WP(C) 7529/09 Page No. 1 of 42 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 08.01.2010 + WP (C) 7529/2009 ERA INFRA ENGINEERING LIMITED ... Petitioner - Versus - DELHI DEVELOPMENT AUTHORITY & ANR ... Respondents Advocates who appeared in this case:- For the Petitioner : Mr Manoj K. Singh For the Respondents : Mr Rajiv Bansal CORAM:- HON'BLE MR. JUSTICE BADAR DURREZ AHMED HON’BLE MS. JUSTICE VEENA BIRBAL 1. Whether Reporters of local papers may be allowed to see the judgment ? YES 2. To be referred to the Reporter or not ? YES 3. Whether the judgment should be reported in Digest ? YES BADAR DURREZ AHMED, J I. Reliefs sought 1. The petitioner is praying for the quashing of the letters dated 03.02.2009 and 05.02.2009, whereby, the Delhi Development Authority (DDA) informed the petitioner that its tender had been rejected and that they (DDA) had decided to recall the tender. The petitioner is aggrieved by the fact that despite its price bid being the lowest (L-1) for the project, the same was rejected and, that too, at a belated stage and without assigning any reasons. Alleging mala fides on part of the respondents, the petitioner seeks WP(C) 7529/09 Page No. 2 of 42 a direction from this court that the turnkey project in question be awarded to the petitioner and also that an independent agency be asked to investigate the matter. II. The facts 2. Before we go into the questions that arise for consideration, an examination of the facts of the case is necessary. On 24.06.2007, the DDA, through a notice published in the Hindustan Times, invited ―Expression of Interest‖ from interested agencies in respect of DDA‘s project of constructing 50,000 multi-storeyed houses in the next five years using fast mode of construction ―like pre-fab construction technologies on turn-key basis.‖ It was also indicated that the job shall comprise of planning, designing and construction of houses with specified services and that the technology to be used shall be ―fast and cost-effective‖ and shall ―conform to NBC of India and relevant BIS codes.‖ The ‗Expression of Interest‘ was invited from those agencies who wished to participate in designing, tendering process for first lot of 10,000 houses per year for next five years to be constructed primarily in Narela, Rohini, Dwarka or any suitable place in Delhi. Era Infra Engineering Ltd., the petitioner herein, expressed its interest in the turnkey project through its letter of 31.07.2007. Alongwith the said letter, the petitioner also enclosed literature of pre-fab construction technology, namely, ELEMATIC and MIVAN. On 28.08.2007, the DDA shortlisted the petitioner alongwith others and requested them to make a presentation on 01.09.2007, regarding the technology that they were going to WP(C) 7529/09 Page No. 3 of 42 use. The presentation was to cover, inter alia, the aspect of ―suitability of technology for low cost housing in Seismic Zone – IV‖. 3. On 14.01.2008, the DDA informed all the shortlisted contractors, including the petitioner herein, to submit their bids in the following manner:- ―Tender on Turn-key Basis in the prescribed form is invited for the following works by the Executive Engineer, Northern Division No. 12, DDA, Narela, Project Office on 12.03.2008, upto 3:00 PM on behalf of DDA from the contractors who are shortlisted agencies for EWS Houses Turkey Mega Project in three envelopes marked ‗A‘, ‗B‘ & ‗C‘ i.e. envelope ‗A‘ containing earnest money of Rs 1.57 crore (out of which not less than Rs 20 Lacs in the shape of demand draft/ call deposit receipt / receipt treasury challan/ Fixed Deposit Receipt of a Scheduled Bank guaranteed by Reserve Bank India, in favour of Sr. A. O. /CAU (North Zone)/DDA and balance in the shape of Bank Guarantee); envelope ‗B‘ for Technical Bid and envelope ‗C‘ for Financial Bid. The tenders will be received at Ground Floor, Vikas Minar, DDA, I. P. Estate, New Delhi-02 upto 3:00 PM on 12.03.2008. The envelope ‗A‘ and ‗B‘ (Technical Bid) shall be opened on the same day at 3:30 PM on 12.03.2008 in the Conference Hall at 5th Floor, Vikas Minar in the presence of intending tenderers or their authorized representatives. The agency may revise their specifications or modify their tendered documents and accordingly they should quote their modified rates in envelope ‗D‘ on or before the date fixed for opening of Financial Bid (to be intimated subsequently). Both the envelopes ‗C‘ and ‗D‘ shall be opened before the bidders, who would be present on the date of opening of Financial Bid.