1 wp3859.10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE WRIT PETITION NO.3859 OF 2010 A2Z Maintenance & Engineering Services Limited A company incorporated under the Companies Act, 1956 having its registered office at O-116, First Floor, Shopping Mall, Arjun Marg, DLF City Phase-I Gurgaon. : Petitioner V/s. 1. Maharashtra State Electricity Distribution Company Limited Prakashgad, Plot No.G-9 Anant Kanekar Marg Bandra (E), Mumbai Through Chairman and Managing Director. 2. Spanco Limited B-22, Krishna Bhuvan, B.S.Deoshi Marg, Deonar, Mumbai—400 088. : Respondents .... Mr.Janak Dwarkadas, Senior Advocate, with Mr.Y.S.Jahagirdar, Senior Advocate, Mr.S.R.Nargolkar, Mr.Zal Andhyarjuna, Mr.Satis Mukharjee, Mr.Makarand Karnik and Mr.Vikrant Nagi, Mr.Sagar Divekar, Mr.Arun Gaur i/b.Trilegal for the petitioner. Mr.R.Dada, Senior Advocate, with Mr.Anurag , Mr.Chirag Modi, Mr.Vivek Shetty and Mr.Rishikesh Soni i/b. DSK Legal for respondent no.1. Mr.Arif Bookwala, Senior Advocate, with Mr.Milind Sathe, Ms Jyoti Singh and Ms Rema Jachak i/b. Dhir & Dhir Asso. for intervenor- respondent no.2. 2 wp3859.10 CORAM : D.D. SINHA AND MRS.MRIDULA BHATKAR,JJ. Date of Reserving ) : 25.06.2010 the Judgement. ) Date of Pronouncing ) : 28.07.2010 the Judgement. ) JUDGEMENT (Per D.D.Sinha, J.) Rule, returnable forthwith. The learned counsel for the respective respondents waive service. Heard the petition finally on merits by consent of the parties. 2. The circumstances which have given rise to the filing of this petition in a nutshell are as follows:- The respondent no.1 in the month of January 2010 issued Request for Proposal (RFP) for appointment of distribution franchisees for the distribution area division of Aurangabad and Nagpur, being Bid Specification No.DF-2/2009-10 and DF-3/2009-10, respectively. The petitioner purchased both RFP documents from the respondent no.1. The petitioner sent various pre-bid queries on the bid documents to the respondent no.1 by their letter dated 14.2.2010. The same was duly 3 wp3859.10 responded by the respondent no.1 by an e-mail dated 22.3.2010 addressed to Mr.Ashish Sahay. The respondent no.1 sent a formal invitation to the petitioner on 18.2.2010 to attend the pre-bid meeting which was scheduled on 20.2.2010. The pre-bid meeting held on 20.2.2010 by the respondent no.1 was attended by the petitioner’s representative Mr.Ashish Sahay. 3. Pursuant to RFP issued by the respondent no.1, the petitioner submitted its bids for both Aurangabad and and Nagpur on 7.4.2010. Six bidders, including the petitioner, submitted their bids for Aurangabad and 11 bidders, including the petitioner, submitted their bids for Nagpur. In the bids submitted by the petitioner, Mr.Lakshmi Narasimhan was designated as the authorised signatory for the petitioner for the bid proceedings through the power of attorney according to the format prescribed in exh.6 of RFP. Apart from this, Mr.Narasimhan signed all supporting documents submitted with the bids. 4. On 27.4.2010, the respondent sent an e-mail to Mr.Ashish Sahay forwarding a copy of the letter dated 27.4.2010 by which the respondent no.1 rejected the petitioner’s bid on the ground that the power of attorney submitted by the petitioner along with the bid was not notarised. An e-mail was sent at about 6.45 p.m. on 27.4.2010 which did not come to 4 wp3859.10 the notice of the petitioner on 27.4.2010. 5. Till 27.4.2010 the respondent no.1 not informed/intimated the petitioner about the date on which the financial bid would be open, even though RFP has stated that technical and financial bid would be opened in the presence of the representative of the bidder. The petitioner became aware that the financial bid may be opened on 28.4.2010. The petitioner sent his representative to the respondent no.1’s office on 28.4.2010. On 28.4.2010 the representative was informed that the financial proposals/bids would be opened on 28.4.2010. The respondent no.1 in their letters Prin.Con./DF/402/12904 and Prin.Co./DF/403/12905 both dated 27.4.2010 to the petitioner’s representative which stated that as the power of attorney submitted by the petitioner was not notarised, the bid of the petitioner was declared as non-responsive and disqualified the technical bid of the petitioner on this ground. The petitioner being aggrieved by the decision of the respondent no.1 dated 27.4.2010 whereby the technical bid of the petitioner was rejected, invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution by filing the present Writ Petition impugning the communication dated 27.4.2010 whereby the