1 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO. 334/2011 1. Shalby Limited, a Company incorporated under the Companies Act, 1956, having its Registered/Corporate Office at S. G. Road, Opposite Karnnavati Club, Ahemadabad, Gujarat-India- 380 015, thr. Mr. Neeraj Lal, Vice President, Quality, Training & Strategic Alliances, having office at S. G. Road, Opposite Karnavati Club, Ahmedabad, Gujarat-India, 380 015 2. Mrs. Darshani Vikram Shah, A shareholder of Shalby Hospitals, having office at opposite Karnnavati Club, Ahemadabad, Gujarat-India- 380 015 ...PETITIONERS V e r s u s 1. The State of Goa, through its Chief Secretary, Secretariat, Porvorim-Goa. 2. Department of Health through its Secretary, Panaji-Goa. 3. Radiant Life Care Private Ltd. Having its office at C-4/5, Lower Gr. Floor, Safdarjung Development Area, Delhi. …RESPONDENTS --------------------------------------------------------------------------------- Mr. A. N. S. Nadkarni, Senior Advocate with Mr. Pankaj Vernekar and Mr. D. Lawande, Advocates for petitioners. Mr. S. S. Kantak, Advocate General with Ms. N. Kholkar, A. G. A. for respondent nos. 1 and 2. Mr. S. G. Aney, Senior Advocate with Mr. M. S. Sonak, Mr. Chetan S. Kapadia, Mr. Ishwar J. Nankani and Mr. P. S. Rao, Advocate for respondent no.3. --------------------------------------------------------------------------------- 2 CORAM: S. A. BOBDE & F.M. REIS, JJ. Date of Reserving the Judgment :- 28 th July, 2011. Date of Pronouncing the Judgment :- 12 th August, 2011 ORAL JUDGMENT (per S. A. Bobde, J) 1. Rule. Rule returnable forthwith. Heard finally by consent of the parties. 2. In Mapusa, the Government of Goa has constructed a 290 bedded modern District Hospital (Hereinafter referred to as the “said Hospital”) through the Goa State Infrastructure Development Corporation. 3. On 04.05.2011, the respondent no.2-Secretary, Health Department, published a notice inviting tender or a request for proposal for development, operation and management of the said Hospital on Public Private Partnership (PPP) basis. Eight prospective bidders participated in the pre-bid meeting. Eventually, only three of the eight bidders submitted their offers. They were Apollo Hospitals, Chennai, Shalby Limited, Ahmedabad (the petitioner) and Radiant Life Care Ltd., New Delhi (the respondent no.3). These three got qualified at “Response to Pre- 3 Qualification” (Part-I). On 27.05.2011, the aforesaid bidders qualified at the Technical Offers (Part-II). The scores obtained by the three bidders were as follows; Apollo Hospital, Chennai : 76.05, Radiant Life Care Pvt. Ltd. : 89.20, and Shalby Limited, Ahmedabad: 77.95. 4. On 02.06.2011, the financial offers were opened in presence of the Joint Secretary of the Department of Health, Director of Health Services, Government of Goa and the representatives of the three bidders and ICRA Management Consulting Services Ltd. i.e. the Consultant appointed by respondent no.2. The respondents-State had asked, inter alia, the bidders to quote annuity grant i.e. the amount that would be payable by the Government or receivable by the Government. If the Government was to pay a certain amount, it was to be considered as a positive annuity grant and if the bidder was to pay a certain amount, it was to be considered as a negative annuity grant. The Financial Proposals were to be evaluated on the basis of the Annuity Grants, positive or negative and bidders were to be selected on that basis vide clauses 5.5.2, 5.5.5 and 5.5.6 of the RFP, which read as follows: 4 “5.5 Evaluation-Part III-Financial Offer: 5.5.1 ..... 5.5.2 Part III- Financial Proposal of all the Bidders would be evaluated on the basis of the Positive or Negative annuity Grant (quoted in INR per year) for the project and the accompanying supporting information regarding assumptions underlying the Financial Quite. 5.5.3 ..... 5.5.4. ..... 5.5.5 The Financial Proposals would then ranked in ascending order of the validated Annuity Grant. 