1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (LODGING) NO.1125 OF 2009 1. Shapoorji Pallonji & Company Ltd. ) a Company incorporated under ) the provisions of Companies Act, ) having their registered office at ) 70, Nagindas Master Road, Fort, ) Mumbai – 400 023. ) 2. Mr. Vinay Karve, ) Executive Vice-President (Legal), ) of Petitioner No.1, having his ) office at 70, Nagindas Master Road,) Fort, Mumbai – 400 023. ).. Petitioners Versus 1. Maharashtra State Power ) Generation Co. Ltd., having their ) office at ‘Prakashgad’, 3rd Floor, ) Bandra (East), Mumbai – 400 051. ) 2. Chief General Manager (P&P), ) Maharashtra State Power ) Generation Co. Ltd., having his ) office at ‘Prakashgad’, 3rd Floor, ) Bandra (East), Mumbai – 400 051. ).. Respondents -- 2 S/Shri Milind Sathe along with C.S. Balsara, Ms Samidha Vedpathak i/by Maneksha & Sethna for the Petitioners. S/Shri Shekhar Naphade along with G.S. Kulkarni, S.K. Chari and Ms P.V. Thorat i/by M.V. Kini & Co. for the Respondents. -- CORAM : SWATANTER KUMAR , C.J. & S.C. DHARMADHIKARI, J JUDGMENT RESERVED ON : 11TH JUNE, 2009 JUDGMENT PRONOUNCED ON : 9TH JULY, 2009 JUDGMENT : (Per SWATANTER KUMAR, C. J.) Rule. Respondents waive service. Rule made returnable forthwith. By consent, heard finally at this. 2. Respondent No.1 is a wholly owned Government of Maharashtra Company and is engaged in the business of generation of power in the State of Maharashtra. Respondent No.1 issued notice of tender for Balance of Plant Package on EPC basis for 3 Chandrapur T.P.S. Expansion Project 2 x 500 MW at Chandrapur, Dist: Chandrapur, Maharashtra. The scope of the work involved was design, engineering, manufacture, assembly, testing work, inspection at works, transportation including insurance, supply, receipt and handling at site, civil and structural works, erection, testing and commissioning of Balance of Plant Package along with supply of mandatory spares for the said expansion project. Tender notice was governed by the Commercial and General Conditions of Contract which was separately made available to all tenderers along with it. The tender documents were put to sell between 17th November, 2008 to 6th December, 2008 and last date for submission thereof and opening of Cover No.1 was 20th January, 2009. 3. Petitioner No.1 is a company incorporated under the provisions of the Companies Act and is engaged in the business for which the tenders have been invited. The Petitioner – Company submitted its tender documents on 14th May, 2009 and on that day itself Cover No.1 submitted by the bidders including that of the Petitioners, were opened and the same were scrutinized in accordance with the General Conditions of Contract particularly 4 Clause 26. On 21st May, 2009 the Petitioner Company were called upon to furnish audited financial reports for preceding 3 years in respect of its two consortium partners /members M/s. Paharpur Cooling Towers Ltd. and M/s. Flowmore Pvt. Ltd., New Delhi. These documents were submitted by the Petitioner-Company on the same day i.e. 21st May, 2009. According to the Petitioner No.1, it submitted its acceptance to clarifications on Assumptions and Clarifications observed by the Respondents on 4th June, 2009. On 6th June, 2009, the Respondent faxed a letter to the Petitioner Company requiring it to depute its representative to collect unopened Price Bid in Cover No.2 submitted by the Petitioner Company along with bid proposal on or before 10th June, 2009. The Petitioner Company, through its Advocates, served a letter upon the Respondent inter alia while referring to Clause 29.4 of the General Conditions of the tender document stated that out of the seven bidders the Respondents had treated four bidders including the Petitioner Company as non-responsive and had opened the Price Bids in Cover No.2 of three bidders. It is at this stage that the Petitioner- Company filed the present Writ Petition challenging the correctness of issuance of letter, by Fax, dated 6th June, 2009 by which the 5 Petitioner- Company was called upon to collect their Price Bid. The Fax letter dated 6th June, 2009 reads as under:- “EXHIBIT-H MAHAGENCO MAHARASHTRA STATE POWER GENERATION CO. LTD. Ref.No.DG/CHW-Expn.Proj/2x500MW/DP BP of SPCL/2746 Date 6 June 2009 Fax/Courier 022-6623 3533 To: M/s.Shapoorji Pallonji & Co. Ltd. Design & Build Division, Contractor Building, 1st Floor, Ramjibhai Kamani Marg, Ballard Estate, Mumbai – 400 038. Attn: Shri S.C. Dixit, Director (Operations)- Design & Build. Sub: Design, Engineering, Manufacture, Assembly, Testing at Works, Civil and Structural Works, Erection, Testing & Commissioning of Balance of Plant Package on EPC Contract basis for Chandrapur TPS Expn. Project 2x500 MW. Return of Price Bid in Cover No. Two regarding Ref: 1. Bid Specification No.DB/CHANDRAPUR EXPN/BOP/T-2. 2. Your Bid Proposal No. P-9505 dtd. 05/05/09. 