IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.5669 of 2010 CORE PROJECTS AND TECHNOLOGIES LTD., A COMPANY DULY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT BLOCK NO. 1-8, BLDG NO.4, SECTOR III, MILLENNIUM BUSINESS PARK, MAHAPE, NAVI MUMBAI AND HAVING ITS CORPORATE OFFICE AT LOTUS BUSINESS PARK, 10TH FLOOR, PLOT NO. C-21, DALIA INDUSTRIAL ESTATE, OFF LINK ROAD, OPP. FUN REPUBLIC CINEMA, ANDHERI LINK ROAD, ANDHERI (W), MUMBAI-400 053 THROUGH MR. VIJAY KUMAR MALIK, DIRECTOR EDUCATION (INDIA), S/O SRI M.R. MALIK, R/O FLAT NO. 131, MONISHA TOWERS, LOKHANDWALA, 4TH CROSS LANE, ANDHERI (W), MUMBAI-400053 Versus 1. THE STATE OF BIHAR THROUGH ITS CHIEF SECRETARY GOVERNMENT OF BIHAR, PATNA, BIHAR 2. THE PRINCIPAL SECRETARY DEPARTMENT OF I.T., GOVERNMENT OF BIHAR, PATNA, BIHAR 3. THE PRINCIPAL SECRETARY DEPARTMENT OF EDUCATION, GOVERNMENT OF BIHAR, PATNA, BIHAR 4. BIHAR STATE ELECTRONICS DEVELOPMENT CORPORATION LTD. (BELTRON), THROUGH ITS MANAGING DIRECTOR BELTRON BHAWAN, SHASTRI NAGAR, PATNA (BIHAR) 5. M/S. EDUCOMP SOLUTION LTD., 1211, PADMA TOWER-1, 5, RAJENDRA PLACE, NEW DELHI-110008. ----------- For the petitioner: M/S. Uday U. Lalit, Sr. Advocate, Arunesh Chowdhary, Raktim Gogoi, Rajesh Ranjan and Sanjeev Kumar. For the respondent/Beltron : M/s. P K Shahi, Sr. Advocate, Shivaji Pandey and Vikas Kamal. For respondent No.5: M/S. Y V Giri, Sr Advocate, Soni Shrivastava, Inder Raj Gill and Vaibhav Bhardwaj. ----------- 05. 03/05/2010 The origin of the present dispute is a short tender notice issued by respondent No.4 i.e. Bihar State Electronics Development Corporation Ltd. (hereinafter referred to as Beltron). The objective behind the notice inviting tender was for providing IT infrastructure including establishment of Computer Lab, Hardware, Networking Software, etc. coupled with Computer Education Services in 600 Schools across rural and urban areas of 2 the State of Bihar. The project was to be executed on the basis of BUILD OWN OPERATE and TRANSFER (BOOT) basis. The short tender notice with requisite details is Annexure-2 to the writ application. 2. The reason for filing the present writ application by the petitioner is the rejection of their technical bid by the respondents and the subsequent award of the contract in favour of respondent no.5 namely, M/S. Educomp Solution Ltd.. The rejection order / reason is stated to be Annexure-11 to the writ application. The petitioner wants a declaration that the action of respondent No.4 i.e. Beltron in disqualifying the petitioner company on spacious and trivial ground is illegal, discriminatory and violative of the fundamental rights of the company. They also want direction upon the concerned respondents to issue a fresh notice inviting tender by annulling the earlier decision. 3. Challenge to the rejection of the technical bid of the petitioner by the respondent is primarily on two grounds – (i) that the Company along with its subsidiary has all the requisite qualification and experience and the reason stated by the respondent for rejection of the technical bid that the Core Education and Consulting Solution Incorporate having the requisite experience certificate is not the experience certificate of CORE Projects and Technologies Ltd, i.e. the present petitioner is misplaced. Treating Core Education and Consulting Solution to be a different entity and experience gained by them not being of 3 any value to the present petitioner seems to be doing violation not only to the terms and conditions of the notice inviting tender but even the requisite provisions under the Indian Companies Act. (ii) the other ground of challenge is the extension of time for opening the bids by the respondent which, according to the petitioner, has created an unfair situation for him. In addition, the extension of time, according to the petitioner, was to accommodate respondent No.5 who is the final beneficiary of such extension. 4. Before the Court embarks upon the exercise of dealing with nitty-gritty of various submissions made on behalf of the petitioner, it would like to reproduce Clause 17 of the notice inviting tender which deals with eligibility criteria. 17. Eligibility Criteria The bidder shall meet the following criteria for eligibility: a) The bid shall be submitted by an individual organization only. Consortium is not allowed. For supply of Hardware, peripherals and other equipments/materials the education service provider may have a back end tie-up with the manufacturer / supplier, however for the bidder will be responsible in totality. 4 b) The bidder should be an Information Technology & Communication Company & specializing in IT learning services with adequate experience of executing similar projects for at least 300 schools. School should be acknowledged by Government as of 31st Dec 2009. c) The bidder should have an average annual sales turnover of INR 100 Crores and above in the last three financial years. d) The Net Worth of the bidder should be positive. The bidder is required to submit its audited balance sheet or copy of the annual report duly signed in original by the authorized signatory. e) The bidder must have experience of completed / executing dually supported by Acceptance Test document at least any one of the following: 1. Project of comprising of hardware, system software, trainer and learning services of Rs.20 Crores. 2. Project of comprising of hardware, system software, trainer and learning services of Rs.10 Crores. 