petitioner was informed about the rejection of its bids. 5 wp3859.10 6. Mr.Dwarkadas, the learned Senior Advocate appearing for the petitioner, has submitted that the rejection of the bid of the petitioner on the ground that the power of attorney submitted by the petitioner was not notarised is illegal and unwarranted as the requirement to notarise the power of attorney is a non-essential and/or ancillary condition of the tender. It is submitted that the relevant clauses of the tender document which deals with this aspect were clause 5.1.1 read with clause 5.1.1.10. It is contended that under these clauses, if the proposal did not contain the applicable power of attorney as laid down in exh.6 of the RFP, the bid was deemed to be non-responsive. It is the case of the petitioner that the power of attorney submitted by the petitioner on 7.4.2010 was in the required format (but was not notarised). Mr.Dwarkadas, the learned Senior Advocate further contended that the other bidder was M/s.GTL Limited (Aurangabad) whose technical bid which was accepted by the respondent no.1, in fact, had submitted only a photocopy of the required power of attorney and such a photocopy (whether duly notarised or not) was not in compliance with the requirements of clause 5.1.1.10 as well as the format at exh.6 of the RFP. The learned Senior Advocate for the petitioner has submitted that despite such a deviation, in the case of M/s.GTL Limited, the respondent no.1 permitted a relaxation in respect of the requirement for the power of attorney as stated in clause 5.1.1 read with clause 5.1.1.10 as well as the format at exh.6 of the RFP. The 6 wp3859.10 learned Senior Advocate for the petitioner has submitted that despite such deviation, in the case of M/s.GTL Limited, the respondent no.1 permitted a relaxation in respect of the requirement for the original power of attorney in terms of the tender document, though declined to do so with regard to the power of attorney submitted by the petitioner. It is contended that the very fact that relaxation was permitted in respect of M/s.GTL Limited’s bid in respect of the requirement of the power of attorney as provided for in the tender, makes it apparent that the requirement for the power of attorney as stated in clause 5.1.1 read with clause 5.1.1.10 read with the format in exh.6 was a non-essential and/or a collateral and/or ancillary and/or subsidiary requirement with regard to the main object sought to be achieved by the condition. Mr.Dwarkadas, the learned Senior Advocate, has contended that when a relaxation is exercised in favour of one bidder, the same principle and criteria must be applied in the case of other bidders. In order to substantiate this contention, reliance was placed on the decision of B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. [(2006) 11 SCC 548]. 7. The learned Senior Advocate appearing for the petitioner has submitted that it is also well-settled that whether a condition is essential or collateral could be ascertained by reference to the consequence of non- compliance thereof. If non-fulfilment of the requirement results in 7 wp3859.10 rejection of the tender, it would be an essential part of the tender, otherwise it would merely be a collateral term. In order to substantiate this contention, reliance was placed on the judgement of the apex Court in the case of Kanhaiya Lal Agarwal v. Union of India & Ors. [(2002) 6 SCC 315. Mr.Dwarkadas, the learned Senior Advocate has further submitted that if the bid submitted by the bidder substantially complies with the purport and object for which the essential conditions were laid down in the tender document, such bid should not be rejected or disqualified for non-compliance/a deviation with regard to a non-essential and/or ancillary condition. The learned Senior Advocate appearing for the petitioner has submitted that the respondent no.1 was fully aware of the fact that the requirement of notarisation of the power of attorney was a non-essential and/or ancillary condition. This is apparent from the handwritten office note dated 16.4.2010 which is reflected in the affidavit-in-rejoinder dated 13.5.2010 of the respondent no.1 which reads thus:- “GTL Ltd. has submitted notarized copy of duly executed and notarized Power of attorney. Hence original can be asked. This bid may be considered if the original is produced. The documents submitted by A to Z is a power of attorney 8 wp3859.10 executed but not notarized. It is not as per Exhibit 6. Hence there is non-compliance of the term. It is not the very important term to reject the tender itself. We can ask the tenderer to submit another copy of power of attorney duly notarized. If submitted it can be considered.” The learned Senior Advocate for the petitioner, therefore, contended that the Chief Legal Advisor’s note in his response to a query made in the Office Note dated 16.4.2010 (exh.