6 Dear Sir, It is requested to depute your representative to collect unopened Price Bid in Cover No. Two submitted along with your Bid Proposal referred at (2) above on or before 10.06.2009 from this office. Thanking you, Yours faithfully, Sd/- Chief General Manager (P&P) C. s.w.r.to : ED (Projects-I)” 4. According to the Petitioner-Company, the above impugned letter dated 6th June, 2009 is liable to be quashed and the Respondents need to be directed by an appropriate writ to consider its Price Bid as per the terms and conditions of the tender document. The letter had been issued arbitrarily without assigning any reasons. The impugned letter suffers from infirmity. It is also in violation of the principles of natural justice inasmuch as no opportunity or show cause notice was given to the Petitioner-Company before rejecting its Price Bid. While referring to the judgment of the Supreme Court in the Tata Cellular v. Union of India, (1994)6 SCC 651, it was 7 contended that though the Government or its instrumentalities have freedom of contract but such a freedom is to be regulated by the principles of fair play and the decision must not only be tested by application of principle of reasonableness but must be free from arbitrariness and not affected by any bias or inequity or actuated by mala fides. Since the order suffers from these infirmities, the Court has to exercise its power of judicial review to interfere. 5. The Respondents, upon notice, had filed reply affidavit. With the consent of the Counsel appearing for the parties and keeping in view the urgency in the matter, the same is taken up for hearing and final disposal at the admission stage itself. 6. Beside this, after hearing the arguments for some time, the Court vide its order dated 17th June, 2009 had directed the Respondents to produce the records in Court as well as examine the Bids comparatively with the financial bid of the Petitioner-Company. The said order reads as under: - “1. In this case, we had heard the arguments for 8 some time. Thereafter we had directed the Respondents to produce the record in Court. The original record was produced. When the case was called out again, for the reasons best known to the officers of both the Respondents, the original papers were not produced. The case was again passed on and the Respondents were directed to produce the record in Court. Now the records have been produced. 2. The bid has been opened. The learned Counsel appearing for the said Respondents have also given us the figures given by the three parties whose technical bid was found to be in order by them. 3. We may notice that this we have done only for the purpose of finding out certain facts and without prejudice to the rights and contentions of the parties that the financial bid of the Petitioners could even be considered or not. 4. Stand over to 18th June, 2009.” 7. The above order was made primarily with an intention to know that if the financial Bid of the Petitioner- Company was not the lowest the entire matter then would be academic and need not be examined by the Court. However, when the Bids were opened, the counsel appearing for the Respondents also filed the Price Schedule 1-A. The financial 9 bid submitted by the Petitioner Company appeared to be much lower to that of the other Bidders. The Petitioners’ Bid appeared to be Rs.1522,59,42,428 ( price without taxes) while the other lowest Bid of M/s. BGR Energy System Ltd., Chennai is Rs.1599.45 crores. It is in these circumstances that we have heard the parties further on merits of the case. 8. As already noticed, the reply affidavit filed on behalf of the Respondents particularly Respondent No.1 stated that technical bid of the Petitioner-Company was found to be non- responsive with that of four other Bidders and therefore, the question of opening the Financial Bid of the Petitioner-Company did not arise. It was for this reason as per tender conditions the Respondent No.1 issued the letter dated 6th June, 2009. It must be noticed that though in the letter impugned before us the reasoning was not given but in the affidavit-in-reply filed on behalf of Respondent No.1 reasons have been given which, according to it, are based on record. The technical/financial bid of the Petitioner-Company was found to be non-responsive for three reasons. Firstly, there was violation of Clause 9.4 of 10 Section 1 of the Instructions to Bidders inasmuch as one of the consortium partners of the Petitioners viz. M/s. Paharpur Cooling Tower Ltd., Kolkata, was also consortium partner of another Applicant -Bidder M/s. Thyseen Krup Industries India Pvt. Ltd., Pune. Thus, 2 Bids were submitted by the Applicant which was not permissible. Secondly, the Petitioners did not meet the requirement of experience of completing water system in terms of Clauses 4.1 and 4.2 as they i.e. the consortium partners, had executed work for only one River Water Pump along with bypass piping for Augmentation work of Koradi TPS in March, 2003 and all Koradi Units were commissioned before 1987. Thus, M/s. Flowmore Pvt. Ltd., New Delhi, and M/s. Indure Pvt. Ltd., New Delhi had not jointly carried out the complete work of water system as stipulated by clause 4.1(b). Similarly, in terms of Clause 4.1, the Bidder should have executed contracts on Engineering, Procurement and Construction (EPC) basis for at least one no coal based/lignite based/ gas based combined cycle power plant of installed capacity not less than 100 MW which had been commissioned during the last 12 years in India and had been in successful 11 operation of a period of not less than one year as on the date of Bid opening. The scope of work of such reference plant should have necessarily included Engineering Supply, Installation (with all associated Mechanical, Electrical, Civil & Structural Works ), Testing and Commissioning on Turnkey basis of either Main Power Plant Equipment (Boiler – Turbine – Generator or Gas Turbine – HRSG – STG ) with all associated integral basis of either OR Coal/Lignite Handling Plant, Ash Handling Plant, Cooling Tower and Water System (Raw Water / DM Plant/ Circulating Water System/ Auxiliary Cooling Water System) of a coal/lignite based Power Plant. 