‖ 4. A corrigendum was issued on 16.01.2008 making certain changes in the schedule. The petitioner purchased the tender documents for Rs 20,000 on 11.02.2008. The tender documents contained the Notice Inviting Tender (NIT) pertaining to construction of 50,000 EWS houses in Dwarka, Rohini and Narela, Delhi (24,460 EWS + 21,900 LIG houses) as a turn-key project. WP(C) 7529/09 Page No. 4 of 42 The estimated cost of the project was Rs 1378 crores and the time for completion was 60 months. The method of submission of tender, inter alia, stipulated:- ―The envelope containing Earnest Money and Bids (Technical & Financial Bid) shall be submitted simultaneously on due date. Only Technical Bid shall be opened on the due date whereas Financial Bid shall be kept sealed. Later on, a date shall be fixed for opening of the Financial Bid and bid of only those contractors whose technical bids are found acceptable by the Technical Board comprising EM/DDA as Chairman, CE (QAC), CE (HQ), CE (NZ), CE (Rohini), CE (Design), CE (Elect.), Chief Architect, Director (LS), Director (Hort.), Addl. Commr. (Plng.) as Members & SE(P)-III/(NS) as Member Secretary, shall be opened. Those bidders whose Technical Bids are found acceptable would be asked to submit revised financial bid plus or minus over the previous bid they had already quoted in the envelope ‗C‘ i.e. Financial Bid. The contractors may be asked to revise their specifications or modify their tendered documents and accordingly they would be asked to quote their revised rates, if any, in envelope ‗D‘. On the date fixed for the opening of the Financial Bid both the envelope ‗C‘ and ‗D‘ shall be opened before the bidders who would be present on the date of opening of the Financial Bid.‖ 5. Four pre-bid meetings were held between 11.02.2008 and 13.06.2008, in the office of the Chief Engineer (NZ) wherein the contractors could seek clarifications regarding the NIT. The last date for submission of bids was 21.07.2008. The petitioner submitted its bid on the same date and the technical bids were opened. The fifth and sixth tender meetings were held on 05.08.2008 and 07.08.2008 respectively. On 05.09.2008, the Technical Evaluation Committee held a meeting to discuss the various issues regarding the technology to be used in the turnkey project. After a detailed discussion, it was ―unanimously‖ decided that 75% Prefab Technology would have to be used in the project. The bidders were given an opportunity to revise their WP(C) 7529/09 Page No. 5 of 42 financial bids in view of the above decision. On 15.09.2008, the petitioner submitted its revised financial bid. On the same date, the financial bids were opened and the petitioner was found to be L-1. A comparative chart of the price bids as given in the petition is set out below:- NAME OF THE PROJECT Opening Date: 15.09.2008 TENDER FOR ―CONSTRUCTION OF 50,000 EWS HOUSES IN DWARKA, ROHINI & NARELA, DELHI (24460 EWS – 21,900 LIG HOUSES) Sl. No. Party Original Revised (Rs) Status 1. Era Infra Engineering Ltd Rs.15,211,253,631.00 Rs.15,210,262,812.00 L.1 5. IVRCL Rs.19,104,366,900.00 Rs.19,104,366,900.00 L.2 3. B.G. Shirkey Rs.19,584,329,292.00 Rs,19,290,564,353.00 L.3 2. Parsvnath Developers Rs.23,825,761,250.00 Rs.23,825,761,250.00 L.4 4. ITDC Rs.36,958,280,000.00 Rs.28,938,968,000.00 L.5 6. On 31.12.2008, the DDA asked the petitioner to extend the validity of rates for the tender job for another 6 months as well as the validity of the bank guarantee, which were duly extended. 7. Thereafter on 03.02.2009, the petitioner received a letter from the DDA informing it that its tender had been rejected by the competent authority and that a formal application should be made by the petitioner for release of the earnest money. The relevant portion of the letter is reproduced hereunder:- WP(C) 7529/09 Page No. 6 of 42 ―Sub: C/o 50,000 EWS Houses in Dwarka, Rohini & Narela - Turnkey Project. I am to inform you that the tender for the above noted work has been rejected by the competent authority. You are requested to make a formal application for release of Earnest Money.‖ 8. This communication was followed by a letter dated 05.02.2009, which informed the petitioner that the DDA had decided to recall the tender. The relevant extract of this communication is reproduced hereunder: ―Sub: C/o 50,000 EWS Houses in Dwarka, Rohini & Narela - Turnkey Project. The tender of above noted work has been rejected by competent authority and it is decided to recall the tender. In this context, a fresh presentation adopting pre-fab technology is to be made at conference hall in VC‘s Secretariat, Vikas Sadan, INA, New Delhi on 11.02.09 at 3.30PM.