*THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY +WRIT PETITION No.24535 of 2007 % Dated 31-12-2007 # M.V.V. Satyanarayana Petitioner VERSUS $ The Engineer-in-Chief (R&B), Hyderabad and another. Respondents ! Counsel for the Petitioner: Mr. Vemulapalli Prasad Rao. ^Counsel for the Respondents: Government Pleader for Roads and Buildings <GIST: > HEAD NOTE: ? Cases referred 1. (1995) 1 SCC 478 2. 999 (5) ALT 47 3. AIR 1991 SC 179 4. AIR 1990 SC 958 5. AIR 1996 SC 11 6. AIR 195 SC 74 7. AIR 1965 SC 1718 8. AIR 1980 AP 158 9. AIR 1963 SC 1737 10. AIR 1965 SC 139 11. (2007) 8 SCC 1 THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION No.24535 of 2007 Date: 31.12.2007 Between: M.V.V.Satyanarayana … Petitioner AND The Engineer-in-Chief (R&B), Hyderabad. and another. … Respondents Counsel for the petitioner: Sri Vemulapalli Prasad Rao Counsel for respondents : G.P. for Roads and Buildings HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY WRIT PETITION NO.24535 of 2007 ORDER:- The action of respondent No.2 in rejecting the technical bids of the petitioner pertaining to the works covered by two tender notifications (for short ‘NITs’) concerning the works of widening of High Level Bridge to 8 lane carriage way across Musi river at KM 2/0 to 2/2 of Inner Ring Road (Nagole Bridge) including approaches right-side and left-side in Ranga Reddy district is questioned in this writ petition. The petitioner is a registered Special Class Contractor and he is admittedly eligible to file his tenders in respect of the works in question. The High Level Bridge as described above is divided into two works and NITs were issued separately for the work of widening of bridge on right- side (for short “right-side work”) vide Tender No.38539/E-In-C(R&B)/ EE(TEC)/TA12/ AEE5/07/01 dated 06.10.2007 for an estimated contracted value of Rs.2,66,57,986/- and for the work of widening of bridge on left- side (for short “left-side work”) vide Tender No.38539/E-In- C(R&B)/EE(TEC)/TA12/ AEE5/07/02 dated 06.10.2007 for an estimated contract value of Rs.5,01,35,383/-. The petitioner applied for both the works through e-procurement by uploading the bid documents within the stipulated time. It is the case of the petitioner that scheduled date of opening of technical and price bids was postponed and the technical bids were eventually opened on 16.11.2007. The petitioner averred in his affidavit that he was telephonically informed by the office staff of respondent No.2 that his technical bids for both the works were rejected on the sole ground that the balance-sheet filed by the petitioner does not stand in his personal name but in the name of M/s.Meher Engineers, a registered firm (for short “the firm”). The petitioner pleaded that he is the registered special class contractor and the Managing Partner of the said firm and in view of the recitals in the parthership deed the balance-sheet and income tax return stand in the name of the said firm, and that the Income Tax Department has been assessing the turnover of the said firm by including the individual turnover of the petitioner. The petitioner further averred that the firm has no separate and independent entity or income, other than the income of the petitioner and that the petitioner’s price bid is lower by 3.06% for both the works which comes to about Rs.80 lakhs less than the estimated value of works. In support of the petitioner’s contention that the income of the petitioner is being assessed under firm’s name, he filed Ex.P6 income tax return for the assessment year 2006-07. Sri B.Laxmaiah, Superintending Engineer, Roads and Buildings, Rural Circle, Balkampet, respondent No.2 filed a counter affidavit. He averred that the technical bids in respect of the two works were opened on 31.1.2007 and that he accepted the technical bid of one Sri K.Sudershan Reddy out of three tenders received as he was found to be the only bidder who applied with all the tender eligibility conditions as per the NITs/bid documents. He further stated that the technical bid for the right-side work of the petitioner was rejected on the ground that he has not furnished the income tax return and balance-sheet statement pertaining to his individual name, as the said certificates are in the name of the firm and that the petitioner’s technical bid for the left-side bridge work was rejected on the additional ground, namely, that his failure to file documents showing that he has executed the work of the value of not less than Rs.2,00,54,154/- in any one of the five preceding financial years as per the eligibility criterion mentioned under NIT/bid document. Respondent No.2 justified the said rejection on the ground that since the registration of the petitioner as Special Class Contractor was done in his individual name and that the firm does not figure in the Registration Certificate, the financial statements standing in the name of the said firm could not be taken into consideration. Respondent No.2 further stated that in June, 2007 a similar tender filed by the petitioner was rejected on the self same ground. In the reply affidavit filed by the petitioner it is asserted that the income tax return filed in the name of the firm reflect the works executed by the petitioner in his name and that authorities such as Municipal Corporation of Hyderabad, Hyderabad Urban Development Authority and other Government Departments have been accepting the financial statements of the firm for awarding the works in the petitioner’s name. In respect of the left-side work the petitioner disputed the correctness of the ground of rejection, namely, that he did not satisfy the requirement of execution of the stipulated value of the work in any one of the preceding five years. The