5.5.6. The Bidder ranked first in accordance with the above procedure would be declared as the Preferred Bidder as evidenced by the issue of Letter of Intent described in section 5.6” After the preferred bidder had complied with certain conditions like the formation of an SPV and submission of a Performance Guarantee, the Authority was to issue a Letter of Award and the preferred bidder was to execute a Concession Agreement with the Authority vide Clause 5.8.4 of the RFP. 5. The Apollo Hospital, Chennai quoted a positive annuity grant of Rs. 500,00,00,000/- for concession period of 20 years. Radiant Life Care, New Delhi-respondent no.3 quoted a positive annuity grant of Rs. 39,40,00,000/- for the concession 5 period of 20 years. The petitioner's bid did not contain a figure of either a positive or a negative annuity grant and according to the petitioner, was a “Nil Bid”. The final quotation of the petitioner reads as follows : Project Name Amount (INR) In Figures In Words Equip, Operate, Maintain and Manage the 290 Bed Mapusa Hospital, Goa for 20 years timeframe. ** ** ** The company is required to invest in capital expenditure of about Rs. 40 Crores (Forty Crores- including working capital, equipment and infrastructure requirements as per IPHS norms which is mandatory as per list given and other equipments & infrastructure upgrade requirement not available in your list provided and which is required as per NABH norms) and we have to further invest in day to day operations of the hospital. We do not demand any subsidy from the Govt. of Goa. In the Same manner, we request the Govt. of Goa not to ask for any compensation from the company.” The representatives of the other bidders objected to the offer of the petitioner, apparently on the ground that the offer contained asterisks (**) followed by the amplification against the 6 column “Amount (INR)” instead of stating “Nil” or “Zero”. The representative of the petitioner is said to have explained that the petitioner wanted to state its offer more explicitly and since there was no adequate space in the table, the petitioner resorted to the asterisks and made a statement below. The petitioner explained that this was a neutral bid. The objections of the other bidders were noted by the officials, who stated that they would consult their Consultant and would then decide upon the objections. The Consultant reported that the petitioner had put two asterisks without indicating any amount therein and had amplified the offer as a separate paragraph. Relying on two legal opinions annexed to the report, they observed that the documents submitted by the petitioner are not in conformity with the format provided. They further reported that they found that based on the legal opinions, the petitioners' bid is non responsive and hence invalid. In the report, there is also an observation that the documents submitted by the petitioner are not in conformity with the format and the value of some other costs is high. The Consultant opined that amongst the valid bids, Radiant Life Care Private Ltd. was the L1 bidder and Apollo Hospitals Enterprise Limited was the L-2 bidder. Accordingly, their Draft Evaluation Report was to be placed before 7 the Project Appraisal Committee (PAC) for their endorsement to invite the preferred bidder for discussion. 6. On 07.06.2011, the PAC met and held the petitioners’ proposal as non responsive and disqualified the petitioner on the basis of the Consultant’s reports. Further, the Committee recommended the bid of respondent no.3 for awarding the work. The PAC also acted on the opinion of the Law Secretary that the petitioner’s bid was ambiguous and vague since it was not according to the format. This ground for rejection has referred to the following format: APPENDIX- 8 (A) (Assumptions Project Cost) Capital Cost for Equipping the Hospital: S. NO DESCRIPTION SUGGESTED CAPACITY QUANTITY UNIT PRICE (INR Lakh) TOTAL PRICE (INR Lakh) 1. Equipment Name (add rows if required) 2. Any Other capital Cost TOTAL COST (Assumptions Operating and Maintenance Cost) O & M Cost S.No Description Annual Cost (Rs. Lakh) 1 Annual Manpower Cost (provide details on no. and designations, etc) 2 Annual Operating and Maintenance cost of 8 S.No Description Annual Cost (Rs. Lakh) Equipment 3 Annual expenditure on building maintenance including power, water, SWM etc. 4. Administrative cost 5. Cost Total O & M COST Thereafter, on the same day, a Letter of Intent (LOI) was issued to respondent no.3. Hence, this petition. 