IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 6623 of 2002 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- ELECON ENGINEERING CO. LTD. Versus GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. -------------------------------------------------------------- Appearance: MR. S.I. NANAVATI, Sr. Advocate with MR.D.S. NANAVATI with MR.SAURIN MEHTA for Petitioners MR. S.B.VAKIL, Sr. Advocate with MR ASPI M KAPADIA for Respondent No. 1 MR.S.B.VAKIL, Sr. Advocate with MR A.S. VAKIL with MR. SATYAJIT MITRA for Respondent No. 2 -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 13/09/2002 ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI for the Court) 1. The petitioners have challenged the action of the respondent No.1 - Gujarat Mineral Development Corporation Ltd. in issuing Letter of Intent dated 11th July 2002 in favour the respondent No.2 - M/s TRF Limited, for award of the contract for Designing, Engineering, Manufacture, Supply, Transportation, Erection, Testing and Commissioning of 600 TPH Lignite Handling System and 300 TPH Lime Handling System on turnkey basis for its Akrimota Thermal Power Project, and have sought a direction on the respondent No.1 to disqualify the tender of the respondent No.2. 2. The petitioner No.1 is a public limited company engaged in the field of design, engineering, manufacture, supply, installation of bulk material handling plants and equipments for power and other industries. The respondent No.1 invited tenders for their Akrimota Thermal Power Project on 1st March 2001. The tender documents contained details about the scope of work and other instructions and conditions. The last date and time of submission of tender consisting of technical and commercial bid (Part I) was 3rd August 2001 upto 14.00 hrs. Part II consisted of original price bid. 2.1 After some correspondence between the tenderers and the respondent No.1, the respondent No.1 issued clarifications in form of Updated Tender Specifications on 21st May 2001, as per Annexure "B" to the petition and the due date of submission was extended upto 8th June 2001 for submitting technical and commercial bid and the price bid in two separate sealed envelopes. The bidders submitted their offers on 20th June 2001. 2.2 After receiving the bids, the respondent No.1 sought clarification with regard to the commercial and technical issues which were submitted by the bidders. Ultimately, the respondent No.1, on 4th September 2001, notified to the bidders about the frozen plant requirements, as per Annexure "C" to the petition. On 5th September 2001, the respondent No.1 forwarded to the bidders general (commercial) points to be considered by all the bidders for the revised price bid in Annexure "1-A" of that letter, which was to be considered alongwith other Annexures sent with the letter dated 4th September 2001 for revising the price bid. On 15th September 2001, the respondent No.1, referring to its earlier letters dated 4-9-2001, 5-9-2001 and 7-9-2001, intimated to the bidders that their price bid for the said tender was to be submitted latest by 15.00 hrs. of 19-9-2001, and that it would be opened on the same day by 16.00 hrs. The bidders were requested to confirm adherence to the requirement of the respondent No.1 finalized after post-bid meetings as intimated in the aforesaid letters. They were also intimated that - "a specific confirmation about adherence to all the requirements may be given on the corresponding Annexures / Letter duly signed by the Authorised Signatory latest by 18-9-2001. If this confirmation is not received, the price bid shall not be opened. Please note that deviations are not acceptable." (emphasis added) 2.3 According to the petitioner No.1, pursuant to this communication, it had sent confirmation on 18th September 2001 and submitted the price bid in a sealed cover on 19th September 2001. In the said letter dated 18th September 2001, at Annexure "F" to the petition, the petitioner No.1 informed the respondent No.1, referring to its earlier letters, "We confirm our adherence to the requirements finalized by GMDC after post bid meeting held between us on 1-9-2001 and intimated to us vide letters at Srl. No. 2, 3 & 4 under reference". The letters duly signed were forwarded as required. 2.4 On 19th September 2001, the price bids were opened as scheduled in presence of the bidders and according to the petitioners, they came to know that the lowest bid was of the respondent No.2 - TRF and the bid of the petitioner No.1 was the second lowest. When the price bid of the respondent No.2 was readover, it was noticed that the respondent No.2 had made a conditional offer, with respect to the commercial conditions, offering imported goods on high seas sale basis as against the GMDC's requirement to deliver the goods at the project site. It was also stated in that price bid that the exchange rate variations shall be payable by the respondent No.1. According to the petitioners, these two conditions specified in the offer of the respondent No.2 were in conflict with the mandatory conditions of the tender and the undertaking taken from the bidders that their offers would conform to the conditions communicated to them in the said letters of the respondent No.1. After opening the bids, evaluation was carried out by the respondent No.1 in respect of cost loading on account of differential power consumption as per Clause II.17.02, (sheet 214) and free issue of cement and re-inforcement steel for civil works based on quantities indicated by the bidder as per Clause II.9.50 and schedule - M. According to the petitioners, as directed by the Government, the respondent No.1 further evaluated the bids, exempting CST and GST components. It is the petitioners' case that on comparison of prices quoted by the bidders and evaluated as per relevant tender conditions and also considering exemption of CST and GST as directed by the State Government, the price quoted by the petitioners of Rs.74=40 crores was net evaluated at Rs.75=30 crores, while that of the respondent No.2, which was quoted at Rs.65=80 crores was net evaluated at Rs.75=06 crores. It is alleged that the prices of the respondent No.1 as quoted and evaluated, although the lowest, were based on major deviations from the tender conditions, and that the respondent No.1 violated the tender evaluation criteria incorporated in Clause II.17.0, ignoring the loading that was required to be done on account of such commercial deviations and issued Letter of Intent on 11-7-2002, which fact the petitioners came to know due to the caveat filed by the respondent No.2 on 15th July 2002. 