* IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) NO. 6792/2008 Reserved on: 20th November, 2008 Date of Decision: 16th December, 2008 GMR INFRASTRUCTURE LTD. & ANR. .....Petitioners Through: Mr. Arun Jaitley, Sr. Adv. with Mr. Atul Sharma and Mr. Milanka Chaudhury, Advs. Versus NATIONAL HIGHWAYS AUTHORITY OF INDIA & ORS. .....Respondents Through: Mr. Dushyant Dave and Mr. Ramji Srinivasan, Sr. Advs. with Mr. Ravi Kini, Mr. Krishan Kumar, Mr. Sumit Gupta, Mr. Mukesh Kumar, Ms. Madhuri Diwan and Ms. Padma Priya, Advs. for respondent No. 1/NHAI. Mr. Gopal Subramanium, ASG with Mr. Gaurav Duggal and Mr. Chetan Chawla, Adv. for respondent No.2/UOI. With + W.P.(C) NO. 6419/2008 MADHUCON PROJECTS PVT. LTD. & ANR. .....Petitioners Through: Mr. C.A. Sundaram, Sr. Adv. with Mr. Amitabh Chaturvedy, Mr. Jeevesh Nagrath and Mr. Mohit Chadha, Advocates. Versus UNION OF INDIA & ORS. .....Respondents Through: Mr. Gopal Subramanium, ASG with Mr. Gaurav Duggal and Mr. Chetan Chawla, Adv. for respondent No.1/UOI. Mr. Dushyant Dave and Mr. Ramji Srinivasan, Sr. Advs. with Mr. Ravi Kini, Mr. Krishan Kumar, Mr. Sumit Gupta, Mr. Mukesh Kumar, Ms. Madhuri Diwan and Ms. Padma Priya, Advs. for respondent No. 2/NHAI. CORAM: HON'BLE MR. JUSTICE MUKUL MUDGAL HON'BLE MR. JUSTICE MANMOHAN 1. Whether the Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the judgment should be reported in the Digest? % J U D G M E N T MUKUL MUDGAL , J . 1. The present petition challenges the letter No. NHAI/BOT/11012/66/2005/3940 dated 26th August, 2008 issued by the respondent no.1 National Highways Authority of India (hereinafter referred to as ‘NHAI’) to the petitioner consortium intimating the petitioner that it is not eligible to participate in the second stage of the bidding process (the bid stage) in supercession of its earlier letter dated June 27, 2008 pursuant to which the consortium had been declared pre-qualified for the project in question i.e. Design, engineering, construction, development, finance, operation and maintenance of Hyderabad-Vijayawada section of the National Highway 9 (hereinafter referred to as NH9) from KM 40.000 to KM 221.500 of NH 9 in the state of Andhra Pradesh under National Highways Development Programme Phase IIIA on Build Operate and Transfer-toll Basis. The petitioner No.1 GMR Infrastructure Ltd. had applied pursuant to the Request For Qualification (RFQ), issued by the respondent No. 1 NHAI in December, 2007. It is not in dispute that pursuant to the process of evaluation and after compliance of the terms of the tender, and in particular Clause 3.5.2, the petitioner was short listed as one of the six successful tenderers, entitled to be further considered. 2. A number of writ petitions have been filed challenging the tender issued by the National Highways Authority of India, which can be broadly classified into three parts. The first challenge through writ petitions relates to the petitioners, i.e., those bidders, who were initially shortlisted but subsequently declared to be not eligible to participate in the second stage of the bidding process after the revaluation. The second challenge relates to those bidders, who were initially not shortlisted but subsequently allowed to participate in the second stage of the bidding process. The third challenge through the writ petitions relates to the petitioners Reliance Infrastructure Ltd. and DLF-Gayatri-Lor Joint Venture, i.e., those bidders, who did not qualify either through the initial evaluation at the qualification stage and who also did not qualify after the revaluation was done. The present writ petitions correspond to those bidders, i.e., WP(C) 6792/08 titled as GMR Infrastructure Pvt. Ltd. & Anr. Vs. NHAI & Anr. and WP(C) 6419/08 titled as Madhucon Project Pvt. Ltd. & Anr. Vs. UOI & Anr., who were declared qualified at the initial stage i.e. the qualification stage but subsequently declared to be not eligible to participate in the second stage of the bidding process after the revaluation. In the present petition, the bidders who were initially not shortlisted but subsequently allowed to participate in the second stage of the bidding process namely M/s Cintra Concessions De In Infraestruras De Tranporte S.A. and M/s Isolux-Soma-Omaxe Consortium were impleaded as respondents and Mr. Rajiv Nayar, who appeared for M/s Isolux-Soma-Omaxe Consortium was also heard. 