7. According to the respondents, the petitioners' bid was non responsive also because it was not in accordance with the prescribed form, which was as follows: APPENDIX- 8 (A) (Assumptions Project Cost) Capital Cost for Equipping the Hospital: S.NO DESCRIPTION SUGGESTED CAPACITY QUANTITY UNIT PRICE (INR Lakh) TOTAL PRICE (INR Lakh) 1. Equipment Name (add rows if required) 2. Any Other capital Cost (Assumptions Operating and Maintenance Cost) O & M Cost S.No Description Annual Cost (Rs. Lakh) 1 Annual Manpower Cost (provide details on no. and 9 S.No Description Annual Cost (Rs. Lakh) designations, etc) 2 Annual Operating and Maintenance cost of Equipment 3 Annual expenditure on building maintenance including power, water, SWM etc. 4. Administrative cost 5. Cost Total O & M COST Instead the figures were substituted as follows: Assumptions Operating & Maintenance Cost Rs in Lacs Sr. No. Description Amount (Rs) 1 2 3 4 5 Annual Manpower Cost Annual Operating & Maintenance Cost of Equipments Annual Expenditure on building maintenance including power, water, SWM, etc Administrative Cost Other Costs (Other Operative Costs) Refer Annexure 2 1,455 80 425 815 8,015 TOTAL COST 10,790 It is submitted that in the last column, the petitioner had omitted the word “Annual Cost” and simply wrote as; “Amount (Rs)”. 10 8. Mr. Nadkarni, the learned counsel for the petitioner, submitted that the petitioners' offer ought not to have been treated as non responsive since there was neither ambiguity nor vagueness in it. The offer in respect of annuity grant i.e. whether positive or negative, was not vague merely because the petitioner had employed asterisks for the purposes of amplifying the text. The quotation could have been treated only as “Nil” in view of the specific statement of the petitioner that, “We do not demand any subsidy from the Govt. of Goa. In the Same manner, we request the Govt. of Goa not to ask for any compensation from the company.” The learned counsel for the petitioner further submitted that the Advocates, who were consulted for the legal opinion have considered that sentence, “We do not demand any subsidy from the Govt. of Goa. In the Same manner, we request the Govt. of Goa not to ask for any compensation from the company” and then opined that reasonable inference that can be drawn is that the Annuity Grant quoted by the petitioner is 0.00 and that merely because the amount “00” is not mentioned in the figures and words, it should be treated as a technical irregularity. 11 9. On the other aspect, the learned counsel for the petitioners submitted that there was no deviation from the format in which the petitioners have stated assumption regarding operating and maintenance costs only because of omission of word “Annual” in the last column. According to the petitioner, their quotation was made in a format downloaded from the Internet, where it was uploaded by the respondents and while reproducing the same, the word “Annual” was accidentally omitted. In any event, the omission of word “Annual” did not change the fact that the figures quoted were indeed annual since the word “Annual” was written in the first column against items 1 and 2. Though, the word “annual” was not written against the figures of Annual Manpower Costs and other costs under items 3, 4 and 5 the figures were, in fact, annual. 10. The main contention on behalf of the petitioner is that, in the circumstances, no reasonable doubt could have been entertained by the respondents regarding the petitioners’ offer which was clear. Assuming that the respondents entertained any bonafide doubt and they wish to consider the petitioners' offer with an open mind, they could have simply resolved the doubt by asking the petitioners if the quotation was nil and whether the figures 12 quoted under the Assumptions Operating and Maintenance Cost were annual. The petitioners’ further contention is that the Letter of Intent (LOI) issued to respondent no. 3 is illegal being contrary to the Rules of Business of the Government of Goa, 1991 (the “Business Rules”) in that no concurrence of the Finance Department was obtained though the Letter of Intent had a financial bearing, within the meaning of the Business Rules. 11. The contention of Mr. Kantak, the learned Advocate General, appearing for respondent nos. 1and 2-State of Goa and Mr. S. G. Aney, learned counsel for respondent no.3, is that the petitioner had no reason to make a long winded statement following the asterisks when the petitioners could have simply written the numerical “0.00” or “nil”. The petitioners having stated that it is required to invest a sum of Rs. 40,00,00,000/- in capital expenditure and in day-to-day operation of the said Hospital, their offer is conditional, which is impermissible since clause 1.4.3 of the RFP clearly stipulates that any conditional offer, proposal shall be regarded as non responsive and would be liable for rejection. As regards the alleged deviation in the format wherein, the petitioner has omitted the word “Annual” the contention of the 13 respondents is that clause 3.6.9 of the RFP clearly requires a bidder to strictly adhere to the format prescribed in the RFP document and that authority reserves the rights to reject a proposal, which does not meet this requirement. 