petitioner re-iterated his stand that the turnover assessed by the Income Tax Department in the name of the firm is nothing but the turnover achieved by the petitioner in his individual name and that the said procedure was being followed in consonance with the terms of he partnership deed. Sri Prasad Rao Vemulapalli, learned counsel for the petitioner submitted that rejection of the technical bids of the petitioner on the ground that the petitioner failed to file the income tax return and balance-sheets standing in his name is illegal and unsustainable. He further contended that the petitioner is the Managing Partner of the firm and since the income tax returns reflect the turnover achieved by the petitioner in his individual name the respondents are not justified in rejecting his technical bid on the purported ground of non-compliance of clause 3.3B(f) of the NITs. He also contended that since the firm is not a legal entity, the income tax return and balance-sheet standing in the name of the firm shall enure to the benefit of its partners. In support of his contention, he relied upon the judgment of the Supreme Court in New Horizons Limited and Another Vs. Union of India and Others[1] and also a judgment of this Court in S.Kireetendranath Reddy Vs. A.P.Transco[2]. He also relied upon the judgment of the Supreme Court in M/s.Poddar Steel Corporation Vs. M/s.Ganesh Engineering Works and Others[3] in support of his contention that every term in a tender need not be complied with in meticulous detail and that a tender cannot be rejected on a technical irregularity of little or no significance. Per contra, learned Government Pleader for Transport and Roads and Buildings contended that clause 3.3B (f) is an essential condition and that since the documents produced by the petitioner in purported compliance of the said condition do not reflect the name of the petitioner, his technical bid was rejected and that the said rejection being inconsonance with the tender conditions the same cannot be interfered with. The learned Government Pleader relied upon the judgment of the Supreme Court in M/s.G.J.Fernandez Vs. State of Karnataka and Others[4] and Tata Cellular Vs. Union of India[5] in support of his contention. The learned Government Pleader further contended that as the petitioner applied for the work in his own name, he cannot file documents pertaining to the financial standing of the firm, because the petitioner’s acts in the course of execution of the work if awarded would not bind the firm and in such an event the department will not be in a position to enforce the liabilities if any incurred by the petitioner against the firm. He therefore, submitted that viewed from that perspective clause 3.3B (f) is an essential condition to be complied with. The learned Government Pleader further contended that in respect of the left-side work, the petitioner failed to produce the documents to show that he executed a similar work of the value of Rs.2,00,54,154/- in any one of the preceding five years and that therefore, the ground of rejection of the technical bid in respect of the said work does not suffer from any infirmity. I have carefully considered the respective submissions of the learned counsel and perused the record. The common ground on which the technical bids of the petitioner pertaining to both the works are rejected is that petitioner failed to file the PAN card and income tax return standing on his name and thereby he failed to comply with clause 3.3B(f) of the NITs. The petitioner’s technical bid for the left-side work of the bridge was rejected on the additional ground that the petitioner failed to demonstrate that he executed the work of the value of Rs.2,00,54,154/-. Let me first examine whether the common ground on which the technical bids for both the works are rejected can be sustained in law? Clause 3.3 of NITs prescribes qualification criteria for opening of the price bid. It is apposite to extract the said clause hereunder: “ 3.3 Qualification Criteria for Opening of the price bid. A. To qualify for opening the price bid each firm in its name, should have during the last five financial years from 2002-2003 to 2006-2007 (specify the financial years those immediately preceding the financial year in which the tenders are invited) vi. The bidder should have satisfactory completed, as prime contractor similar nature of Bridge works of value not less than Rs.1,06,63,195/- (and Rs.2,00,54,154/- in respect of left-side work) in any one financial year during the last five financial years i.e., from 2002-2003 to 2006-2007 (this value will be updated to the year 2007-2008 in which the tenders for this work is called duly giving 10% weightage for each financial year. Sub- contractors/GPA holders’ experience shall not be taken into account. Note: The cost of completed works of previous years shall be given weightage of 10% per year to bring them to current price level (the financial year in which bids are invited). a) Executed in any one year the following minimum physical quantities. S.No. item for this work _________________________________________________________________ 1. PCC or VCC or VRCC 1324 cum (2114 cum combined quantity for left-side work) _________________________________________________________________ B) Each bidder should further demonstrate: a) Availability (either owned or leased of the following key and critical equipment for this work) S.No. Equipment type and Minimum no. Characteristics of required 1. Concrete Mixers 3 nos. 2. Weigh Batchers 2 nos. 3. Pin & Pan Vibrators 10 nos. b. The contractor shall procure the Hot Mix material to the work site duly maintaining the required laying temperature as per the specifications. c. For all