*HON'BLE SRI JUSTICE C.V. NAGARJUNA REDDY + W.P.No.24340 of 2011 % Date : 28-10-2011 # M/s. EFKON AG – EFKON India Pvt.Ltd. Consortium, Mumbai, represented by its Authorised Signatory M. Nagaiah, .. Petitioner Vs. $ Hyderabad Growth Corridor Limited, represented by its Managing Director, Hyderabad. .. Respondent ! Counsel for petitioner : Sri B. Adinarayana Rao for Sri K.V. Subba Reddy ^ Counsel for respondent : Sri A. Sudarshan Reddy, Advocate-General < Gist: > Head Note: ? Cases referred: 1. (2000) 2 SCC 617 2. (2004) 4 SCC 19 3. (2005) 6 SCC 138 4. (2007) 14 SCC 517 5. (1979) 3 SCC 489 6. (1994) 6 SCC 651 7. (1997) 1 SCC 738 8. (1999) 1 SCC 492 9. (2001) 2 SCC 451 10. (2005) 6 SCC 138 11. (2006) 10 SCC 1 12. (2006) 11 SCC 548 13. (2008) 16 SCC 215 HON'BLE SRI JUSTICE C.V. NAGARJUNA REDDY W.P.No.24340 of 2011 Date : 28-10-2011 Between : M/s. EFKON AG – EFKON India Pvt.Ltd. Consortium, Mumbai, represented by its Authorised Signatory M. Nagaiah, .. Petitioner And Hyderabad Growth Corridor Limited, represented by its Managing Director, Hyderabad. .. Respondent Counsel for petitioner : Sri B. Adinarayana Rao for Sri K.V. Subba Reddy Counsel for respondent : Sri A. Sudarshan Reddy, Advocate-General The court made the following: ORDER: The petitioner, which is a consortium of two companies, viz., M/s. EFKON AG of Austria and M/s. EFKON India Private Limited, filed the present Writ Petition feeling aggrieved by the communication of the respondent vide letter No.CGM(T)/HGCL/DGM(T)-II/602/2006-07 dated 22-8-2011 whereby it was informed that the technical bid submitted by the former is non-responsive. The background facts leading to the filing of the present Writ Petition are summarized hereunder : The respondent has received financial aid to a tune of 42027 Million Yen from the Japan International Corporation Agency (JICA) towards cost of Hyderabad Outer Ring Road project. As part of this project, the respondent has issued bid notice No.CGM(T)/HGCL/2/2009-10 dated 22-3-2010 inviting pre-qualification tenders for design, supply, installation, commissioning, testing and warranty, maintenance for equipments of Toll Collection System and related facilities for Outer Ring Road to Hyderabad City in the State of Andhra Pradesh, India under Phase-2 program. The bidding consists of three stages i.e., (i) pre-qualification and short-listing, (ii) technical bid and (iii) price bid. The petitioner and nine other bidders have submitted their pre- qualification bids in response to the said notice. After opening the pre-qualification tenders, six companies were short-listed for submission of technical bids and accordingly bid notice No.ORR/JICA2/TMS/10-11 on 5-10-2010 was issued for submission of technical bids. In response thereto, the petitioner submitted its technical bid. After opening the technical bids and in the course of analysis thereof, the respondent addressed letter dated 26-4-2011 to the petitioner wherein it has raised as many as 69 queries. The petitioner submitted its clarifications to all those queries on 16-5-2011 supported by documentary evidence. The respondent issued letter No.CGM(T)/HGCL/DGM(T)- II/602/2006-07, dated 22-8-2011 informing therein that the petitioner’s bid, on evaluation, is determined as non- responsive as per Clause 28 of the Instructions to Tenderers (ITT). This communication is questioned in this Writ Petition. A detailed counter-affidavit is filed by the Managing Director of the respondent. The relevant averments of the counter-affidavit are as under: The evaluation of the technical bids was placed before the Technical Evaluation Committee constituted by the Government of Andhra Pradesh vide G.O.Ms.No.313, Municipal Administration, dated 23-4-2008. The terms of reference to the Technical Evaluation Committee as per the said G.O.are : (i) to discuss and deliberate on various issues related to the project and to arrive at unanimous opinion; (ii) to evaluate the bids (received on ICB route), seek clarifications, if any, from the bidders/consultants, determine whether the bids are substantially responsive without material deviation, reservation or omission etc.; (iii) to determine and recommend the lowest evaluated bids in respect of Civil Works Contractors/Consultants to the High Level Committee for approval; and (iv) to attend the Technical Evaluation Committee meetings as and when convened in view of the importance of Outer Ring Road project; that the Technical Evaluation Committee was requested during the meeting held on 27-6-2011 to examine the 32 unsatisfactory clarifications given by the petitioner along with two major and one minor deviations and consider