2.5 The petitioners had sent letters dated 30th April 2002 and 19th June 2002 (copies at Annexure "H" collectively), bringing to the notice of the respondent No.1 the irregularities in the tender of the respondent No.2. It is alleged that the respondent No.2, with an ulterior motive and for the reasons best known to the respondent No.1, was given the contract in violation of the provisions of Article 14 of the Constitution. Inspite of the clear stipulation that no deviation from the terms and conditions will be allowed and though the bidders had submitted their confirmation letters that the bids will conform to the terms and conditions communicated to them in the said letters, the respondent No.2 had deviated from the mandatory terms with respect to delivery of material at site on F.O.R. basis and the terms of payment by making a counter proposal to the respondent No.1 in respect of arranging the "sale on high seas basis" for the items which were to be imported requiring the respondent No.1 to pay the custom duty directly. It is contended that, by offering high seas sale, the respondent No.2 automatically got an exemption from the liability of State sales tax and derived the benefit of competitive price. Such a course amounted to deviation in violation of the mandatory condition of providing delivery at the project site. It is alleged that, by allowing such a bid of the respondent No.2, the respondent No.1 had shown favouritism towards the respondent No.2 and the decision making process was vitiated. It is also the petitioners' case that the respondent No.2 has not only deviated from the requirement of "firm price offer" as per Clause 2(c) of the tender terms and conditions, but it also did not comply with the conditions communicated alongwith the letter dated 5th September 2001 in Annexure "1-A" thereto, in which it was specifically stated that, there shall not be any escalation of price and variation in exchange rate. The respondent No.2 had quoted the price subject to condition of price variation on account of variation in the exchange rate, and therefore, according to the petitioners, its bid ought to have been rejected at the threshold. It is contended that award of the contract to the respondent No.2 was not only arbitrary and illegal, but also amounted to favouritism and was therefore malafide. 2.6 The petitioner No.1 filed additional affidavit dated 2nd September 2002 placing on record certain documents which included copy of the price bid submitted by the respondent No.2 and the communications between the parties. 3. In the affidavit-in-reply filed on behalf of the Respondent No.1 - Corporation, a preliminary objection was taken to the effect that the petitioners had not quoted separate prices for the two plants but quoted a total price of Rs.7,439=45 lacs though Schedule - B, i.e. the Schedule of Prices contained in the Updated Technical Specifications, required the tenderer to submit a lumpsum firm price for design, manufacture, supply and delivery separately for the Lignite Handling Plant and the Lime Handling Plant. Moreover, the petitioners had quoted for the two plants lumpsum price mentioning "crusher" and not "sizer", which was required to be mentioned as per the Updated Technical Specifications. Since a Sizer is more expensive than a crusher, this was, according to the respondent No.1, a major deviation in the schedule of prices of the petitioners. A copy of the petitioners' letter dated 18-9-2001 and a copy of Schedule - B i.e. Schedule of Prices submitted by the petitioner are annexed at Annexure "1" and "2" to the said reply. The petitioners had not given total power consumption (KW) equipment-wise, as required, but had given guaranteed power consumption for various paths, as per Annexure "3" to the said reply. Since pathwise equipments were not shown, according to the respondent No.1, it would be difficult to work out whether any loading and if yes, what load in price was required to be given in the price bid of the petitioner company. As regards the Schedule of Prices (i.e. Schedule - B), of the respondent No.2, it has been admitted in para 6 of the reply that it contained the said two notes as per Annexure "4" to the reply. According to the respondent No.1, the bidders were required to give a specific confirmation about adherence to all the requirements in its letters dated 4-9-2001, 5-9-2001 and 7-9-2001 and that the respondent No.2 had by its letter dated 19-9-2001, a copy of which is at Annexure "5" to the reply, confirmed that they will adhere to all the requirements of the respondent No.1. Since the pathwise power consumption in the tender of the petitioners was the lowest, it was treated as a base for working out loading of price related to power consumption for the other bidders. It is then stated that the petitioners had quoted for Crusher instead of Sizer, which could also call for price loading, since the cost of Sizers