`2’ to the affidavit-in-rejoinder) which specifically requested him to examine the deviation in the power of attorney submitted by M/s.GTL Ltd. and the petitioner. The said office note also bears another note made by the Company Secretary and Director (Finance) which is at page 374 of the affidavit-in-rejoinder and reads as under:- “The documents are historical in nature and the(y) can be obtained to ensure competition. Hence, as proposed above the bids may be considered on submission of original documents.” The learned senior Advocate for the petitioner, therefore, contended that it 9 wp3859.10 is evident that the Chief Legal Advisor, the Company Secretary and Director (Finance) were all of the view that the bids ought to be considered upon the submission of duly complied documents. It is contended that the reasons given for accepting M/s.GTL Limited’s bid and rejecting the petitioner’s in the resolution passed by the Board dated 23.4.2010 on the ground that the former was “minor deviation” and the latter a “major deviation” has no basis whatsoever in law and shows that the Board applied different criteria while evaluating the bids of the petitioner as well as M/s.GTL Ltd., though the deviation was in respect of non-essential eligibility condition alleged to have been committed by both. 8. The learned senior Advocate for the petitioner further submitted that the respondent no.1 failed to appreciate that clause 5.1.1 provides that the bid may be deemed non-responsive in the event that the condition, inter alia, in clause 5.1.1.10 is not met. This is, however, in marked contrast to other provisions submitted in clause 6.5.1.3 which reads thus:- “Bids, which are not accompanied by the above fee receipt, shall be rejected by MSEDCL as non- responsive.” 10 wp3859.10 And clause 6.15.2 of the tender document reads thus: “Strict adherence to formats, wherever specified, is required. Non-adherence to formats may be a ground for declaring the Proposal non-responsive.” It is contended that in the instant case, the powers of attorney submitted by the petitioner as well as the respondent no.1 even if it is assumed for the sake of argument were not as per the specified format, the action of the respondent no.1 in only rejecting the technical bid of the petitioner is discriminatory, illegal and against the settled principles of law and, therefore, unsustainable in law. 9. Mr.Dwarkadas, the learned Senior Advocate, has submitted that the action of the respondent no.1 in rejecting the bid of the petitioner is mala fide which is evident from the following facts and circumstances:- (i) The petitioner’s bid was submitted on 7.4.2010 along with a demand draft for Rs.2 crores. (ii)The power of attorney (not notarised) but otherwise in every manner complied with the requirement of the tender was enclosed with the bid on 7.4.2010. 11 wp3859.10 (iii)Between 7.4.2010 and 27.4.2010, the respondent no.1 raised no query/objection with regard to the petitioner’s bid, though the so- called discrepancy with regard to the petitioner’s power of attorney had already been noted, as is evident from the abovementioned notes dated 13.4.2010 and 16.4.2010, as stated above. (Reference is already made in the above referred paragraph). (iv)The recommendations of the Chief Legal Advisor of the respondent no.1 was never acted upon. The communication on 27.4.2010 rejecting the bid was sent at 6.37/6.45 p.m. i.e. after office hours, deliberately to preclude the petitioner from rectifying the so-called deficiency in respect of the power of attorney which was not notarised. (v)It is contended that failure to notarise the power of attorney does not, in any manner, denude the authority conferred by the power of attorney. In order to substantiate this contention, reliance is placed on the decision of the apex Court in the case of Grafitek International v. K.K. Kaura & Ors. [96 (2002) Delhi Law Times 385]. 