whether the unsatisfactory clarifications are critical or they may be ignored or those deviations can be rectified at the stage of design approval; that upon deliberations, the Members of the Technical Evaluation Committee recommended to reject the petitioner’s bid as not responsive to the tender conditions and a decision was accordingly taken and informed to the petitioner by the respondent; that Clause 28.4 of the ITT provides for waiver of minor infirmity, but in the present case, there are two major and one minor deviations and that the following are the deviations: Major deviations: (i) The tenderer proposes two different types of Automatic Vehicle Classification System without specifying which one is the proposal and which is alternative and requests the Employer to choose one of them even after they are requested to specify in the clarification. The procedure is not compliant to the Employer’s Requirements; (ii) The On Board Unit (OBU) and the transaction procedure proposed do not comply with the Employer’s Requirement. The requirements required to record the data in OBU at both entry and exit interchanges. The proposed system does not record the data at the exit. Such system will not work properly and transaction cannot be processed; Minor deviation: The tender process to issue a new Touch and Go card, in case the existing Touch and Go card cannot be read at the entry interchange. The procedure is different from what is required in the Employer’s Requirement and practically not feasible; That out of 69 clarifications sought, the petitioner satisfactorily answered only 37 queries and even though the petitioner was provided with an opportunity to inform the technical proposals so as to conform its technical bid to the tender conditions, it has failed to respond in appropriate manner; that as per Clause 13.9 of ITT, non-conformity with the Employer’s Requirements shall be a justifiable ground for rejection of a tender; that out of six short-listed tenderers, M/s.Telvent-L&T and M/s.IRDI-IRDSA could not provide tender security due to which their bids were declared as non-responsive and that the petitioner’s bid was also declared as non-responsive in view of the two major and one minor deviations. A reply affidavit has been filed on behalf of the petitioner. With reference to the alleged major deviations relating to Automatic Vehicle Classification System (for short “the AVC System”), it is averred that Clause 7.12 of Section VII-Part-B of the Employer’s Requirement, dealing with classification sensors, gave a choice to the contractor to provide any or a combination of five types mentioned therein; that in its proposal, the petitioner has stated that it has expertise in both height sensor based as well as in-road sensor (treadle based) technologies and that either one can be used and accordingly both the specifications were given. It was further averred that no change in commercial proposal was made by the petitioner; that when query No.56 was made during the evaluation of the technical bid, the petitioner has given technical clarification of both the methods and that the query has not stated that the petitioner’s offer constitutes non-compliance of the tender conditions; instead the petitioner was asked to clarify certain technical details “in either case”. With regard to the second alleged major deviation relating to OBU it is pleaded that as per para-1 of Clause 3, relating to Functional Requirements for ETC System-Section VII-Part-B of the Employer’s Requirements, the ETC equipment operation shall include two components viz., Ground equipment or the antenna installed in each lane; and OBU with contactless smart card installed with vehicles. The petitioner placed reliance on Clause 3.2.2 of Section VII-Part-B of the Employer’s Requirements, which envisages that the amount shall be deducted from the pre-paid balance of the contactless smart card and the same in no manner specifies “writing on the OBU”. While stating that the smart card cannot be equated with the OBU, the petitioner averred that the data relating to the pre-paid balance is read and written into the smart card of the tag and not OBU and that therefore the petitioner’s tender does not suffer from deviations. The petitioner stated that had it been given an opportunity to give further clarifications on the above aspects, it would have fully satisfied the Technical Evaluation Committee that there are no deviations at all. The petitioner referred to the Technical Evaluation Committee accepting and receiving additional papers relating to technical bid documents of M/s. LSIS and RIT, whose price bid was opened