would be much higher than the Crushers. It is stated in paragraph 6 of the affidavit-in-reply that; "Since the petitioner does not dispute that TRF is the lowest bidder, it is not necessary to examine in detail the question of loading the price". According to the respondent No.1, since no sales tax was payable on imported goods, no loading was required to be considered in the bid of the respondent No.2. Moreover, since the respondent No.2 had, by its letter dated 19-9-2001, confirmed that only statutory variations shall be payable on taxes and duties in percentage, there was no question of respondent No.2 claiming any such sales tax on the imported goods. It was stated that since the respondent No.1 did not agree to sale on high seas for the imported items, the contingency of loading of interest at 18% for the period of atleast six months on the amount of custom duty and port clearance charges did not arise and therefore, "there was no question of loading the price bid of the respondent No.2". In paragraph 7 of the affidavit-in-reply, the respondent No.1 has taken the stand that, in view of the confirmations given by the respondent No.2 - TRF in its letter dated 19-9-2001, the price bid submitted by the respondent No.2 was not in contradiction with any undertaking given by it to the respondent No.1. It is stated that the respondent No.1, by its letter dated 10th July 2002 (copy at Annexure "6" to the affidavit-in-reply), sought re-confirmation of the petitioner on five points specified therein and the respondent No.2 had re-confirmed the same. It is stated in para 7 of the reply that, "The only reason for which contract has been given to TRF is that its tender has been found to be the most competitive and in the interest of GMDC. In the price comparison, TRF was found to offer lowest ex-factory price. Even after applying evaluation criteria on the basis of tender conditions, TRF still was the lowest bidder." 3.1 The respondent No.2, in its affidavit-in-reply, reiterated the preliminary objections which have been raised by the respondent No.1, stating that, any judicial relief at the instance of the petitioner, whose tender / offer did not comply with the terms and conditions of the tender, would be misplaced. It was also submitted in paragraph 3.2 of its reply that, Section D of the terms and conditions in Tender Volume I indicated that it would be permissible to a contractor to indicate / bring out technical and commercial deviations and in that sense, the specification may not be mandatory. In paragraph 3.3 of the reply, it is admitted that the respondent No.2 "made a conditional offer with respect to commercial condition offering imported goods on high sea sale transactions as against GMDC's requirement to deliver the goods to project site. Schedule - B of Prices in the tender / offer of TRF contains three notes. .......". It is stated that the note regarding arrangement of sale on high seas for the imported items like Sizer, Crushers and flip flop screens was an option offered to the respondent No.1 by the revised price bid of the respondent No.2, and that, since by its letter dated 10th July 2002 (copy annexed at Annexure "I" to the reply), informed the respondent No.2 that the high seas was not permitted, the respondent No.2 confirmed the same, and therefore, in execution of the project by the respondent No.2, no question of high seas sale was involved. It is stated that since the respondent No.1, by its letter dated 10th July 2001, informed the respondent No.2 that exchange rate variation was not permitted and the respondent No.2 confirmed the same, there was no deviation done by the respondent No.2. Moreover, once the respondent No.2 confirmed that there would be no high seas sale of imported items, the question of custom duty, port clearance charges to be paid by the respondent No.2 in advance, did not survive and therefore, there was no question of loading the prices quoted by the respondent No.2 on those counts. It is denied that any mandatory condition was ignored by the respondent No.2 or that the treatment similar to that given to the respondent No.2 was not extended to the other bidders. 3.2 In response to the additional affidavit dated 2nd September 2002 of the petitioners, the respondent No.1 placed on record the events that took place after the issuance of the Letter of Intent dated 11-7-2002, pointing out that the Work Order was issued by it to the respondent No.2 on 26-7-2002. Copies of the Letter of Intent and Work Order are placed at Annexure "1" and "2" of the said further reply dated 4th September 2002. In paragraph 5 of the said affidavit-in-reply, while referring to the Schedule of Prices of the respondent No.2, the respondent No.1 admitted that it had not given schedule of unit prices for material handling plant components in Srl. No. 4.0 of Schedule of Prices. It was, however, stated that "the price bid of the petitioner was not rejected on the ground that the petitioner in Schedule of Prices of its tender did not give break up of ex-works firm price of material handling plant equipment as per 2.02 (a) or had failed to give in the schedule of price unit price for material handling plant components". It was stated that this aspect had been referred to in the affidavit-in-reply on behalf of the respondent No.1 only in support of the preliminary objection that the petitioner is not entitled to maintain the petition. It is stated that the letter dated 19-9-2001 of confirmation sent by the second respondent was received by the respondent No.1 before the price bids were opened on that day. It is then stated that the respondent No.2, in its tender, had indicated separately custom duty of Rs.1,32,30,000=00 and therefore, if the second respondent was not required to pay