10. Mr.Dwarkadas, the learned Senior Advocate for the petitioner, has submitted that the petitioner has denied the case of the respondent no.1 that its representative Mr.Ashish Sahay informed the respondent 12 wp3859.10 no.1’s representative that he will immediately get two power of attorney from Aurangabad and Nagpur divisions notarised, back dated and would submit the same. In fact, in paragraph 12 of the affidavit-in-rejoinder, the deponent has stated that “when the petitioner had come to know about the rejection of the petitioner’s bid on the ground of non-notarization of the power of attorney, it had requested for an opportunity to rectify the defect. It is denied that the petitioner proposes to backdate any document as alleged or at all. The petitioner only sought to get the spare set of the power of attorney that had been prepared for the bid (which was also not notarized as per the format) to be duly notarised and submitted to the respondent.” It is contended that the true copy of the Register of Notary Public clearly shows that the power of attorney submitted by the petitioner was presented for notarisation on 28.4.2010. It is contended that there was no question of back-dating any power of attorney and, in fact, the same had been duly notarised on 28.4.2010. 11. It is contended that the issue raised by the respondent no.1 of so- called back-dating is totally unfounded and to see to somehow justify its unwarranted rejection of the petitioner’s bid. 12. Mr.Dwarkadas, the learned senior Advocate for the petitioner, has submitted that the respondent no.1 has gone to absurd lengths to seek to 13 wp3859.10 justify its illegal and unwarranted rejection. This is apparent from the submission made by the respondent no.1 in the affidavit-in-reply that the act of the petitioner in submitting a non-notarised power of attorney “might be a strategic move to keep the option open for backtracking from the offer, if it does not suit the business interest of the petitioner.” It is contended that the said submission of the respondent no.1 is absurd in view of the fact that the petitioner submitted a demand draft for Rs.2 crores along with its bid which would have been forfeited in the event of any default on the part of the petitioner. 13. Mr.Dwarkadas, the learned senior Advocate, further contended that the respondent no.1 has not denied the fact that the petitioner was the highest bidder by a considerable margin of Rs.102.68 crores for Aurangabad and Rs.8 crores for Nagpur. The respondent’s argument during the hearing of the matter that these margins were not substantial in view of the huge outlays involved in the proposed contracts is liable to be rejected on the ground that the same is against the public interest. 14. Mr.Dwarkadas, the learned senior Advocate, therefore, submitted that the action of the respondent no.1 in rejecting the technical bid of the petitioner is illegal, arbitrary and based on ulterior and extraneous consideration and, therefore, liable to be set aside and the petition 14 wp3859.10 deserves to be allowed. 15. Mr.Rafiq Dada, the learned senior Advocate appearing for the respondent no.1, has submitted that the respondent no.1 issued RFP in January 2010 for appointment of distribution franchisee for distribution areas of Aurangabad and Nagpur. The last date of submission of the bid document was 7.4.2010. The petitioner’s bid was rejected by a unanimous decision of the Board of the respondent no.1 dated 23.4.2010 and communicated on 27.4.2010. The financial bid was opened at 3.00 p.m. on 28.4.2010. The successful bidder declared by the respondent no.1 are M/s.GTL Ltd. for Aurangabad and Spanco Limited for Nagpur. 16. The learned Senior Advocate for the respondent no.1 has contended that the bids of the petitioner were rejected because the petitioner had not submitted notarised power of attorney and also the power of attorney was not executed in the format prescribed in exh.6 to the RFP and also the power of attorney was not attested by the executant. It is contended that notarisation of the power of attorney is an essential and mandatory term of the tender and, therefore, if the power of attorney is not notarised, then the signature of the attorney is not attested nor verified by the Notary Public. Hence, the petitioner who has signed all the pages of the bid document is not authorised by the petitioner and in the absence thereof, 15 wp3859.10 the entire bid of the petitioner becomes invalid. It is contended that the entire bid document on behalf of the petitioner was signed by Mr.R. Lakshmi Narasimhan, whose signature is neither attested nor verified or confirmed by the Notary Public or by the executant. Mr.Lakshmi Narasimhan has not accepted the power of attorney. Mr.Dada, the learned Senior Advocate, has submitted that the petitioner’s authorised representative in whose favour the power of attorney was executed as per the RFP was required to sign each and