5 3. Project of comprising of hardware, system software, trainer and learning services of Rs.7 Crores. f) References (contact details, customer completion certificate, customer satisfaction certificates etc.) for these projects shall be provided. Projects executed for bidder’s own, bidder’s group of companies or bidder’s JV companies shall not be considered. g) Qualification of Hardware (server/Desktop) supplier – Should have ISO 9001 certification, as OEM with experience of supply & multilocational installation at minimum of 400 different sites in the State of Bihar. h) The bidder must have had at least 100 employees on roll over each of the last three years (as on December 31, 2009, 2008 & 2007). i) The bidder shall have Quality certification from an accredited and internationally reputed / renowned firm (viz. ISO 9001 and ISO 14000). j) The bidder should have office in Bihar. In case bidder has no presence in Bihar, bidder 6 shall furnish an undertaking that an office shall be opened in Bihar, with sufficient personnel and inventory of spares within a month of selection as Successful Bidder. k) The bidder shall have bank’s certificate of solvency. l) The bidder must have company registration certificate, registration under Labour Laws Contract Act, valid sales tax registration certificate and valid service tax registration certificate. 5. Reading of Clause 17(a) indicates that the bid has to be submitted by individual organization only. Consortium is not allowed. Clause (b) states that bidder should be an Information Technology & Communication Company specializing in IT learning services with adequate experience of executing similar projects for at least 300 schools. School should be acknowledged by Government as of 31st December 2009. Other clause which also must be emphasized is Clause 17(f). Clause 17 (f): References (contact details, customer completion certificate, customer satisfaction certificate etc) for these projects shall be provided. Projects executed for bidder’s own, bidder’s group of companies or bidder’s JV companies shall not be 7 considered. 6. Submission of the learned senior counsel representing the petitioner is that a reading of various clauses of eligibility criteria leads to only one conclusion that the only bar for participation in the bid by any company is to a consortium. The bidding which has been made by the petitioner includes experience of its subsidiary company, which is not prohibited. The definition clause which is Clause 2 of the notice inviting tender defines ‘affiliate’ as under: “Affiliate” shall mean any holding company or subsidiary company of a party to the Agreement or any company, which is subsidiary of such a holding company. The expressions “holding company” and “subsidiary company” shall have the meaning specified in section 4 of the Companies Act 1956 (as amended from time to time). 7. A plain reading of the said word coupled with section 4 of the Companies Act would show that the subsidiaries or the holding companies would be treated as one identity and they have the eligibility to participate in the bid. The stand taken by the respondents that the present petitioner does not have the eligibility because they have annexed the experience certificate of an affiliate or a subsidiary company which is registered in America would be in breach of the notice and the terms of eligibility, taken note of in 8 earlier part of the order. 8. Learned senior counsel representing the petitioner on the basis of some of the documents which have been brought on record, specially certification of the auditors, submits that the Core Education and Consulting Solution Incorporate is a limb and part of the present petitioner. Though it may have been incorporated in United States of America but the present company is the holding company and for all practical purposes the experience gained by that company ought to be treated as experience gained by the present petitioner. The report of the Chartered Accountant would show that there are various companies under the umbrella of the present petitioner. They have been submitting balance sheet and accounts in a consolidated fashion and that would be in terms of the requirement of section 212 of the Indian Companies Act. The effort on the part of the Beltron to treat the American subsidiaries as a separate entity is not supported by the law of the land or the eligibility criteria read with definition of ‘affiliate’ given in the notice inviting tender. 9. Learned senior counsel for the petitioner relies on a few decisions in support of the proposition that a subsidiary company is as much a part of the holding company and they ought to be treated as one entity and their experience ought to be included for consideration for eligibility and experience. Some of those decisions are the case of State of U.P. and others v. Renusagar Power Co. and others, (1988) 4 SCC 59. Emphasis is 9 on para 62, 66 and 67. 62. In Charterbridge Corpn. Ltd. v. Lloyds Bank Ltd. at page 1194 Justice Pennycuick emphasized that the reality of the situation must be looked in. 66. It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding. Here, indubitably, we are of the opinion that it is correct that Renusagar was brought into existence by Hindalco in order to fulfil the condition of industrial licence of Hindalco through production of aluminium. It is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of take over of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for 10 establishing and expanding the power station were taken by Hindalco, Renusagar is wholly owned subsidiary of Hindalco and is completely controlled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has at no point of time indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order the profits of Renusagar have been treated as the profits of Hindalco. 