9. To this, rejoinder has been filed by the Petitioner Company which has denied the ground that the Petitioners’ bid was non-responsive and has given certain details showing that it had adequate experience. It was also contended on its behalf that various letters were exchanged between the parties before opening of Price Bid and at no point of time, the above defects were pointed out by the Respondents, as the Respondents did not raise any objection during that period. No doubt certain 12 letters including the letters dated 21st May, 2009, 30th May, 2009 and 4th June, 2009 were exchanged between the parties. These letters as already noticed, the Respondents had asked for audited financial report for the preceding 3 years in respect of consortium partner of the Petitioners M/s.Parharpur Cooling Tower Pvt. Ltd., Kolkata, and M/s. Flowmore Pvt. Ltd., New Delhi, which was submitted by the Petitioners and subsequently on the examination of those documents and other material, later on, it was found by the Respondents that the Petitioner Company had committed breach of Clause No.9.4 and 4.1.(b) respectively, which resulted in issuance of letter, by fax, dated 6th June, 2009. In our view, mere fact that some letters were written by the Respondents would in no way amount to treating it as a bar against the Respondents from rejecting the Bid at a subsequent stage. It cannot be disputed that the Bids were being examined and process of examination was on. It is only on 6th June, 2009 that it was noticed by the concerned Authorities and the same was acted upon. 10. Scope of judicial review in relation to technical 13 matters is very limited one. The Court cannot sit as an Appellate Expert Body and find out whether there is breach of any terms or conditions relating to experience and as to whether the same have been satisfied or not, particularly when it relates to high-tech projects. 11. The Supreme Court in the case of Akhil Bharat Goseva Sangh (3) v. State of A.P. & Ors., (2006)4 SCC 162, clearly held that :- “59. The appellant sought to challenge the veracity and correctness of the figures given in the report of the Central Government as well as in the quinquennial census. In our view, this submission is devoid of merit. It is now well settled by various decisions of this Court that the findings of expert bodies in technical and scientific matters would nor ordinarily be interfered with by the courts in exercise of their power under Article 226 of the Constitution or by this Court under Article 136 or 32 of the Constitution. For this proposition, reliance can be placed on the decision of this Court in Systopic Laboratories (P) Ltd. v. Dr. Prem Gupta, 1994 Supp(1) SCC 160. Paras 19 and 20 of this decision clearly give the answer on the question whether the findings of the expert body in technical and scientific matters can be interfered with by the Court either under Article 226 or by 14 this Court under Article 32 or 136 of the Constitution.” 12. We have to therefore examine the present case in light of the above principle. The Petitioners in the present case had submitted that the Court should interfere with the tender process on the ground that the Respondents have acted arbitrarily and in any case the breaches or non compliance stated to be not in conformity with the terms of contract are of such a meager nature that they can safely be overlooked even in accordance with law. Reliance has been placed by the learned counsel appearing for the Petitioners on the judgment of the Supreme Court in the case of Poddar Steel Corporation v. Ganesh Engineering Works & Ors., (1991)3 SCC 273, where the Court held that minor technical irregularity can be waived like requirement of depositing earnest money with the tender either in cash or by demand draft drawn on State Bank of India and the Banker’s cheque had been submitted. Reliance is placed on the following observations of the Supreme Court. 15 “6. 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 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. This aspect was examined by this Court in C.J. Fernandez v. State of Karnataka, (1990)2 SCC 488 a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view. The High Court has, in the impugned decision, relied upon Ramana Dayaram Shetty v. International Airport Authority of India, (1979)3 SCC 489 but has failed to appreciate that the reported case belonged to the first category where the strict compliance of the condition could be insisted upon. The authority in that case, by not insisting upon the requirement in the tender notice which was an essential condition of eligibility, bestowed a favour on one of the 16 bidders, which amounted to illegal discrimination. The judgment indicates that the court closely examined the nature of the condition which had been relaxed and its impact before answering the question whether it could have validly condoned the shortcoming in the tender in question. This part of the judgment demonstrates the difference between the two categories of the conditions discussed above. However it remains to be seen as to which of the two clauses, the present case belongs.” 13. After stating above principles, the Supreme Court in that case has found that the case fell under the second category, and therefore, it was not essential to follow the terms and conditions of the contract strictly or rigidly. On facts, Poddar Steel Corporation’s case (supra) has no application to the facts of the present case. In the case in hand, according to the Respondents, it is not a formal or a mere irregularity in depositing the money but is based on two vital factors which have rendered the technical bid of the Petitioners non- responsive are substantial terms which requires strict construction. The two being, (i) eligibility for applying and (ii) experience in the specialized field. 