidder subject to value addition. For ensuing value addition and eligibility of price preference, domestic bidder is required to provide evidence of meeting the following criteria : I. be registered within India II. Have majority ownership by nationals of India and III. Not subcontract more than 50% of the Works measured in terms of value to foreign contractors. As PLL meet the above mentioned criteria, they are eligible for price preference over the lowest acceptable foreign bidder i.e. HHI. The price quoted by PLL is US $ 103.562 million and thus, their offer is within the 10% price preference criteria stipulated in the tender document. Accordingly, ONGC has ranked PLL as the lowest bidder on evaluated basis and recommended award of contract to PLL against this tender. On the issue raised by HHI that as PLL’s domestic content is only 55% of their quoted bid, therefore, offer of HHI’s should be loaded only by 5.5% of their quoted price for determining the price preference, it is explained to us that according to the price preference criteria stipulated in the tender document, domestic bidders are entitled for price preference of upto 10% over the total evaluated price of the lowest acceptable foreign bidder. As the lump sum rates of PLL are within 10% of the evaluated rate of HHI, therefore, in terms of the above mentioned price preference caluse mentioned in the BEC, PLL are entitled to 10% price preference and thus, have emerged as the lowest bidder on evaluated basis with price preference. ONGC have confirmed that PLL have been considered eligible for price preference because they meet three criteria mentioned in the tender document for ensuing value addition. 6. Mr.Chinony however, submitted that the said Committee ssp 6 WP(L) 2198 of 2011 has not gone into the details at all and practically it is a non-speaking order. At this stage, a reference is required to be made to the noting of the Tender Committee, the relevant part of which is reproduced as under: - 4.7 TC noted that as per the certificate issued by Statutory Auditors of Punj Lloyd, they have stated to have adopted exchange rate of Rs.45 for USD and have certified that more more than 50% of the works measured in terms of value has been subcontracted to foreign contractors. However, the exchange rate adopted for evaluation of the bids is 1USD = Rs.48.29. 4.8 TC on review of subcontracting details noted that the Consortium has indicated percentage of subcontract on foreign contractors as 1.57% TC noted that the consortium has indicated the procurement of materials including line pipes by Punj Lloyd and the value of subcontract on foreign contractor on this account has mentioned as ‘O’. TC further noted that maximum percentage of foreign subcontract even after considering the procurement of materials and design engineering under foreign subcontract, the total foreign subcontracting works out to 26.76% which is blow the prescribed limit of 50%. Hence, price preference is admissible to M/s.Punj Lloyd Ltd. and M/s.PT Sempec Indonesia Consortium. 7. Mr.Chinoy however, argued that though substantial or at least more than 50% raw material is to be procured from foreign contractors, it can be presumed that the respondent No.3 has given subcontract to foreign contractors which is more than 50%. In our view, it is not possible to accept the said submission. It is required to be noted that simply because the raw material to an extent purchased by the said respondent, which is also in dispute whether it exceeds 50% or not, yet it ssp 7 WP(L) 2198 of 2011 cannot be said that it should be considered as if the subcontract is given exceeding 50% to foreign contractors. There is also a disputed question of fact which arises for consideration as to whether the percentage of the raw material exceeds 50% or not. Considering the documentary evidence on record, even if we ignore the certificate of the Chartered Accountant, it cannot be said that the respondent No.1 has committed any irregularity in the matter of treating the bid of respondent No.3 as L-1. In our view, we do not find any illegality or arbitrariness which requires interference of this Court under Article 226 of the Constitution of India and it cannot be said that the respondent No.1 has committed any illegality in the matter of arriving at a decision which it has arrived at based on the documentary evidence on record. It is not possible to accept the say of the learned counsel for the petitioner that since the raw material purchased from the foreign contractors is more than 50%, it should be presumed that the respondent No.3 is not eligible to get the benefit of 10% price preference. It is impossible for us to presume the percentage of raw material which the respondent No.3 is going to purchase from foreign countries exceeding 50%. Considering the facts and circumstances of the case, we do not find any arbitrariness in the decision taken by the respondent No.1 in the matter of giving price preference to the respondent No.3. ssp 8 WP(L) 2198 of 2011 8. We accordingly do not find any substance in the petition, which is accordingly dismissed. Notice discharged. ( MRS.MRIDULA BHATKAR, J.) ( P.B.MAJMUDAR, J.)