3. Since common issues of law arise in the present writ petition and the Writ Petition(C) 6419/2008 titled as M/s Madhucon Projects Pvt. Ltd. & Anr. Vs. Union of India and Anr. we are taking into account only the facts of the present petition, which are as follows:- (a) The Petitioner No.1 GMR Infrastructure Ltd. and its group companies together are one of the fastest growing infrastructure organizations in the country with interests in airports, energy, highways and urban infrastructure (including special economic zones). (b) The Petitioner no. 2 Punj Lloyd Ltd. is in the business of Engineering, Procurement, Construction /Developer. The various areas of operation of the Petitioner No. 2 include Road/Highway and Bridge Construction, Industrial Construction, Laying of Cross Country Pipelines, Tankage and Composite Construction, EPC Contracts and Telecom Contracts. (c) The Respondent No. 1 National Highways Authority of India is engaged in the development of highways and as a part of this endeavor, the Respondent No. 1 decided to undertake development of four/six laning of Hyderabad – Vijayawada section in the state of Andhra Pradesh from KM 40.000 to KM 221.500 of NH 9 through private participation on BOT basis and as such issued the RFQ in December 2007 for selection of the preferred bidder/sponsor. By issuing the RFQ, the Respondent No. 1 intended to pre-qualify suitable applicants who will be eligible for participation in the bid stage for awarding the Project through open competitive bidding process in accordance with the procedure set out in the RFQ. (d) The Petitioner No. 1 and Petitioner No. 2 formed a consortium and entered into a Joint Bidding Agreement dated 14th January, 2008 to participate in the bidding process for the Project. (e) As per the RFQ, the successful bidder shall be responsible for designing, engineering, financing, procurement, construction, operation and maintenance of the Project under and in accordance with the concession agreement to be entered into between the successful bidder and the Respondent no. 1. The scope of work as indicated in the RFP would include rehabilitation, upgradation and widening of the existing carriageway to four/six lane standards with construction of the new pavement, rehabilitation of the existing pavements, construction of major and minor bridges, culverts, intersections, interchanges, underpasses, drains etc. (f) As per the RFQ, the Respondent No. 1 intended to follow a two stage process for the selection of the preferred bidder for the Project which is as under:- i. At the first stage (the Qualification Stage) the interested parties are invited to furnish the information specified in the RFQ document. Upon submission of the documents and information of the document as contained in the RFQ, Respondent No. 1 announces/shortlists a list of bidders for the next stage (the Proposal stage) who are then invited to submit detailed proposals in respect of the project in accordance with the Request for Proposal (RFP) document. ii. In the second stage (the proposal stage) the shortlisted applicants are requested to examine the project in further detail and submit Proposals along with a bid security. The pre-qualified applicants in the second stage submitting a Proposal in accordance with the RFP document, would then be evaluated on the basis of technical, other submissions and financial bids as detailed in the RFP documents. As part of the RFP documents, the Respondent No. 1 shall provide detailed instructions for applicants relating to submission of the Proposals, a draft Concession Agreement and project report/feasibility report containing other information pertaining/relevant to the Project. The award of Project is based on the lowest amount of grant sought from the Authority or the highest premium/revenue share offered, as the case may be. (g) Pursuant to the RFQ, the Petitioners, as a consortium, submitted a request for qualification application dated January 19, 2008 to NHAI. (h) Post evaluations of the RFQ Application, Respondent No. 1, vide its letter No. NHAI/BOT/11012/66/2005/3349 dated June 27, 2008, conveyed to the Petitioners' Consortium that the Consortium had been pre-qualified for the bid stage against the RFQ Application submitted by the Consortium. In the very same letter, the Petitioners' Consortium was called upon by the Respondent No. 1 to collect the bid documents from July 2, 2008, onwards. (i) Upon receipt of the above letter, the Petitioners' Consortium vide its letter dated June 30, 2008 approached Respondent No.1 for issue of the RFP documents but despite the Petitioners' Consortium tendering the requisite fee of Rs. 50,000/- in the form of Bank Draft, the Respondent No. 1 failed/refused to accept the same and also refused to issue the RFP documents. (j) Thereafter, the Petitioners' Consortium received a letter from Respondent No. 1 bearing letter no. NHAI/BOT/11012/66/2005/3712 dated August 8, 2008, in terms of which it was conveyed to the Petitioners' Consortium that in view of certain representations in regard to the evaluation done by the Respondent No. 1, although having been pre-qualified, the process of Petitioners' Consortium's pre- qualification was being kept in abeyance and certain clarifications were sought from the Petitioners' Consortium in relation to their RFQ Application. (k) In response to the same, Petitioners' Consortium vide their letter No. GIL/BD/SV/08-09 dated August 13, 2008, inquired if Consortium's pre-qualification was being reviewed due to representations received and also whether the criteria for pre-qualification remain unaltered. Alongwith the letter of the Petitioners' Consortium, the Consortium also furnished to the Respondent No. 1 the clarification asked for them vide letter dated August 8, 2008. (l) Another letter was received by Petitioner bearing letter No, NHAI/BOT/11012/66/2005/3940 dated August 26, 2008, impugned in this petition, conveying to the Petitioners' Consortium that based on the clarifications submitted by the applicants, the Respondent No. 1 has re-evaluated/reviewed the submitted applications for the RFQ and as a result of the same the Petitioner has not been short listed for the Project and that it is not eligible to participate in the second stage of the bidding process . 