every page of the bid document and also there were several important documents which were to be signed by the authorised representative. It is, therefore, contended that it was essential as well as mandatory for the power of attorney to be notarised and also the same was required to be executed in the form as provided in exh.6 of the bid document. In the absence of duly notarised power of attorney, the bid of the petitioner is invalid. On the other hand, in the circumstances of the present case, the bids submitted by the petitioner, for the reasons stated hereinabove, could not be treated to be a valid bid. 17. The learned counsel for the respondent no.1 further submitted that the Board of Directors of the respondent no.1 company had in the meeting of the Board of Directors deliberated on the aspect of non-submission of notarised power of attorney by the petitioner and after due deliberation and discussion, decided to reject the bid of the petitioner as non- 16 wp3859.10 responsive. The relevant part of the minutes of the Board is reproduced below:- “4. As regards A2Z, the opinion of the CLA was that the Power of Attorney submitted was not notarized and hence the same was non-compliance as per Exhibit 6 of the RFP. The Board discussed the issue and further noted that a Power of Attorney, notarized by a Notary Public, was required to be submitted along with the technical bid as per exhibit 6 of RFP. Non- compliance of the same was a major deviation and would have legal/financial repercussion. The Board noted that in the absence of a notarized Power of Attorney the party is free to backtrack on the submissions made in the bid document jeopardising the complete process. The Board then opined that as this requirement could not be waived off and obtaining a fresh/revised notarized document at this stage (which cannot be prior to the date of bid submission) would be considered as illegal and also deprive the rights of the other eligible bidders, the bid of A2Z be considered as non responsive in respect of the compliance of the said clause and be 17 wp3859.10 rejected.” 18. Mr.Dada, the learned Senior Advocate, has contended that the Board of Directors of the respondent no.1-company after detailed discussions and deliberations, considered the failure of the petitioner to submit notarised power of attorney as non-compliance of terms and conditions of RFP and, therefore, rejected the bid of the petitioner. The decision of the Board of Directors is proper and reasonable and not at all arbitrary or unfair. In order to substantiate this contention, reliance is placed upon the recent judgement of this Court in the case of Coastal Marine Construction and Engineering Ltd. v. ONGC & Anr. in Writ Petition No.41 of 2010 dated 18.2.2010. The relevant part of the judgement relied upon by the respondent no.1 is as follows:- 15. While examining the merits of the petitioner’s case, we will have to remind ourselves that while judicially reviewing an administrative action, we are concerned with the decision making process of the administrative authority and not the ultimate decision. In the case of Tata Cellular (supra), the apex Court has observed thus:- 18 wp3859.10 “77. The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii)Irrationality, namely, Wednesbury unreason- ableness. (iii) Procedural impropriety.” 19 wp3859.10 19. It is contended that the Supreme Court in the case of Tata Cellular v. Union of India [(1994) 6 SCC 651] has laid down that the duty of the Court is to confine itself to the question of legality and its concern should be (i) whether a decision-making authority exceeded its powers; (ii) committed an error of law; (iii) committed a breach of the rules of natural justice; (iv) reached a decision which no reasonable tribunal would have reached or; (v) abused its powers. And it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. The Court is concerned with the manner in which those decisions have been taken. It is further contended that the apex Court in paragraph 94 of the decision in the case of Tata Cellular has observed thus:- “94. The principles deducible from the above are: (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 decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise 20 wp3859.10 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. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5)The Government must have freedom of contract. In other words, a fair play 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 facts pointed out above) but must be free from arbitrariness not affected by bias