‖ 9. Aggrieved by the rejection of its bid and recall of the tender itself, the petitioner filed this writ petition. The main question for consideration is whether the DDA could have rejected the petitioner‘s tender vide letter dated 03.02.2009 and/or recalled the tender through its letter dated 05.02.2009, after the financial bids had been opened and the petitioner had been found to be L-1, or at all ? III. The petitioner’s contentions 10. The first contention put forward by the learned counsel for the petitioner was that the DDA could not reject the petitioner‘s tender without assigning any reason for the same. Nor could the DDA ask the petitioner to make a fresh presentation regarding the use of pre-fab technology for the project, when the same issue had been already been discussed in detail in a WP(C) 7529/09 Page No. 7 of 42 series of meetings. In the advertisement published in the newspaper on 24.06.2007, itself, it was stated clearly that the ‗DDA is planning to construct 50,000 multi-storey houses in the next 5 years using faster modes of construction like ‗pre-fab construction‘ technologies on turnkey basis‘. The petitioner, in response to the said advertisement, expressed its interest in the project through its letter dated 31.07.2007, and submitted all the pre- qualification documents along with literature on pre-fab construction technology for consideration. Thereafter, the petitioner and the DDA corresponded in detail with specific reference to the various technologies that had to be used which included the suitability of the same for low cost housing in Seismic Zone-IV. As many as seven meetings regarding the issue of pre-fab technology were held and in the seventh meeting held on 05.09.2008, the Technical Evaluation Committee finally decided that “the agency, whose tender is accepted, shall invariably provide at least 75% of each category of structural members in pre-fab construction for the RCC of super structure‖. The minutes of the meeting are reproduced hereunder: ―Sub: Minutes of the meeting on Technical Evaluation Committee held on 05th September, 2008 in the chamber of Engineer Member, DDA in respect of 50,000 EWS Houses in the meeting taken by Engineer Member. The list of officers from DDA and representatives of various agencies attended the meeting is enclosed herewith as Annexure-A. 1. It was intimated to all the members of the agencies that an evaluation of various provisions made by them in their technical bid have been gone into by a Committee constituted by EM, which has considered the same on 05th August, 2008 and the minutes of the appraisals are annexed herewith as Annexure-‗B‘. WP(C) 7529/09 Page No. 8 of 42 All the intending agencies are required to go through these observations and confirm their offer with reference to these observations, which are common to all the participants. 2. It was reiterated in the meeting held on 05th September, 2008 that the basic requirement of DDA is to go for faster mode of construction like pre-fab technology with an objective of construction 90000 (sic) to 1000 (sic) houses per year now. After discussing the salient feature of various technologies in the meeting, it has been held that the agency, whose tender is accepted, shall invariably provide at least 75% of each category of structural members in pre-fab construction for the RCC of super structure. 3. It was, therefore, clarified to all the intending agencies that the above common datum have been decided for evaluation of the financial bid. The intending agencies may, therefore, revise their financial bids, if they so desire to come at par with the aforesaid datum in the light of para 2 & 3 above. 4. The revised financial bid will be received upto 3.00 p.m. on 12th September, 2008 and will be opened along with original financial bids at 3.30p.m. on same date in the conference hall at 5th Floor, Vikas Minar, I.P. Estate, New Delhi-110002. 5. The minutes were announced in the presence of all the agencies and were unanimously accepted by all of them. These issues with the approval of EM, DDA.‖ (Underlining added) 11. It was emphasized by the learned counsel for the petitioner that the DDA could not depart from the conclusion arrived at the above-mentioned meeting, arbitrarily and without any reason. 12. This led to the second contention of the petitioner, that the DDA, while rejecting the tender and informing them of their decision to recall the tender did not assign any reason for the same, nor was the petitioner given an opportunity of being heard with respect to the same. The learned counsel for the petitioner submitted that the actions of the DDA were malafide, arbitrary and discriminatory. It was submitted that from the fact that on WP(C) 7529/09 Page No. 9 of 42 31.12.2008, the DDA asked the petitioner to extend the validity of rates for the tender job for a further period of 6 months as well as to extend the bank guarantee, it was clear that they were ready to award the tender in favour of the petitioner before they suddenly changed their mind. Also, the NIT provided for negotiation and, in case there was any issue which needed to be clarified, the DDA, instead of rejecting and recalling the tender, could have negotiated with the petitioner. 