67. In the aforesaid view of the matter we are of the opinion that the corporate veil should be lifted and Hindalco and Renusagar be treated as one concern and Renusagar’s power plant must be treated as the own source of generation of Hindalco and should be liable to duty on that basis. In the premises the consumption of such energy by Hindalco will fall under section 3(1)(c) of the Act. The learned Additional Advocate- 11 General for the State relied on several decisions, some of which have been noted. 10. The other decision is the case of New Horizons Limited and another v. Union of India and others, (1995) 1 SCC 478 (para relied on are 23, 25 and 26 of the said decision). Other cases are Reliance Energy Ltd. and another v. Maharashtra State Road Development Corpn. Ltd. and others, (2007) 8 SCC 1 and the decision rendered by Justice Denning in the case of D. H. N. Food Distributors Ltd. v. Tower Hamlets London Borough Council, (1976) 1 WLR 852. 11. Coming to the other aspect which has been urged and hammered forcefully is the conduct of the respondents in extending the date for submission of the tender twice over. Original date of submission i.e. 8.3.2010 was extended till 10.3.2010 up to 12 PM and yet another extension was granted to 16.3.2010 till 1 PM. 12. Senior counsel Mr. Lalit states that according to the notice inviting tender the dates given therein were to be treated as final and the same cannot be extended, which has been done for extraneous consideration. The extended period of time has given undue benefit to the private respondent since he did not upload his bid within the original notified date which was 8th March, 2010. He did so in the extended time frame after 8th of March 2010 and this has also created unfair competition as only two participants had filed their bids by the fixed time frame of 8th 12 of March 2010. There is a categorical provision in Clause 12, which states that any bid received by the tenderer after time and date for receipt of the bids prescribed in the RFP ( Request for Proposal) document shall be rejected and returned unopened to the bidder. Respondent No.4 ought not to have extended the time for submission of the bid and even if the bid was submitted it was fit for rejection. 13. The Court is also informed that pre-bid meeting was held. The various suggestions and amendments proposed by the persons who had expressed their interest in the tender participated and the pre-bid meeting led to certain amendments which shall be reflected from Annexure-5 of the writ application. The pre-bid meeting held on 6.3.2010 crystallized every thing. At that point of time there was no indication that the original time frame for submission of bid would not be maintained. 14. Learned Senior Counsel for the petitioner has made yet another submission with regard to pre-bid meeting. The suggestions made by the various bidders on the clauses of the notice inviting tender and the corresponding amendment/modification or clarification which was reached , petitioner too had submitted pre-bid queries and clarifications in terms of Annexure-3. The amendments/modifications are Annexure-4 to the writ application. It is his stand that based on his pre-bid queries and clarifications the clause dealing with the firm experience contained in Annexure-5 stood changed to ‘locations’ 13 from the terminology ‘located within the country’. According to the counsel therefore, this has widened the ambit and helps the petitioner in the manner that the firm’s experience and assignment now can be considered with regard to any location even globally. 15. The court fails to understand that how the said modification contained in Annexure-4 has the effect of modifying clause 17(b) of the notice inviting tender which still stood as it originally was meaning thereby the bidder’s firm had to be an information technology and communication company specializing in IT learning services with adequate experience of executing similar projects for at least 300 schools. The schools had to be further acknowledged by Government as on 31st December, 2009. Mere change of the word from location within the country to location does not make global experience, in conformity with Clause 17(b). This submission of the petitioner to justify experience of Core Education and Consulting Solution Incorporate to be meeting the requirements of the notice inviting tender seems to be totally misplaced. 16. Counter affidavit has come to be filed both on behalf of respondent No.4 i.e. Beltron as well as the private respondent No.5. Stand of respondent no.4 is that whatever decision has been taken by the tender committee is in conformity with the terms and conditions of the notice inviting tender. Rejection of the petitioner’s technical bid is because of the non- fulfilment of the clear terms of eligibility laid down therein. So 14 far as the eligibility of respondent No.5 is concerned, it is not under challenge. What is required to be answered is whether there were cogent and valid reasons for rejecting the technical bid of the petitioner as they failed to demonstrate the basic eligibility as envisaged under Clause 17 of the notice inviting tender. 