IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 12.05.2011 CORAM: THE HON'BLE MR.JUSTICE V.DHANAPALAN W.P. No.14488 of 2010 P.Ramadas ... Petitioner vs. The Officer-in-charge, Materials Management Division : Cauvery Asset Oil & Natural Gas Commission Limited, Neravy, Karaikal 609 604. ... Respondent Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of mandamus forbearing the respondent from accepting any tender and enter into contract with any other tenderer without considering the tender of the petitioner also alongwith others pursuant to the Tender No.V16AC10009 for hiring Light Vehicle (Car Taxis and Jeep Taxis) in so far as Group 'A' and 'C' are concerned. For Petitioner : Mrs.Radha Gopalan For Respondent : Mr.V.Ramachandran, Senior Counsel for Mr.K.Shanmugakani O R D E R Heard Mrs.Radha Gopalan, learned counsel appearing for the petitioner and Mr.V.Ramachandran, learned Senior Counsel appearing for Mr.K.Shanmugakani, learned counsel for the respondent. 2. The petitioner has come up with the present writ petition seeking a writ of mandamus forbearing the respondent from accepting any tender and enter into contract with any other tenderer without considering his tender also along with others pursuant to the Tender No.V16AC10009 for hiring Light Vehicle (Car Taxis and Jeep Taxis) in so far as Group 'A' and 'C' are concerned. 3. Facts of the case as put forth by the petitioner in his affidavit would run thus : (i) The respondent invited tender for hiring of Light Vehicles https://hcservices.ecourts.gov.in/hcservices/ vide Tender No.V16AC10009 with the last date of submission of tenders as 26.05.2010 at 14.00 hours for following categories : Group 'A' – Car Taxi – 10 hours duty – 46 Nos. Group 'B' – Car Taxi – 24 hours duty – 6 Nos. Group 'C' – Jeep Taxi – 10 hours duty – 13 Nos. Group 'D' – Jeep Taxi – 24 hours duty – 16 Nos. The sale of the tender document started from 05.04.2010 and the closing date being 24.06.2010. (ii) Pursuant to the said tender, after paying necessary EMD of Rs.3,20,000/-, the petitioner submitted his tender on 26.04.2010 for Group 'A' – Car Taxi 10 Nos. and Jeep Taxi 3 Nos. Along with the tender document, the petitioner enclosed a forwarding letter listing out the documents that have been enclosed. (iii) According to the petitioner, he is the existing contractor with the respondent for the past 20 years, viz. from 1991 itself and he has been awarded with a contract in respect of Ambulance, Tempo Traveller and Cars from 1991 to 2010. On 09.02.2010, the petitioner was issued with the Letter of Award (LOA) for hiring 3 Nos. Ambulances against his offer to the Tender No.V16AC09021 by the respondent and again on 31.03.2010, the respondent issued LOA against Tender No.V16AB10005 for hiring car taxi (09 Nos. for four months). It is his further submission that the same tender form has been issued even for the earlier periods, for which he has been granted with Letter of Award and there is no change in the tender conditions. The respondent, being satisfied that the petitioner is a qualified tenderer, awarded LOA to the petitioner in February and March 2010. (iv) Subsequently, the petitioner received a letter dated 04.06.2010 from the respondent in response to his present tender seeking certain clarification and documents, for which the petitioner gave a reply on 09.06.2010 stating that the Auditor Annual Reports for 2007- 2008, 2008-2009 duly audited and certified by Chartered Accountant with Membership Number is enclosed in original and stated that their average turnover for these years is more than 30% of their Annualized bid value. Further, the petitioner has also given an undertaking to establish a local office at Karaikal with telephone facility within 30 days from the placement of Letter of Intent (LOI) by the respondent. He has also enclosed the Auditor's certificate of proprietor concern in original. In fact, he is already having a local office at Karaikal for which the petitioner produced the lease agreement, etc. Since the respondent wanted an undertaking, the petitioner also produced the undertaking. Therefore, he has complied with all the formalities. (v) As this is two bid system viz. techno commercial bid and price bid, the techno commercial bid was opened on 26.05.2010. Only after https://hcservices.ecourts.gov.in/hcservices/ opening of the commercial bid, the respondent thought that some clarification and certain documents are necessary and therefore, they have written the above letter dated 04.06.2010, for which the petitioner has clarified and complied with by producing all the documents by his letter dated 09.06.2010. Therefore, he is eligible for the price bid. (vi) The petitioner would further submit that he has not been asked to participate in the opening of the price bid, which is to be held on 05.07.2010. He came to know of this from one of the participants who has received a letter from the respondent on 02.07.2010 only asking him to participate in the opening of the price bid to be held on 05.07.2010. As already submitted, when the techno commercial bid was opened on 26.05.2010 and the respondent, by its letter dated 04.06.2010 asked for certain clarifications from the petitioner and the same has been complied with, it goes to show that he is eligible for price bid itself as otherwise after the opening of the techno commercial bid they would not have sent a letter seeking clarification. 