13. The third contention raised by the learned counsel for the petitioner was with respect to Clause 3(d) of the section entitled ―PWD-6‖ of the NIT, which clearly states that the ‗Technical Bid‘ of the parties shall first be scrutinized and approved and if the same is not found to be within the parameters of the tender document, the tender shall stand rejected. In other words, the ‗Financial Bid‘ of the tenderer will not be opened unless he qualifies in terms of the technical requirements for the project. To make things clearer, the said clause 3(d) is reproduced hereunder: ―(d) Technical Bid of a tenderer, if not found within the specified parameters of this tender document, the Financial Bid i.e. envelope ‗C‘ of the said tenderer shall not be opened and his offer for this work shall stand rejected. Decision of the Engineer-in-charge in this respect shall be final and conclusive.‖ 14. On the strength of this clause, it was submitted that because the petitioner‘s financial bid was opened, it clearly implied that its technical bid was within the specified parameters of the tender document. It was further submitted that the petitioner, being L-1 and, therefore, having succeeded in WP(C) 7529/09 Page No. 10 of 42 both the Technical and the Financial Bids, deserved to be awarded the contract and the DDA were duty bound to award the same in favour of the petitioner. The learned counsel for the petitioner contended that the DDA could not arbitrarily reject the tender for unlawful and extraneous reasons. 15. In support of the contentions — that judicial review of administrative decisions in respect of tenders was permissible in law; that the DDA should have substantiated its decision with reasons; that the DDA did not have unfettered discretion in the award or rejection of tenders; and, that the DDA had the power to alter/ modify tender conditions in public interest, the learned counsel for the petitioner placed heavy reliance upon the following two decisions:- 1) Reliance Airports Developers P Ltd v. Airports Authority of India and Others: 2006 (V) AD (Delhi) 524 2) Reliance Airport Developers (P) Ltd v. Airports Authority of India and Others: 2006 (10) SCC 1 IV. Respondent’s (DDA’s) contentions 16. The DDA, through its counter affidavit and during the course of the arguments, pointedly raised the issue that the technology proposed to be used by the petitioner was never within the specified parameters of the tender document. In fact, none of the bidders had offered a technology that was completely in consonance with the requirements of the tender. It was contended that a scrutiny of the technical bids revealed that there were deficiencies in all the bids, though of varying degree. This led to the DDA WP(C) 7529/09 Page No. 11 of 42 indulging in numerous meetings with the bidders in order to rectify the defects. Finally, in the meeting on 05.09.2008, a unanimous view, that the agency, whose tender is accepted, shall invariably provide at least 75% of each category of structural members in pre-fab construction for the RCC of superstructure, was arrived at. If the DDA had wanted to favour any particular concern or if the intention was to reject the petitioner‘s bid arbitrarily, unlawfully or with mala fides, then it would not have taken pains to hold such meetings to keep the petitioner and the other bidders in the tender process. In short, it was submitted that the petitioner‘s contention that its technology was in consonance with the requirements of the tender documents was not true as it was the variance in the technology offered by it and the other bidders, in the first place, that prompted all the meetings that followed. 17. The learned counsel for the DDA further submitted that the contention of the petitioner that merely by being L-1 in the tender process, a right to be awarded the work accrued in its favour, was completely unsustainable. It was submitted by him that no actual binding contract came into existence at that stage in the tender process and numerous other factors had to be considered before a final decision on awarding the tender could be made. Thus the DDA was not at all duty bound to accept the petitioner‘s tender and had not acted beyond its capacity in rejecting and recalling the same. 18. It was also contended that while the petitioner relied strongly on the said clause 3(d) of the NIT, which stated that if the technical bid was WP(C) 7529/09 Page No. 12 of 42 unsatisfactory, the tender would be rejected and the financial bids would not be opened, the petitioner failed to appreciate the letter dated 19.06.2008, by the Chief Engineer, where, in paragraph 15, it had been clarified that any major deviation in the technology presented by the bidders from that of the tender document, would not be accepted. The relevant extract of the same letter is reproduced hereunder: ―15. It is clarified that the agencies were short listed based on the applications received in view of the Expression of Interest invited by DDA and also detailed presentation made by them for the technology subsequently. Any major deviation in the technology presented by them will not be accepted.