17. According to learned Advocate General representing respondent No.4, the terms of Clause 17(a) clearly indicate that the bid has to be submitted by the individual organization and clause (b) indicates that the said bidder must have adequate experience of executing similar projects for at least 300 schools which are acknowledged by Government as of 31st December, 2009. The documents which have been filed by the present petitioner do not indicate that they have any adequate experience of executing similar projects duly acknowledged by Government as of 31st December, 2009. The experience shown by the present petitioner is of the Core Education and Consulting Solution, incorporated in United States of America, having executed projects in the United States. They do not indicate that they have any experience of execution of projects, acknowledged by the Government. Stand of the learned Advocate General is that even if a broad meaning to the word ‘Government’ is given then it has to be either the Government of Bihar or the Government of any State within the territorial boundaries of the Country and may be Government of India but the same cannot be read to mean Government of United States of America. 15 18. Submission of the learned Advocate General is that reading of Clause 17 (a), (b), (e) and (f) together would make it very clear that respondent Beltron were looking for an organization having capacity, eligibility and experience in their own right. Certain serious doubts have already been expressed about the status of the so-called Core Education and Consulting Solution. The core object of the notice inviting tender is to provide opportunities to rural and urban government schools within the State of Bihar, at the level of secondary or senior secondary level across the State to be imparted computer education and literacy. They do not want to deal with an organization of having no exposure or experience of such kind within the country. A kind of procured experience or status of a company located and registered under the law of United States of America may not be enough to confer or accept that the present petitioner has eligibility and experience of the execution of the projects of the kind. 19. Learned Advocate General also brings to the notice of this Court the so-called balance sheet and the certification of the Chartered Accountant which has been included as part and parcel of the writ application. He points out that there are certain significant expressions which have been used by the auditors. In their report they have described the so-called company as a group of companies as would be evident from perusal of page 214 of the writ application. Effort by the present petitioner to pass off 16 the experience of another company incorporated and registered in the United States as a subsidiary would not be doing justice to the eligibility clause contained in Clause 17 especially Clause (a). 20. Reliance is placed on a few decisions with regard to ambit and scope of a writ court in adjudication of such disputes. Attention of this Court has been drawn to the case of Air India Ltd. v. Cochin International Airport Ltd. and others, (2000) 2 SCC 617. According to the counsel, para 7 has significance for the question and issue raised in the present writ application. 7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489, Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India, (1981) 1 SCC 568, CCE v. Dunlop India Ltd., (1985) 1 SCC 260 : 1985 SCC (Tax) 75, Tata Cellular v. Union of India, (1994) 6 SCC 651, Ramniklal N. Bhutta v. State of Maharashtra, (1997) 1 SCC 134 and Raunaq International Ltd. v. I.V.R. Construction Ltd., (1999) 1 SCC 492. The award of a contract, whether it is by a private party or by a public body or the State, 17 is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public 18 duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene. 21. Other decisions relied upon by respondent No.4 is the case of M/S. Master Marine Services v. Metcalfe & Hodgkinson Pvt. Ltd. and another, 2005 (3) PLJR (SC) 97 (especially para 11, 12 and 13) and B.S.N.Joshi & Sons Ltd. v. Nair Coal Services Ltd. and others, (2006) 11 SCC 548. 22. A reading of the above decisions would show that unless there is something fundamentally wrong with the decision- making process the commercial interest of the party inviting tender notice will have to be looked into and certain amount of play in the joint will have to be allowed. If the decision taken by the respondent No.4 is not shown to be extraneous or arbitrary but on a bonafide interpretation of eligibility clause then merely 19 because the petitioner has lost out in his effort at the bid at the technical stage, it would not serve the purpose of justice by carrying out an exercise of re-evaluation or to sit in appeal over the decision. 23. The other aspect which was raised by the petitioner is with regard to legality of extension of time. Averment made in the counter affidavit is that said extension was granted on the basis of a request made by the petitioner himself. The petitioner had prayed for extension of time by at least a week in the communication dated 9th of March 2010. But it was not only the request of the