customs duty in the event of high seas sale, the custom duty of Rs.1,32,30,000=00 separately shown in the second respondent's price would be required to be deducted, and therefore, it would have made no difference if the respondent No.1 were required to pay the customs duty in the event of high seas sale. It is further stated in paragraph 5.2 of the reply that in the event of high seas sale, no sales tax at 4% or at all would have been required to be paid since such tax was payable when sale of goods was made within the State. Moreover, even in case of high seas sale and assuming that respondent No.1 was required to pay port clearance and forwarding charges, it would have recovered the same from the respondent No.2. The calculation of interest for a period of six months by the petitioner on the amount of customs duty that the respondent No.1 would have had paid if the high seas sale took place, was disputed, and as stated in paragraph 5.3 of the reply, such interest would be required to be calculated at 12.5% per annum for a period of one month which amount would come to Rs.1,37,812=50. The cost loading calculation of Rs.1,12,65,000=00 for variation in exchange rate made by the petitioner is disputed, and in paragraph 5.4 of the reply, it is stated that such variation in exchange rate was relatable only to customs duty and not to the entire landed costs of the imported goods. According to the respondent No.1, the petitioner had submitted a statement on 16-5-2001, as per Annexure "4" to the said reply, in which loading on account of variation in exchange rate was calculated on customs duty and not on the landed cost. It is stated that, any calculation of variation in exchange rate was hypothetical, because, it would be difficult to predicate whether on the date of the clearance of the imported consignment 1 Euro would be equal to Rs.42=09 ps. or higher or lower than that. It is pointed out that, in July 2002, 1 Euro was equal to Rs.49=00 and in the next month, it went down to Rs.47=00. It is finally stated in paragraph 5.5 of the reply that, even if the part charges were required to be loaded on the price offered by the respondent No.2, the loading would be of Rs.12,10,000=00 for port charges and Rs.1,37,812=50 ps. for interest on customs duty and port charges aggregating to Rs.13,47,812=50 ps. which was lower than the difference of Rs.24,00,000=00 in the prices given by the petitioners in paragraph 4.12 of the petition. 4. It has been contended on behalf of the petitioners that the revised price bid of the respondent No.2 did not meet with the mandatory conditions of the tender and therefore, its bid should have been rejected when it was opened on 19-9-2001 and by not doing so, the respondent No.1 has acted arbitrarily and in violation of Article 14 of the Constitution. It was submitted that, as per Clause 2(c)(i) of the tender terms and conditions read with letters dated 4-9-2001, 5-9-2001 and 15-9-2001 of the respondent No.1, there were mandatory stipulations that the prices offered would be firm, the price was to be quoted on the basis of free delivery at the project site on door delivery basis and that exchange rate variation was not payable. Since these conditions were mandatory, they could not have been relaxed by the respondent No.1. It was submitted that, after a lapse of about eight months, the respondent No.2 was given a special opportunity by communication dated 10th July 2002 sent by the respondent No.1 to change its bid conditions, without giving any such opportunity of altering the revised price bid to the petitioner, who was the next lowest tenderer. Such a course was calculated to favour the respondent No.2, because, without such opportunity, the deviated price bid of the respondent No.2 was liable to be rejected at the threshold. It was submitted that, by quoting the price with a rider that the goods imported by the respondent No.2 will be delivered on the high seas basis, the respondent No.2 was benefitting in sales tax to the tune of Rs.30,05,000=00 and on the variation in exchange rate, at Rs.1,12,65,000=00, as worked out in a sheet attached to the additional affidavit of the petitioners, dated 2nd September 2002. Moreover, by this process, the respondent No.2 was also saving port clearance and forwarding charges to the tune of Rs.12,00,000=00 as well as interest on customs duty amount which would have been paid by the respondent No.1 to the tune of Rs.11,90,000=00. As regards the exchange rate variation, it was submitted that, in context of the base exchange rate of Rs.42=09 adopted in note - 3 of the Schedule - B of the prices quoted by the respondent No.2, the additional liability on the respondent No.2 would have gone upto Rs.1,12,65,000=00 on the basis of the exchange rate that prevailed on 30th August 2002 of Rs.48=50 which difference came to 15%. Thus, according to the learned senior counsel, if proper evaluation of the bids of the petitioners and the respondent No.2 was done, the difference in the price bid due to technical loading of Rs.24,00,000=00 would have vanished and the net difference of price quoted by the petitioners and the respondent No.2 would have tilted in favour of the petitioners by Rs.1,30,165=00. 4.1 In support of the above contentions, the learned Senior Counsel relied on the following decisions : [a] The decision of the Supreme Court in Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation, reported in (2000) 5 SCC 287 was cited for the proposition that, in the matters of tender process and award of contract, while public interest is paramount, there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. The legal position was summed up by stating that the Government was free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest, and that