‖ 19. The next contention raised by the learned counsel for the DDA was that due to the discrepancy in the technologies offered by the bidders and the requirement of the tender document, and also due to the fact that there had been a substantial amount of discussion on the same, the DDA, upon the representation of one of the tenderers before the Lieutenant Governor of Delhi for relooking in to the processing of the tenders, referred the matter to the Central Vigilance Commission for their advice. In this regard, the notes of the CVO dated 11.11.2008, 23.12.2008 and 05.01.2009 are relevant. Since these notes are significant, the same are reproduced hereunder in their entirety:- CVO’s Note dated 11.11.2008: ―As desired by VC, DDA I examined the tender process and my observation is that there have been irregularities in handling the tender. The requirements regarding use of pre-fab technology has been changed from time to time. Following are the procedural lapses. WP(C) 7529/09 Page No. 13 of 42 1. The idea was to go in for expeditious construction of houses and it was possibly thought that use of Pre-fab technology would be helpful in that regard. Though the notice inviting tenders mentioned that ―the works shall be executed on turn key basis from the concept to commissioning, services including pre-cast component, design, method of erections in accordance with the layout plans and architecture/ structural design to be approved by DDA‖, the NIT did not mention anything more than that regarding use of pre-fab technology. The minimum acceptance specifications regarding use of pre-fab technology dealt at item 3.1 (P-231) of the tender document was that the RCC in column, beams, slabs and walls could be pre-cast/ as well as cast-in-situ. Thus, the tender document did not specify that pre-cast technology must be used. 2. It was in the pre-bid conference held on 11.02.2008 that the Technical Committee under the Chief Engineer (NZ) clarified to the prospective bidders that tenders have been invited for construction using pre-fab technology based on the presentation made by the agencies in continuation of the expression of interest (EOI). This was a deviation from the original tender document. The firms who specialize in pre-fab construction could complain that since DDA was not insistent on pre-fab construction in the NIT, they did not file EOI (expression of interest) with the apprehension that they could not have competed in cost with those who opt for conventional in-situ construction and hence could not get the opportunity. 3. Subsequently, technical bids were received and scrutinized by the Technical Committee on 05.08.2008. The scrutiny document had pointed out the deficiencies against the technical bids. One of the deficiencies pointed out in case of M/s Era Infra Engineering Ltd. was that technology proposed for the construction was at variance with proposal submitted in expression of interest and subsequent presentation and therefore not acceptable. A meeting of the Technical Committee was held on 06.09.2008 with the representatives of the agencies. In this meeting, it was decided to do away with the detailed scrutiny of technical bid. Relevant extract from the minutes of the meeting is reproduced below: ―A meeting of Technical Committee was held in the Conference Room on 05.08.2008 with the representatives of the agencies. There was general consensus among the WP(C) 7529/09 Page No. 14 of 42 agencies that detailed scrutiny of technical bid may be dispensed with in view to save time as they were ready to carry out necessary modifications in line with tender provision and subsequent clarifications.” Dispensing with the scrutiny of technical bid is a serious lapse. Without proper evaluation of technical bid DDA does not get the opportunity to ensure the technical specifications and uniformity in that regard before evaluating the financial bids. 4. Another deficiency in the process is that, in this meeting, the use of pre-cast technology was relaxed to the extent of 75%. The Technical Committee in its meeting held on 05.09.2008 decided as follows: ―After discussing the features of various technologies in the meeting, it has been decided that the agency, whose tender is accepted, would invariably provide at least 75% of each category of structural members in pre-fab construction for the RCC of superstructure”. This decision dilutes the earlier decision to completely use pre-fab technology. That apart, since there was no technical evaluation done after this meeting, DDA has not been able to assess whether any of the bids really met this evaluation criterion of 75% or not. Further, since