4. Respondent has filed counter affidavit along with Vacate Interim Injunction Petition, wherein, it is stated that the allegations set out by the petitioner are denied except those that are specifically admitted. According to the respondent, the tender conditions for tenders valuing upto Rs.500 lakhs (Rs.5 crores) are different from tender conditions for tenders valuing Rs.500 lakhs or more. The main difference is that in case of tenders valuing less than Rs.500 lakhs, there will not be any "Financial Criteria" clause in the Bid Evaluation Criteria (BEC) of the tender. However, in case of tenders valuing Rs.500 lakhs or more, there will be a financial criteria clause in the BEC of the tender and which will be incorporated as a part of Commercial rejection criteria. If any of the bidders is not meeting the financial criteria of the BEC of the tender, then their bid will be commercially rejected and their price bid will not be opened. The tender No.V16AC09021 invited for hiring of Ambulances and tender No.V16AB10005 invited for hiring of car taxies are the tenders valuing less than Rs.500 lakhs. Hence, no Financial Criteria was kept in the BEC of these tenders. The petitioner has participated in the above tenders valuing less than Rs.500 lakhs and complied with the Bid Evaluation Criteria and accordingly, his bids were considered as Techno-Commercially acceptable. Since his bids were considered as techno-commercially acceptable, their offers were short-listed for price bid opening. Subsequent to opening of their price bids in the respective tenders, Letter of Awards (LOA) were issued to them as their bid was L1 in both the tenders. 4a. However, the present tender No.V16AC10009 invited for hiring of light vehicles is of value more than Rs.500 lakhs (Rs.5 crores). Accordingly, the following Financial Criteria clause was incorporated as one of the commercial rejection criterion in the BEC of the tender. https://hcservices.ecourts.gov.in/hcservices/ Financial Criteria : 1. Turnover of Bidders : 30% of annualized bid value or more 2. Net-worth of Bidder : Positive (as per latest audited annual report) (i) The basis of bid value shall be the price quoted by the bidder including duty and taxes, if any, which is taken into consideration for evaluation. However, in case Customs duty in respect of foreign bidders is not a part of their quotation, it shall not form basis for determining the bid valud. (ii) For the purpose of ascertaining parameter of Turnover of the bidder, average turnover of the bidder for the previous two financial years shall be considered. The bidder will provide a copy each of audited annual report of previous two financial years for ascertaining their turnover. The date of the immediate previous year's annual accounts should not be older than eighteen (18) months from the bid closing/un-priced bid opening date. In case of two Bid System, in the un-priced bid, the bidder will submit a 'certificate of compliance' to the effect that the Turnover of the bidder is equal to or more than the required value as applicable. 4b. The respondent would further submit that it is evident from the above that the tender conditions for the present tender No.V16AC10009 are not same as earlier tenders, i.e. Tender No.V16AC09021 and Tender No.V16AB10005, participated by the petitioner. Hence, the contentions of the petitioner that the same tender form has been issued even for earlier periods, for which they have been granted with LOA and that there is no change in the tender conditions of the present tender are not correct and misleading. 