12. According to the learned Advocate General, the State was not bound to seek any clarification from the petitioners but was entitled to consider the petitioner as disqualified and reject their bid because the tender was vague and was not in accordance the form prescribed by the State. Further, according to the learned Advocate General, the statement made by the petitioner in amplification that, “**The company is required to invest in capital expenditure of about Rs. 40 Crores (Forty Crores-including working capital, equipment and infrastructure requirements as per IPHS norms which is mandatory as per list given and other equipments & infrastructure upgrade required not available in your list provided and which is required as per NABH norms) and we have to further invest day to day operations of the hospital” makes the offer conditional, which is not permissible, therefore, renders the offer liable to be rejected. Further, the contention is that the offer is made conditional upon investment of Rs. 40 Crores 14 and if Rs. 40 Crores are not invested, it is not possible to know what the offer is. As regards the alleged deviation in the format, where the word “Annual” has been omitted, the contention of the learned Advocate General is that by omitting the word “Annual”, the petitioners have reserved their right to turn around and say that the figures are not annual and thereby make an undue claim at a later stage. 13. The consideration of the issue requires the Court to determine, whether the requirement to write “Nil” in figures and in words is an essential requirement, which vitiates the whole quotation and renders the tender itself non responsive and liable to be rejected and, whether difference in language employed by the petitioners is a deviation in substance or whether differs only in the form. The petitioners-bidders were required to indicate the documents in the following format: “I/we are pleased to inform that I/We would charge/Pay the following Annuity Grant (positive/negative) for carrying out the Project envisaged under the Scope of work indicated in this RFP document. 15 Project Name Amount (INR) In Figures In Words Equip, Operate, Maintain and Manage the 290 Bed Mapusa Hospital, Goa for 20 years timeframe. We confirm that the amount quoted above includes all taxes except for service tax as applicable or any other equipment tax as applicable in future. We confirm that in case of discrepancy in Figures and Words for the amount Quoted the Lowest will be considered. We confirm that the Financial Proposal conforms to all the terms and conditions stipulated in the Request for Proposal Document. We confirm that our Financial Proposal is FINAL in all respects and contain No conditions.” Instead, as reproduced earlier, the petitioners have quoted as follows : Project Name Amount (INR) In Figures In Words Equip, Operate, Maintain and Manage the 290 Bed Mapusa Hospital, Goa for 20 years timeframe. ** ** ** The company is required to invest in capital expenditure of about Rs. 40 Crores (Forty Crores- including working capital, equipment and infrastructure 16 requirements as per IPHS norms which is mandatory as per list given and other equipments & infrastructure upgrade requirement not available in your list provided and which is required as per NABH norms) and we have to further invest in day to day operations of the hospital. We do not demand any subsidy from the Govt. of Goa. In the Same manner, we request the Govt. of Goa not to ask for any compensation from the company.” There is no dispute about the other statements. 