17 14. In the case of Raunaq International Ltd. v. I.V.R. Construction Ltd. And Ors., AIR 1999 SC 393, the Supreme Court, while dealing with the issues raised by unsuccessful tenderer, clearly stated that unless there was substantial public interest involved and there were great mala fides, mere difference in price offered may not be a sufficient indication for the Court to interfere and there would be no justification for delaying such project which may ultimately cause the exchequer of huge public money. The Supreme Court held as under:- “11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved int he litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by Court intervention, the proposed project may be 18 considerably delayed thus escalating the cost for more than any saving which the Court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the Court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the Court should not intervene under Article 226 in dispute between two rival tenderers.” 15. Clause 4 of the General Terms and Conditions dealing with the qualifying requirements for bidders and as already noticed, the entire case hinges upon interpretation of Clauses 4.1 and 4.2 which read as under:- “4.1. The Bidder should have executed contracts on Engineering, Procurement and Construction (EPC) basis for at least one no. coal based/lignite based/ gas based combined cycle power plant of installed capacity not less than 100 MW which has been commissioned during the last 12 years in India and has been in successful operation for a period of not less than one year as on the date of Bid opening. The scope of work of such reference plant should have necessarily included Engineering, Supply, Installation (with all associated Mechanical, Electrical, Civil & Structural Works), Testing & Commissioning on Turnkey basis of either : (a) Main Power Plant Equipment (Boiler 19 – Generator of Gas Turbine – HRSO – STG ) with all associated integral auxiliaries. OR (b) Coal/Lignite Handling Plant, Ash Handling Plant, Cooling Tower and Water System (Raw Water / DM Plant/ Circulating Water System / Auxiliary Cooling Water System ) of a coal/Lignite based Power Plant. 4.2. The Bidder can submit the Bid in his individual capacity or in consortium with other partner(s). In case of consortium, number of consortium partners should be limited to four (4) and all consortium partners should jointly meet the requirement of Clause 1(b) above. International consortium partner is also acceptable. One of the consortium partners shall be the consortium leader. The consortium partners shall be jointly and severally responsible for the execution of the contract. The consortium agreement shall be furnished clarifying the split up of scope between consortium partners. In case of award - (i) If the Bidder is qualified on individual basis (without consortium partners), the Bidder shall be required to furnish Bank Guarantee towards Contract Performance Security for 10% (ten percent) of Contract Price valid till 90 days beyond the expiry of guarantee period. 20 (ii) If the Bidder is qualified on the basis of consortium partners each consortium partner excluding consortium leader shall be required to furnish Bank Guarantee for 5% (five percent) of Contract Price valid till 90 days beyond expiry of guarantee period. In addition to this, the consortium Performance Security for 15% (Fifteen percent) of the Contract Price valid till 90 days beyond the expiry of guarantee period.” 16. Another clause which has to be read in conjuncture with Clause 4.1 is Clause 9.4. “9.4 The Bidder shall note the following: a) Bid documents are not transferable; b) i) Not more than one bid for the work shall be submitted by one Bidder or one firm of Bidders. ii) If the bidder submits more than one bid, by way of submitting one bid under the name of the firm and the other bid as a joint venture partner or has interest or participation in more than one bid, in such an eventuality, all the bids are liable for rejection. The bidder in his own interest should 21 ensure to submit only one bid. c) If the Bidder deliberately gives wrong information in its bid to create circumstances for the acceptance of its bid, the Owner reserves the right to reject such bid and/or cancel the order, if placed. d) Bid documents submitted by the Bidder shall become the property of the Owner and the Owner shall have no obligation to return the same to the Bidder. e) Bid must cover the entire scope of work as specified in bid specification. f) Bid covering partial scope of work shall not be acceptable.” 17. In addition to the above Clauses in terms of Clause 4.6, the bidder has to provide satisfactory evidence that the Bidder, or, where applicable, the consortium members have adequate financial stability and status to meet the financial obligations pursuant to the works covered in the Bidding documents and have adequate capability and capacity to perform the work properly and expeditiously within the time specified. Under Clause 9.3, the Owner has been vested with 22 the discretion to reject or accept any bid or bids at its sole discretion and any such action shall not be called into question and the Bidder