works costing more than Rs.2.00 crores, the contractor shall submit quality plan and also show proof of owning quality lab or tie-up with an established quality lab. d. Availability of the key personnel i. Graduate Engineer 1 no. ii. Diploma Holders with adequate experience 1 no. e. Liquid assets and/or credit facilities of not less than Rs.53,31,598/- credit facility/letter of credits/solvency certificates from commercial banks etc. f. Copy of PAN card with a copy of latest income tax return submitted with proof of receipt. g. Copy of Value Added Tax (VAT) registration and latest valid commercial tax clearance certificate.” A reading of Clause 3.3 as extracted above reveals that it is in two parts, namely, A and B. Part-A prescribes experience of the bidder of satisfactory completion of work executed in its name (as prime contractor) similar nature of bridge works of a specified value in any one financial year during the last five financial years, i.e., from 2002-03 to 2006-07. In respect of the right-side work, it is stipulated that the bidder should have executed in the above mentioned period the work of similar nature of the value of not less than Rs.1,06,63,195/- and in respect of left side work he should have executed a similar work of the value of Rs.2,00,54,154/-. Under part-B of the said clause each bidder should further demonstrate availability of critical equipment and key personal indicated therein. Under sub-clause (f) of part-B copy of PAN card with a copy of latest income tax return submitted with proof of receipt shall be submitted. With respect to the right-side work of the bridge, the respondents admit that the petitioner satisfied the requirement of part-A and also part-B except to the extent of sub-clause (f) of clause 3.3B. From a careful reading of clause 3.3 it would be evident that clause 3.3A constitutes the core and substantive requirement to be satisfied by the bidder, as it relates to the previous experience of the bidder in respect of the work of similar nature. Similarly, under part-B clauses (a) to (d) which prescribe proof of availability of critical equipment and key personal and clause-(e) under which the bidder should produce proof of owning liquid assets and/or credit facility of not less than Rs.53,31,598/- (in the case of right-side work), solvency certificates etc., also constitute conditions of substantive nature. As regard clauses 3.3B (f) and (g), all that is required therein is that the bidder should file copies of PAN card with latest income tax return submitted with proof of receipt and Value Added Tax (VAT) registration and latest valid commercial tax clearance certificate respectively. It is significant to notice that all the sub-clauses of clause 3.3 except sub- clauses (f) and (g) stipulate that the bidders should produce proof of possessing experience, critical equipment, key personal and liquid assets/solvency certificate to the extent of specified requirements, where as such stipulations are not contained in sub-clauses (f) and (g) and, as already noted under the said clauses, the bidders are merely required to file copies of the documents prescribed therein. The said clauses do not further stipulate the requirement of minimum turnover etc., both in respect of income tax and VAT. On a careful consideration of clause 3.3 in its entirety, I am of the considered view that while all other sub-clauses of clause 3.3 are substantive (essential) in nature, sub-clauses (f) and (g) are merely procedural in nature which are intended to ensure that the bidders are assessed under the Income Tax Act, 1961 and registered and assessed under the Andhra Pradesh Value Added Tax Act 2005. Keeping in view the nature of sub-clause (f) of clause 3.3B, I shall now examine whether respondent No.2 is justified in rejecting the technical bid filed in respect of right-side work on the ground of violation of the said clause. The claim of the petitioner that he is the managing partner of the firm is admitted by the respondents (in para-6 at page-4 of the counter affidavit of respondent No.2). I find from the record produced by the learned Government Pleader that alongwith the tenders, the petitioner filed a copy of partnership agreement dated 1.4.1993 with a copy of the deed of amendment of the partnership dated 2.4.1993. Clause 6 of the amended partnership deed reads as under: “Partner No.1 viz., Sri M.V.V.Satyanarayana shall be the Managing Partner of the firm who shall have the power of control and management of the affairs of the business. He shall have the power individually to apply for tenders and negotiate the terms thereof, to enter into agreements, to accept measurements, to sign the bills and to receive payments etc. He shall also have the power to appoint necessary staff, to maintain the books of accounts and to incur necessary expenses and to do all acts and things necessary and incidental to carry on the business of the firm. Any of the works tendered and obtained in the name of Sri M.V.V.Satyanarayana shall be deemed to have been taken on behalf of this firm.” (emphasis added} From the above re-produced clause it is clear that it is agreed by all the partners that the petitioner who is the managing partner of the firm is inter alia given the freedom to individually apply for tenders and it is further agreed that where the contracts are awarded in the name of the petitioner they shall be deemed to have been awarded on behalf of the firm. In this connection it is necessary to consider the relevant provisions of the Indian Partnership Act, 1932 (for short “the Act”). Section 4 of the Act defines the terms ‘partnership’, ‘partners’, ‘firm’ and ‘firm name’ as under: “"Partnership" is the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm name".” Section 11 of the Act enables the partners of the firm to determine their mutual rights and duties by contract between them and that such contract may be expressed or implied. Section 12 inter alia provides that subject to contract between the partners every partner has a right to take part in the conduct of the business. Under Section 13(e)(i) of the Act the firm shall indemnify a partner in respect of payments made and liabilities incurred by him in the ordinary and proper conduct of the business and under section 13(f) a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm. Under Section 16, if a partner derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm name, he shall account for the profit and pay it to the firm and if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business. Under Section 18, subject to the provisions of the Act, a partner is the agent of the firm for the purpose of the business of the firm. Under Section 19, subject to the provisions of Section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm and the partner has the implied authority to act as an agent of the firm. Under Section 22 in order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention of binding the firm. Under Section 26, where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of its partners, loss or injury is caused to any third party or any penalty is incurred, the firm is liable therefor to the same extent as the partner. A similar liability is fastened on the firm in respect of mis- application of money and property received from third parties under Section 27(a) of the Act. From the above reproduced definitions under Section 4, it is clear that a partnership is nothing but a collective form of all its partners. In Bacha F Guzdar, Bombay Vs. Commissioner of Income Tax, Bombay[6] it is held that a partnership is merely an association of persons for carrying on the business of partnership and in law the firm name is a compendious method of describing the partners. I n Her Highness Maharani Mandalsa Devi Vs. M.Ramnaram Private Limited[7] the Supreme Court held that for certain purposes law has extended a limited personality to a firm which is not a legal entity. This Court in S.Kireetendranath Reddy (2 supra) considered in extenso the status of a partnership firm in law and its partners. That was a case where A.P.Transco declined to recognize the experience claimed by one of the two partners of a partnership firm in respect of the works executed in the name of the firm. When the said action was questioned in a writ petition, this Court in para-18 held as under: “It is well settled that a firm is not a legal entity, but is only a collective or compendious name for all partners. It is neither a legal entity nor a person. A firm has no legal existence apart from its partners. A firm name is really a description of the individuals who compose it. The essential characteristic of a firm is that each partner is a representative of the other partners. Each of the partners is an agent and a principal. He is an agent in so far as he can bind the other partners by his acts within the scope of the partnership business and he is principal to the extent that he is bound by the acts of the other partners. The liabilities of the firm can be enforced against each of the partners personally.” After analyzing various provisions of the Act and the decided case law in para 24, it is held as under: “An examination of the above propositions of law and the authorities clearly goes to show that a partner when he acts in all matters which are within the scope and objects of the partnership, he steps into the shoes of the firm, which is a personified person but not a legal person in popular language, and binds all other partners, who compose it by his acts. Artifice of speech devised for compendious expression is extensively used in popular language to personify even non-persons as persons. For example, we speak of the estate of a deceased person, a team of players, a group of students, a public meeting, and a Bench of Judges as if they were themselves persons though they are not. Similarly, we speak of a firm as a person distinct from the individual persons. Undoubtedly, all legal personality involves personification, but all personification need not necessarily involve legal personality. Salmond’s the following observation is apposite: “…….legal personality is not reached until the law recognizes, over and above the associated individuals, a single entity which in a manner represents them, but is not identical with them.” On the above premise, the action of the A.P.Transo in disqualifying the petitioner therein by not taking into consideration the experience of the firm as his experience as a partner was invalidated by this Court and the A.P.Transco was directed to treat the experience of the firm as his experience. In my considered view the ratio laid down in this judgment apply in all fours to the present case. In the light of the settled law as discussed above a firm has no independent existence dehors its partners. I have perused letter dated 17.11.2007 addressed by respondent No.2 to respondent No.1 wherein he sent his recommendations after evaluating the technical bids. In the case of the petitioner’s technical bid, he stated as under: “Sri M.V.V.Satyanarayana, the bidder has submitted hard copies in time to this office. During the course of technical evaluation of his bid it was observed that, the bidder has not furnished the IT return filed on the same name i.e., Sri M.V.V.Satyanarayana. Instead he has submitted the IT returns filed on the name of a firm M/s.Meher Engineering of which Sri M.V.V.Satyanarayana is the managing partner.