4. The main grievance of the petitioner as articulated by Mr. Arun Jaitley, the learned Senior Counsel in the present writ petition is as follows: (a) The process of evaluation has been done on the basis of the representations made by unsuccessful applicants and the said representations were forbidden by Clause 2.21 of the RFQ: Clause 2.21 reads as follows: “2.21 Short listing and notification- After the evaluation of Applications, the Authority would announce a list of short-listed pre-qualified Applicants (Bidders) who will be eligible for participation in the Bid Stage. At the same time, the Authority would notify the other applicants that they have not been short-listed. The Authority will not entertain any query or clarification from Applicants who fail to qualify. (emphasis supplied)” (b) Not only the representations from M/s Inolux Soma Omana Consortium, M/s Reliance Infrastructure Ltd. and M/s Macquarie were entertained but also pursuant to the said representations the petitioner was knocked out from the first six names where he was placed subsequent to the initial evaluation in accordance with Clause 3.5.2. The learned counsel for the petitioner has submitted that the said representations and any action pursuant thereto are contrary to the mandate of Clause 2.21. (c) It has also been submitted that the receiving of the said representations from the unsuccessful applicants amounted to 'an undesirable practice' as it clear from Clause 4.2(d) of the RFQ: Clause 4.2(d) reads as follows: “(d) “Undesirable practice” means establishing contact with any person connected with or employed by the Authority with the objective of canvassing, lobbying or in any manner influencing or attempting to influence the Bidding Process.” (d) It has also been submitted that Clause 2.18 of the RFQ mandates that all the information submitted to the respondent no.1 shall be treated in confidence. The representations made by the unsuccessful applicants, however, clearly indicate the breach of confidence, as the information qua the petitioner's tender is available to the unsuccessful applicants. (e) It is submitted that the petitioner’s i.e. GMR Infrastructure Pvt. Ltd. project and the construction work commissioned was not taken into account in order to disqualify the petitioner. It has been submitted that the requirement of Clause 3.2.3(d) of the RFQ only required the commissioning of the constructed work and payment there for. The commissioned project of the petitioner has not been considered by the respondent on the ground that the project was not commissioned. (f) Even though the respondent no.1 sought the explanation which was satisfactorily given by the petitioner, the marks for the projects in respect of which clarification was given was not given including scores claimed by M/s Sembawang Engineers and Constructors Pvt. Ltd., were not awarded. The relationship between M/s Sembawang Engineers & Constructors Pvt. Ltd. pursuant to the clarification sought by the respondent no.1 was given by the letter dated 13th August 2008 and that explanation was not taken into account. It is lastly submitted that even if it is assumed that the Two Member Committee Report could have been taken into account, the said recommendations have not been fully implemented. The said recommendations read as follows: “(iii) As a result of above exercise there is likelihood of change in the shortlist of top six bidders. In case it is decided to issue RFPs on the changed list of six shortlisted bidders, this may lead to further representation and possible litigation. Under the circumstances there could be two options for carrying the project further:- (a) NHAI Board may consider one time relaxation for this particular package and may increase the number of bidders in the shortlist to accommodate those who qualify in the review exercise and whose experience score in higher than the final score(after review) of the present lowest scorer (M/s Madhucon-Galfar-SREI) in the already declared shortlist. However, its implication on other seven project packages where evaluation is going on will also need to be kept in view as also the legal implications. (b) NHAI Board may consider annulling the whole exercise and direct re-invitation of RFQ for this package (Hyderabad-Vijayawada). This would also meet the