and pleaded that a similar opportunity should have been provided to the petitioner for submitting further clarifications and additional documents. The petitioner alleged that there is no whisper in letter dated 26-4-2011, wherein 69 queries were raised, that any of those queries constitutes deviation and that the respondent was pre-determined to eliminate the petitioner from competition without giving proper opportunity. Sri B. Adinarayana Rao, learned counsel representing Sri K.V. Subba Reddy, learned counsel for the petitioner and Sri A. Sudarshan Reddy, learned Advocate-General appearing for the respondent, advanced extensive arguments. The submissions of the learned counsel for the petitioner are as follows: (i) The rejection of the petitioner’s technical bid as non-responsive is patently arbitrary and irrational and that the whole decision making process is defective and vitiated by extraneous reasons; (ii) The purported two major and one minor deviations are invented only for the purpose of rejecting the petitioner’s technical bid and that they do not constitute any deviation as per the terms of the ITT or the Employer’s Requirements. (iii) The Technical Evaluation Committee allowed JICA representative to participate in its deliberations and was unduly swayed away by the latter’s opinion. The learned counsel for the petitioner has taken the Court through the queries relating to the three alleged deviations, the answers given by the petitioner to the said queries, the relevant Clauses of the ITT and the Employer’s Requirements and G.O.Ms.No.313, dated 23-4-2008 to substantiate the above three submissions. The learned Advocate-General while opposing the above submissions has taken the Court through the relevant material and submitted that the decision to declare the petitioner’s bid as non-responsive was taken on the advise of the Technical Evaluation Committee and that the decision making process undertaken by the respondent does not suffer from any illegality, irrationality or arbitrariness warranting interference of this Court in exercise of its power of judicial review under Article 226 of the Constitution of India. The learned Advocate-General placed reliance on the following Judgments: Air India Limited Vs. Cochin International Airport Limited and another[1], Directorate of Education Vs. Educomp Datamatics Limited[2], Master Marine Services (P) Limited Vs. Metcalfe & Hodgkinson (P) Limited[3] and Jagdish Mandal Vs. State of Orissa and others[4]. Before adverting to the submissions of the learned counsel for the parties on the correctness or otherwise of the decision of the respondent rejecting the petitioner’s bid as non-responsive, it is necessary to refer to the settled legal principles regarding the scope of judicial review on the issue relating to award of contracts. The Judgment of the Apex Court in Ramana Dayaram Shetty Vs. International Airport Authority of India[5] created a watermark on the issue relating to award of contracts and scope of judicial review in relation thereto. In its celebrated Judgment, the Supreme Court held that the State or its instrumentalities are required to adhere to the tender conditions on the pain of invalidation of the decision in the event of their non-adherence. The subsequent Judgments, however, have recognized some “freedom of play in joints” for the employer while finalizing the tenders. In Tata Cellular Vs. Union of India[6] the Supreme Court has defined the parameters for judicial intervention as under : “The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision-making authority exceeded its powers? 2. committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind (1991) 1 AC 696), Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, “consider whether something has gone wrong of a nature and degree which requires its intervention.” It has deduced the following legal principles: 1. The modern trend points to judicial restraint in administrative action. 2. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. 3. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. 4. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. 5. The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in the administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. 6. Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” In Air India Limited (1-supra), the Supreme Court held that the award of a contract even by a private party or a public body or the State is essentially a commercial transaction and that in arriving at commercial decision, considerations which are paramount are commercial considerations and that the State can choose its own method to arrive at a decision and fix its own terms of invitation to tender and that is not open to judicial scrutiny. It further held that the State is free to grant any relaxation for bona fide reasons if the tender conditions permit such a relaxation. It however added a caveat that the State, its Corporations and instrumentalities are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. In several Judgments rendered thereafter, the Supreme Court while choosing the path of judicial restraint, however, repeated and reiterated the core jurisprudential principle that where the Constitutional Court is satisfied that the decision making process is vitiated by arbitrariness, irrationality, unreasonableness, bias or mala fides, it is bound to interfere with such a decision. (See: Asia Foundation & Construction Ltd. Vs. Trafalgar House Construction (I) Ltd.[7], Raunaq International Ltd. Vs. I.V.R. Construction Ltd.[8], Air India Ltd. (1-supra), W.B. SEB Vs. Patel Engg. Co.Ltd.[9], Master Marine Services (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd.[10], Reliance Airport Developers (P) Ltd. Vs. Airports Authority of India[11], B.S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd.[12], Jagdish Mandal (4-supra) a n d Siemens Public Communication Networks (P) Ltd. Vs. Union of India[13]). Keeping in view the above settled legal principles, let me now examine whether the decision of the respondent is liable to be interfered with. Clause 28 of the ITT deals with Examination of Tenders and Determination of Responsiveness. Clauses 28.3 and 28.4 of the ITT which are material for this case, are as under: “28.3 A substantially responsive Tender is one which conforms to all the terms, conditions and specifications of the Tender Documents, without material deviations, objections, conditionality or reservation. A material deviation, objection, conditionality or reservation is one (i) which affects in any substantial way the scope, quality or performance of the Contract; (ii) which limits in any substantial way, inconsistent with the Tender Documents, the Employer’s rights or the successful Tenderer’s obligations under the Contract; (iii) whose rectification would unfairly affect the competitive position of other Tenderers who are presenting substantially responsive Tender, or (iv) which fails to commit to the dates specified for the Completion of the Works. 28.4 The Employer may waive minor informality, nonconformity or irregularity in a tender that does not constitute a material deviation, whether or not identified by the Tenderer in Schedule FT-9 Statement of Deviations to the Form of Tenders, and that does not prejudice or affect the relative ranking of any Tenderer as a result of the technical and financial evaluation.” Through letter dated 26-4-2011, the Managing Director of the respondent informed the petitioner’s representative that certain clarifications were required by the respondent’s office regarding the petitioner’s technical proposals. It was therefore requested that the clarifications on the questions mentioned in the annexure to the said letter may be sent on or before 10-5-2011 for further necessary action. The said annexure contains as many as 69 questions. According to the respondent, the replies of the petitioner to 37 questions were judged as acceptable by the evaluation team and that the remaining 32 queries, described as “unsatisfactory clarifications”, were placed before the Technical Evaluation Committee in the meeting held on 27-6-2011, to consider whether they were critical or they may be ignored or can be rectified at the design approval stage. Similarly, in cases of other tenderers also, certain queries were raised and they were placed before the Technical Evaluation Committee. Of the 32 queries which were judged not acceptable, the Tender Evaluation Committee stated that there were two major and one minor deviations and it requested the Technical Evaluation Committee to consider whether they are critical and the bid can be declared as non-responsive or they may be made clear and Employer’s Requirements may be got confirmed at the time of design approval, if the contract is awarded. The Technical Evaluation Committee, in its meeting held on 27-6-2011, merely reproduced the alleged deviations referred by the Tender Evaluation Committee and opined that in view of two major technical deviations, the Members recommended to reject the petitioner’s bid as the same is not responsive to the tender conditions. Significantly, the Technical Evaluation Committee has neither referred to the Employer’s Requirements as prescribed in the ITT nor the answers given