14. We have no doubt that the petitioners have unnecessarily burdened, what would have been a simple quotation, with several unnecessary words and statements. There is no doubt that the only thing that the petitioners were called upon to write in figures were the numbers “0.00” and the words “nil”. They have obviously strayed far from the simple requirement. But the question is, have they not submitted a quotation which is “nil”? The answer seems to be in the affirmative in view of their statement that, “We do not demand any subsidy from the Govt. of Goa. In the Same manner, we request the Govt. of Goa not to ask for any compensation from the company.” They have chosen to use a word “subsidy” instead of “annuity” so also stated that they 17 would not pay any “compensation” instead of payment of “annuity”. Reading of these words, it seems plain that the petitioners-bidders do not want any payment from the Government nor do they intend to make any payment. It is understandable that a question could have arisen in the mind of the respondents- authority as to the exact meaning of the quotation but then the simple answer to that was to ask the petitioner what they meant. There is also no merit in the contention that the quotation has become conditional only because the petitioners have stated that they are required to invest Rs. 40 Crores in capital expenditure. There is no foundation for the expression on behalf of the respondents that they do not know what the offer would become if the investment is less than Rs. 40 Crores. Nowhere have the petitioners stated that the figures they are quoting would be “nil” if the investment is Rs. 40 Crores and it would be some other figure if the investment is more or less than Rs. 40 Crores. There is no foundation for the respondents' apprehension that the petitioners' quotation is conditional. It is not possible to countenance the contention on behalf of the State that they were entitled to simply ignore the entire quotation without seeking any clarification, particularly since the petitioners' quotation appears to be 18 financially the best in that the Government would not have to pay anything to the petitioners for running the hospital for 20 years in comparison to the quotation of respondent no.3, which requires the Government to pay a sum of Rs. 1,97,20,000/- annually. There is no doubt that since the matter involves public revenue, the Government was duty-bound in law to accept the lowest or the most beneficial tender and was, therefore, bound to ascertain, if necessary, by asking a few questions to the petitioners about what the offer was assuming it to be ambiguous. Similarly, even in regard to the omission of the word “Annual” in the column under heading “Assumptions Operating & Maintenance Cost.” It appears that there was no real reason to assume that the figures quoted were not annual since in the first column there is sufficient indication, particularly in the first three items that the figures are annual. If there was any doubt regarding, whether the figures were annual or not in the other items, seeking a simple clarification would have enabled the Government to consider and possibly accept the tender, which appears to be the lowest and the most beneficial to it. 15. From the above, we are of the view that this is not a case where the bidder has embarked on a deviation from an 19 essential term of tender, which mandatorily attracted a rejection. In fact, it appears that there is no deviation made by the petitioners in any term and there is at the most a defect of technical nature in the manner in which the quotation is expressed. 16. In M/s. Poddar Steel Corporation ..vs.. M/s. Ganesh Engineering Works and others; AIR 1991 Supreme Court 1579 the Supreme Court observed in para 6 as follows: “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 20 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 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 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 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.” Change in the manner of the expression of the quote 21 and the omission of the word “annual” in the format was a technical irregularity, which did not involve the continuation of any deviation. It was certainly open to the respondent not to insist upon strictly literary compliance of the format or the manner of expressing the quote. The strong resistance exhibited by the respondent to even seeking simple clarification and proceeding to reject the tender as non responsive raise a serious question about the manner of exercise of the power. Indeed, the State Government, while entering into commercial transactions is called upon to act like a prudent businessman and in the present case, like any prudent businessman ought to have sought the necessary clarification if it entertained any doubts particularly since the tender which it has left out of consideration appears to