ends of justice as all prospective bidders would have an opportunity to apply and be evaluated as per the present evaluation procedure.” (g) The respondent accepted the first recommendation while brushing aside the second recommendation and this could not been done. It is finally submitted that there is a gross disparity of the marks awarded by the respondent no.1 for different projects for almost same experience. (h) The documents filed by the respondent No. 3 Cintra Concessions De In Infraestruras De Tranporte S.A. and Shapoorji Pallonji & Co. Ltd. in reply to the clarification sought on 8th August, 2008 clearly shows that the said documents specifically the certificate issued by the Statutory Auditors were ready much before 8th August, 2008, i.e. on 24th July, 2008 and 28th July, 2008. The respondent No. 3, therefore, had prior knowledge of the fact that clarification was to be sought by the respondent No. 1. 5. The main grievances of the petitioner in WP(C) No.6419/2008 titled as M/s Madhucon Projects Pvt. Ltd. & Anr. Vs. Union of India & Anr. as articulated by Mr. C.A. Sundram, the learned senior counsel is as follows: (a) The Government could not have directed NHAI to seek clarifications because as per Clause 2.20, clarifications, if any, are to be sought by NHAI on its own and not on the directions of the Government. In terms of clause 2.20, it was in the discretion of NHAI as to whether or not to seek clarifications. In other words, NHAI was not obliged to seek clarifications. The defence taken by Union of India (UOI) in its counter-affidavit that NHAI ought to have taken clarifications is thus contrary to clause 2.20(i) of the RFQ. (c) Such clarifications could not have been sought after the completion of the shortlisting process. Clarifications, in terms of clause 2.20(i) of the RFQ were meant for the purpose of facilitating the evaluation of the applications. The evaluation process was completed on 27th June 2008 when the shortlisted candidates were declared. No clarifications could have been asked for or entertained thereafter. Thus, in terms of Clause 2.20(ii) all the applicants were barred from questioning the interpretation arrived at by NHAI. Additionally, it needs to be noted that NHAI had sought clarifications earlier, i.e. before completing the shortlisting and after receiving the response to such clarifications, NHAI evaluated the applications and then announced the names of shortlisted bidders on 27th June 2008. (d) No clarifications could have been sought by NHAI on the basis of representations received by Government from applicants, who had failed to qualify, which representations were forwarded by the Government to NHAI for consideration, comment and subsequently for further action of seeking clarifications. The making of any representation to NHAI was specifically barred under clause 2.21, which is reproduced as under: “2.21 Short-listing and notification After the evaluation of Applications, the Authority would announce a list of short-listed pre-qualified Applicants (Bidders) who will be eligible for participation in the Bid Stage. At the same time, the Authority would notify the other Applicants that they have not been short-listed. The Authority will not entertain any query or clarification from Applicants who fail to qualify.” (e) The entire decision making process was vitiated, defective, illegal, and contrary to the terms of the RFQ. Further, once clarification had been sought for, and decision was taken, the applicants were debarred from questioning the interpretation of NHAI. Once the decision was taken, no representation or clarification could have been entertained from applicants who had failed to qualify as per clause 2.21 of the RFQ. (f) Once the evaluation process was completed and the short list was declared by the letter dated 27th June 2008, NHAI had no further role to play insofar as evaluation under the RFQ was concerned. There is no power of re-evaluation of review given in the RFQ. (g) The respondents, particularly UOI has stated in its counter affidavit that in terms of clause 2.20 of the RFQ, NHAI could have sought clarifications from applicants. Since, this was not done, UOI directed NHAI to seek clarification. There is no provision in the RFQ which gives UOI the power to supervise the tender process and further clarification in terms of clause 2.20 could have been sought by NHAI for the purposes of evaluation of the applications. It was in the discretion of NHAI whether or not to call from clarification and NHAI could not have been directed to do so. A necessary corollary is that clarifications, if any, could have been sought only till such time that the process of evaluation was not complete. Once the evaluation process was completed and the short-list was declared, there was no provision in the RFQ under which clarification could have been sought or entertained and there is no provision under which UOI could have directed NHAI to call for clarifications. (h) The entire