4c. According to the respondent, the original offer submitted against the present tender that the Annual Reports for the years 2007- 2008, 2008-2009 were kept in the price bid cover. As the annual reports were required to be submitted along with Techno-commercial bid as per the requirement of the tender, ONGC asked the petitioner to submit notary attested copies of annual reports for the financial years 2007-08 & 2008-09 duly audited and signed by registered Chartered Accountant having membership number mentioned on the annual reports along with other clarifications/confirmations/deficient documents within the cut- off date i.e. 10.06.2010. The petitioner has submitted their replies vide letter dated 09.06.2010, which was received in ONGC office, Karaikal on 10.06.2010. On going through the clarifications/confirmations/deficient documents submitted by the petitioner, it was noticed that the petitioner has complied with all requirement except "Net worth" as per Financial Criteria of BEC of the tender. On going through the latest audited Balance Sheet for the financial year 2008-09, it was noticed that the Net-worth of the https://hcservices.ecourts.gov.in/hcservices/ petitioner is Negative i.e. (Rs.70,203.78). As the petitioner's net- worth was negative for the financial year 2008-09, the petitioner was not meeting the financial criteria of tender. Hence, their offer was considered as commercially not acceptable and thereby, their offer was commercially rejected as per BEC criteria, though Technically acceptable. In view of the above, their offer was not short-listed for price bid opening. 4d. In the counter, it is further stated that the petitioner was not asked to participate in the opening of the price bid which was to be held on 05.07.2010 is not correct. The contention of the petitioner that he was eligible for price bid opening itself as otherwise ONGC would not have sent a letter seeking clarification after opening of techno-commercial bid is not correct and misleading. ONGC has asked the petitioner to submit clarifications/confirmations/deficient documents, wherever required, as their offer was incomplete and deficient with respect to tender requirement. Acceptability of the offer of petitioner could be ascertained only after the receipt of clarifications/confirmations/deficient documents from the petitioner. However, on evaluation of their original offer and clarifications/confirmations/deficient documents submitted by the petitioner subsequently, their offer was found commercially not acceptable due to their negative net-worth as per latest audited Balance sheet for the financial year 2008-09. 4e. It is the further submission of the respondent that the petitioner is providing the services since several years and the respondent has respect for the petitioner and that the petitioner has participated in several tenders of ONGC and ONGC has not rejected the bids of the petitioner earlier, as the same were complied with the terms and conditions of those tenders and it is also a fact that the tender is to be finalized as per the terms and conditions of the tender and there is no second thought in this matter. 4f. In order to qualify in the tender for price bid opening, the bidder must comply the Bid evaluation criteria (BEC) of the tender. The petitioner is well aware of this as he has participated in several tenders earlier. As per the BEC, the Net-worth of the bidder as per the latest audited annual report should be positive, which the petitioner has not satisfied as per the Balance Sheet for 2008-09. As the other bids have been finalized and order could not be placed due to the the injunction order obtained by the petitioner in Group A & C which will lead to irreparable loss to the ONGC, the respondent prays for dismissal of the writ petition. 5. To the above counter affidavit, a reply has been filed by the petitioner, wherein, it is stated as follows : (i) As soon as the petitioner received the letter of the https://hcservices.ecourts.gov.in/hcservices/ respondent dated 04.06.2010, he sent a reply along with the documents, which included the balance sheet for the year 2008-09 and the petitioner was also having balance sheet for the year 2009-10. Since the petitioner is too old, i.e. Aged 76 years, though he was having the balance sheet for the year 2009-10, he forgot to send the same. Thereafter, on 20.06.2010, by a letter addressed to the Director (On Shore), Jeevan Bharathi Tower, New Delhi, he sent the balance sheet for the year 2009-10, wherein, he has specifically stated that by mistake, he failed to submit the balance sheet for the year 2009-10, though it was available with him and as per the report, the net worth is positive. A copy of the said letter is also marked to the Executive Director & Asset Manager of the respondent herein. Therefore, even before the price bid was opened the annual report for the year 2009-10 was very much available on record of the respondent. Therefore, the respondent ought to have taken that into consideration and if that is taken into account, then the network of the petitioner is only positive, because, as per the criteria in the column net worth, it is stated as positive. Therefore, the petitioner has satisfied the