to the queries by the petitioner. It has also not discussed the reasons as to why the answers given by the petitioner cannot be accepted. At the hearing, the learned Advocate-General, has however, placed before the Court the statement containing the analysis pertaining to the queries and the replies and their evaluation by a team called ITS Team, wherein with reference to query No.56, which pertains to the AVC System, the petitioner was asked as to which type of the AVC System is proposed as tender and in either case the petitioner shall describe the sensor layout, classification mechanism, logic and the sequence and decision table of the AVC System proposed. In reply thereto, the petitioner stated that either one of the options proposed in page-651 can be used on the Employer’s consent depending on the site conditions. As pleaded by the petitioner and also as specifically stated in the Tender Evaluation Report, the petitioner has not proposed any deviation but the Technical Evaluation Committee has treated the petitioner giving a choice among the two alternative proposals, as a major deviation. Indeed, query No.56 has not suggested that the same constituted deviation. While answering the first part of the query i.e., which type of the AVC System is proposed, the petitioner stated that either of the two options indicated at page-651 can be used on the “Employer’s consent depending on the site conditions”. For the second part of the said query, which solicited further details in respect of either of the two proposals, those details have been provided. In the note prepared by the ITS Team, it is stated that the petitioner failed to specify the system to be used and instead presented two options for the respondent’s choice and that the Employer requires the tenderer to propose the AVC System that meets the requirements. The learned counsel for the petitioner submitted that Clause 7.12 of Section VII- Part-B of the Employer’s Requirement, has given a choice of classification sensors to be used to the contractor and that the tenderer can propose any or a combination of the five types of the classification sensors specified in the said Clause. I find force in this submission of the learned counsel. The said Clause, while leaving choice to the tenderer to propose any or a combination of the sensors mentioned therein, does not prohibit the tenderer from specifying the alternative classification sensor, leaving the same to the choice of the Employer. By leaving such a choice to the Employer, no harm is caused. On the contrary, the Employer can always instruct the tenderer to follow a particular method of its choice. So long as there is no additional expenditure involved, indicating an alternative choice by the tenderer cannot be, by any stretch of imagination, treated as a deviation, much less a major deviation, in the absence of a stipulation in the tender conditions that such alternative proposal is prohibited. There is one other aspect on which the ITS Team adversely commented. This relates to the accuracy of the AVC System proposed by the petitioner at 99% or better. It is stated that as per Clause 7.12 of Section VII-Part-B of the Employer’s Requirements, the AVC System’s accuracy for vehicle counting shall be 99.9% and for vehicle classification the same shall be 99.5%. The learned counsel for the petitioner submitted that neither the Tender Evaluation Committee has treated this aspect as constituting a deviation nor the Technical Evaluation Committee has referred to this aspect. The learned counsel further submitted that the supplier for the petitioner and for M/s.LSIS & RIT is the same Japanese company and that the accuracy of the equipment to be installed by the petitioner will be the same as that of M/s.LSIS & RIT. In my opinion, except making a note in the statement prepared by the ITS Team, the alleged short-fall in the accuracy is not specifically pointed out either in the query or by the Tender Evaluation Committee. In the light of the stand taken by the petitioner that it is proposing to install the equipment from the same supplier as M/s. LSIS & RIT proposes to, and in the absence of apparent deviations, the respondent ought to have sought further clarification as envisaged in G.O.Ms.No.313, dated 23-4-2008, if it was not satisfied with the reply given by the petitioner. On a careful consideration of the ITT, the query and the answer given by the petitioner, this Court is of the firm opinion that the offer made by the petitioner cannot be said to be in deviation of the tender requirements stipulated by the respondent. At best, the petitioner’s proposal may have called