process of re-evaluation was undertaken on the basis of representations received from the unsuccessful bidder, who had not been shortlisted for the Bid Stage. This was contrary to the express terms of the RFQ, namely clause 2.20(ii) which barred any applicant from questioning the decision arrived at by NHAI after clarifications had been sought, and clause 2.21 thereof, which provided that no clarification or query from any unsuccessful applicant would be entertained. (i) According to well established practice and procedure, NHAI had no power to recall/review its order/decision once it had informed petitioner that it had been pre-qualified for the Bid stage. NHAI by seeking to consider representations received by from unsuccessful applicants was acting in breach of Clause 2.21 of the RFQ. In terms of Clause 2.21 of the RFQ, NHAI could not consider any representation made by unsuccessful applicants. Furthermore, there was no provision in the RFQ to keep the pre-qualification into abeyance. (j) The arguments of the UOI regarding the inherent power of the NHAI to carry out ‘re-evaluation or review’, at least to the extent of self-correction, to achieve the object of “seeking the best man for the project” and the inter-linked argument of the inherent power of the Government to intervene and direct NHAI to carry out ‘re-evaluation or review’, at least to the extent of self-correction, is wholly fallacious. (l) The entertaining of representations from unsuccessful bidders; constituting a committee to give recommendations; calling for clarifications after the process of evaluation was over and list of short- listed candidates had been declared; and carrying out re-evaluation, was contrary to the terms of the RFQ and amounted to changing the rules. (m) The reliance by the respondents on Section 33 of National Highway Authority of India Act, 1988 is totally misplaced since the said section applies only to laying down of policy which admittedly in the instant case is not applicable. The said section only permits the issuance of a generic fiat on policy matters alone and does not permit the issuance of person-specific directions based on individual grievances brought to its notice. Should the said clause be read so widely as to include the right to interference in every decision making process with regard to award of any particular contract by giving a go- by to the RFQ, the entire independence and autonomy of the authority so created under National Highway Authority of India Act, 1988 would be negated. 6. The learned Additional Solicitor General Shri Gopal Subramanium on behalf of the Union of India (UOI) contended as follows:- (a) By virtue of Section 3 of the National Highways Authority of India Act, 1988, the NHAI has been constituted. Section 11 of the said Act empowers the Central Government to vest in or to entrust to NHAI such national highway or stretch thereof as may be specified in a notification to be published in the official gazette. Proviso to Section 15 of the said Act states that no contract exceeding such value or amount as the Central Government may prescribe shall be entered into by NHAI without the prior approval of the Central Government. By virtue of Section 17 of the said Act, the Central Government has been empowered to provide any capital that may be required by NHAI or pay to NHAI by way of loans or grants such sums of money as it may consider necessary for the efficient discharge of the functions by NHAI. Section 21 of the said Act mandates that the consent of the Central Government is necessary before NHAI borrows money from any source. By virtue of Section 24, the Central Government has an obligation to place the annual report and auditor's report of NHAI before each House of Parliament. Section 31 empowers the Central Government to temporarily divest NHAI of the management of any national highway if it is of the opinion that in the public interest it is necessary to do so. Section 32 empowers the Central Government to supersede NHAI in specified situations. Section 33 empowers the Central Government to issue directions on questions of policy to NHAI and NHAI shall be bound by such directions. Sections 37 states that the rules and regulations made under the said Act have to be placed before each House of Parliament. (b) A perusal of the aforesaid provisions of the National Highways Act, 1956 and the National Highways Authority of India Act, 1988 and Government of India (Allocation of Business) Rules, 1961 clearly shows that national highways vest in the Central Government and NHAI is an implementing agency of the Government of India in matters relating to development of highways. In the present case, the highway in question vests with the Central Government by virtue of the Schedule to the National Highways Act, 1956. A perusal of the 1988 Act clearly shows that the Central Government has the power to ensure that NHAI functions efficiently and in a transparent manner. The provision relating to the consent