financial criteria and the respondent ought to have called him for the price bid. A letter addressed to the Director has been enclosed and copy of the same is marked to the Executive Director of the respondent along with the balance sheet for the financial year 2009-10. Had the petitioner been given an opportunity, he would have explained that the net worth is positive for the above said reasons. (ii) Even otherwise, when the respondent has taken into consideration the balance sheet, they should have seen that as per the income and expenditure account submitted there is an excess of expenditure over income to the extent of Rs.4,00,443.36. This minus figure is due to claiming of depreciation to the tune of Rs.14,67,666/- and actually the depreciation is only a notional charge and it is not cash expenditure. Hence, cash profit derived by the petitioner for the financial year ending 31.03.2009 is Rs.10,67,222.64 and if the cash profit is credited in the capital account of the petitioner, then his account will show a credit balance of Rs.28,17,803.22 as on 31.03.2009. Hence, by debiting in the income and expenditure account, the notional charge of Rs.14,67,666/- (depreciation), the petitioner's capital account has been depleted and resulted in a minus figure of Rs.70,203.78. If cash basis is adopted and cash profit is considered his capital account will show a surplus of Rs.28,17,803.22 for the year ended 31.03.2009 and assets minus liabilities will be of the same figure. The above content is the report given by the auditor along with the tender documents, which has not been considered in the proper perspective and if this is taken into account, then there is no question of minus figure. Merely because minus figure is shown then it does not mean that the net worth is negative. The respondent without considering the auditors report has come to the conclusion that the net worth is "negative". If this is taken into account with regard to net worth, then the net worth will be positive. Merely because it is shown as (-) https://hcservices.ecourts.gov.in/hcservices/ Rs.70,203.78, the net worth cannot be stated as negative. As stated above, there is only a surplus of Rs.28,17,803.22 for the year ending 31.03.2009 and assets and liabilities are of the same figure and liabilities are not more than assets. In fact, in the column net worth, it is stated as 'Positive'. Therefore, the entire report should have been taken into consideration without that merely saying that there is minus report and therefore, it is negative one is highly and arbitrary. Even a perusal of the balance sheet at Page No.181 would show that net loss is Rs.4,00,443.36, whereas the credit is Rs.5,00,000/- and fixed assets are Rs.34,24,561.00 and for hiring vehicles by ONGC he has got towards hire charges Rs.65,91,605.00. Therefore, at no stretch of imagination it can be said that the net worth is negative. 6. Mrs.Radhagopalan, learned counsel appearing for the petitioner would submit that the petitioner has satisfied the terms and conditions of the contract and as per the latest audited annual report, he has satisfied the "Net Worth" condition as positive which the respondent has not taken into account, even though it was addressed to the Director, (On Shore), Jeevan Bharathi Tower, New Delhi, on 20.06.2010 with a copy marked to the Executive Director and Asset Manager of the respondent herein. It is her contention that if the petitioner had been given an opportunity, he would have explained that the 'Net Worth' is positive. Therefore, there is violation of the principles of natural justice. From the statement of the respondent, she pointed out that the petitioner has provided service since several years and he has participated in several tenders and awarded with the said tenders and his tenders were not rejected earlier and that the respondent has respect for the petitioner. 7. Per contra, Mr.V.Ramachandran, learned Senior Counsel appearing for the respondent would strenuously contend that the petitioner has not satisfied the bid criteria, particularly his "Net Worth", which is negative and therefore, he was not called for the price bid. When the criterion is prescribed, it is the discretion of the respondent to go according to the terms and conditions of the tender and it cannot be deviated. As the petitioner has not satisfied the financial criteria, he was not called for the price bid. It is his further contention that though the petitioner has been called for a clarification to comply with certain defects and deficiencies, they were not complied with and satisfied by him. Therefore, the respondent cannot be restrained from proceeding with the public tender which involves larger public interest. When the petitioner has not enclosed the audited annual report to satisfy the condition, the action of the respondent cannot be faulted with. He pointed out that certain documents which are enclosed by the petitioner are materially corrected and therefore, the petitioner has approached this Court with unclean hands. 7a. To substantiate his case, learned counsel for the respondent https://hcservices.ecourts.gov.in/hcservices/ has relied on the following decisions of the Supreme Court: (i) (2005) 1 SCC 679 (Association of Registration Plates v. Union of India) "37. It is not controverted that the technical “know-how” for the manufacture of high security registration plates presently is available outside India. Technically and financially, competent indigenous manufacturers are mostly those who are in collaborations with foreign companies engaged in such manufacturing activities. The scheme contemplated under Rule 50 for registration plates is a new experiment for India. In the initial stages of its implementation, tender conditions encouraging such manufacturers who are in foreign collaborations cannot be held to be discriminatory to indigenous manufacturers. Keeping in view the nature of the contract and job involved, particularly its magnitude and the huge investment for infrastructure required, attempt to select such manufacturer — maybe having collaboration with foreign companies and experience in foreign countries — cannot be held to be a deliberate attempt on the part of the State authorities to eliminate indigenous manufacturers. 38. In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration plates in foreign countries and the quantum of business turnover are intended only to keep indigenous manufacturers out of the field. It is explained that on the date of formulation of scheme in Rule 50 and issuance of guidelines thereunder by the Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long-term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates. https://hcservices.ecourts.gov.in/hcservices/ 40. Selecting one manufacturer through a process of open competition is not creation of any monopoly, as contended, in violation of Article 19(1)(g) of the Constitution read with clause (6) of the said article. As is sought to be pointed out, the implementation involves large network of operations of highly sophisticated materials. The manufacturer has to have embossing stations within the premises of the RTO. He has to maintain the data of each plate which he would be getting from his main unit. It has to be cross-checked by the RTO data. There has to be a server in the RTO’s office which is linked with all RTOs in each State and thereon linked to the whole nation. Maintenance of the record by one and supervision over its activity would be simpler for the State if there is one manufacturer instead of multi-manufacturers as suppliers. The actual operation of the scheme through the RTOs in their premises would get complicated and confused if multi- manufacturers are involved. That would also seriously impair the high security concept in affixation of new plates on the vehicles. If there is a single manufacturer he can be forced to go and serve rural areas with thin vehicular population and less volume of business. Multi-manufacturers might concentrate only on urban areas with higher vehicular population. 42. There is no material on record to infer any mala fide design on the part of the tendering authority to favour parties having foreign collaborations and to keep out of the fray indigenous manufacturers. The high security plate is a sophisticated article — new for a manufacturer in India. It is being introduced for the first time under the scheme contained in Rule 50 of the Rules and the Act. At the time of issuance of notices of tender, technical know-how for manufacture of plates and its further development was undoubtedly outside the country. Only a few concerns in India having collaboration with foreign parties possessed the expertise and were available in the market. The terms of the notice inviting tenders were formulated after joint deliberations of Central and State authorities and the available manufacturers in the field. The terms of the tender prescribing quantum of turnover of its business and business in plates with fixation of long- term period of the contract are said to have been incorporated to ensure uninterrupted supply of plates to a large number of existing vehicles within a period of two years and new vehicles for a long period in the coming years. It is easy to allege but difficult to accept that terms of the notices inviting tenders which were fixed after joint deliberations between State authorities and intending tenderers were so tailored as to benefit only a certain