WP(C) 4196/2010 Page 1 of 52 * HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 15th July, 2010 % Judgment Pronounced on: 26th July, 2010 + WP(C) No.4196/2010 & CMs 8327/10 & 8466/10 SUMITOMO CHEMICAL INDIA PVT. LTD. ..... Petitioner Through: Mr. Akhil Sibal, Adv. with Mr. Deepak Khurana, Ms. Mihira Sood, Mr. Pradeep Chiinndra, Advs. Versus UNION OF INDIA AND OTHERS ….. Respondents Through: Mr. Jatan Singh, Central Govt. Standing Counsel for R-1 Mr. Parag P. Tripathi, ASG with Mr.Anuj Bhandari, Mr. Pragyan P. Sharma, Mr. Rupesh Gupta, Advs. for Respondent No.2 Ms. Mini Pushkarna, Standing Counsel for Respondent No.3/MCD Mr. Mukul Rohtagi, Mr. Neeraj K. Kaul, Sr. Advs. with Ms. Kanika Agnihotri, Mr. Darpan Wadhwa, Mr.Aseem Chaturvedi, Mr. Vaibhav Agnihotri, Advs. for Respondent No.7 CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN 1. Whether reporters of the local papers 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 the Digest? Yes WP(C) 4196/2010 Page 2 of 52 DIPAK MISRA, CJ The present lis, though frescoes a picture and depicts a scenario at the very nucleus level pertaining to the stem principles in the realm of award of contract inclusive of the undeniable concept of the element of public interest regard being had to the essential power of flexibility bestowed on the owner called „allowable free play in the joints‟, yet the said inherent features were differently graduated and calibrated to the arena of competition and no- competition, owner‟s role in the field of adaptability due to necessity on one hand and guillotining of the same on the other by bending the norms with an undue sense of generosity and mal-adroit propensity of impropriety and malice judged on the scale of balance. Thus, the duty cast is to adjudge whether the decision taken by the respondents, in the ultimate eventuality, stands on the terra-firma or collapses like a pack of cards. 2. HLL Lifecare Ltd., the second respondent herein, floated tender No. HLL/PCD/MCD-01-10-11/BTI inviting bids for purchase of larvicide Baccilus thuringiensis var israealensis (Bti) (AS) in the quantity of 2,75,000 litres or 343.75 MT on 29.03.2010. The Invitation For Bids (IFB) was compartmentalized into two parts, namely, the Techno-commercial Bid and Price or Financial Bid. The IFB indicated that the Municipal Corporation of Delhi (MCD) intended to procure the items used for anti malaria operations for the year 2010-11 through the procurement and consultancy service division of M/s HLL Lifecare Ltd. It was stipulated that a complete set of bidding documents could be purchased by an interested eligible bidder on WP(C) 4196/2010 Page 3 of 52 the submission of a written application. In the Instructions to Bidders (ITB), it was postulated that the bid documents shall be read in conjunction with the Press Tender Notice dated 29.3.2010 which was annexed as part of the tender document. Clause 1 of the ITB stipulated the content of bidding documents which included the technical specifications and the qualification criteria. It also postulated various other aspects which included what a bidder is required to do and what would constitute a disqualification. Clause 5 dealt with documents comprising the bid, namely, Techno- commercial/Technical Bid and Price Bid prepared by the bidder. Clause 5(a) dwelled upon what should be included in the Technical Bid and clause (b) dealt with the Price Bid. Clause 7 provided about the Documents Establishing Bidders‟ Eligibility and Qualification. Clause 16 dealt with Clarification of Bids and Clause 17 dealt with Preliminary Examination. Clause 18 stipulated that the purchaser would evaluate and compare the bids on the basis of techno-commercial/technical evaluation followed by the price bid evaluation. 3. Section III of the IFB dealt with General Conditions of Contract and Section IV dealt with Special Conditions of Contract (SCC). Clause 4 of SCC provided for Qualification Criteria. Clause 5 dealt with Performance Statement. Section V provided the Schedule of Requirements (SOR) and Section VI dealt with Technical Specifications. Clause 2 of the same provides the criterion as regards the quality and storage of the product. Section VII is a section which is devoted to Qualification Criteria (QC). In WP(C) 4196/2010 Page 4 of 52 the said section, there is a reference to Clause 7.2(b) of ITB. Section VIII provides for Proforma-Sample Forms and there is a proforma in the same which relates to performance statement. 4. The petitioner, a company registered under the provisions of the Companies Act, 1956, is engaged in the business of import, sale and marketing of insecticides, larvicides, bio-larvicides, etc. The larvicide Bacillus thuringiensis var israealensis (Bti)(AS) (hereinafter referred to as the product) is manufactured by Valent Bio Sciences Corporation, a company incorporated in the United States. The said product is marketed by the petitioner - company under the brand name „Vectobac 12 AS‟. The petitioner had obtained a registration certificate to import/sell to market the larvicide by the Registration Committee of Central Insecticide Board (CIB) which is a body constituted under the Insecticides Act, 1968 under the Ministry of Agriculture. Be it noted, the initial certificate was granted in favour of M/s Aventis Crop Science India Ltd. and eventually, there was an endorsement in favour of the petitioner on 15.7.2004. The registration certificate issued to the petitioner for importing and marketing „Vectobac 12 AS‟ approved that the product can be stored between temperature 15OC to 25OC. Subsequently, the temperature range for storage of the petitioner‟s product was modified and approved by the Registration Committee of CIB to 1.9OC to 44.9OC in its meeting held on 20.10.2009. It is urged in the petition that the product of the petitioner fulfills the entire criteria and parameters which are necessary as mandated by the National Vector Borne WP(C) 4196/2010 Page 5 of 52 Diseases Control Programme (NVBDCP). The product has been approved by the Technical Advisory Committee (TAC) which has the authority to consider the bio-efficacy of the product and the TAC had given the approval in that regard. It is contended that as per the requirement of the IFB, to fulfill the criteria, the product of a bidder should be registered and approved by CIB, TAC and NVBDCP under the National Programme and the product can be stored at a temperature not exceeding 42.5OC and, further, should be suitable for storage in Delhi. As pleaded, on 28.4.2010, the petitioner submitted the Techno-commercial/Technical Bid along with the requisite documents. It had also submitted the satisfactory performance certificate and the documentary proof that it has supplied more than 25% of the quantity for the specified product in any one year during the last three years prior to the date of bid opening. After the submission of the bid, the petitioner received a letter on 21.5.2010 from the second respondent asking whether the TAC had approved the aforesaid modification in the temperature range to 1.9OC to 44.9OC as endorsed by the CIB and RC for storage of the product of the petitioner. It is put forth that the said clarification came as a complete surprise inasmuch as the TAC was required to approve only the use of the product and not the storage temperature of the product. That apart, vide the said letter, the respondent No.2 further asked the petitioner to furnish satisfactory performance certificate from its clients for the supplies made after the modification of the storage temperature. On the same date, the second respondent entered into correspondence with the Director, NVBDCP seeking a clarification as to whether the modified WP(C) 4196/2010 Page 6 of 52 storage temperature range of the petitioner‟s product from 1.9OC to 44.9OC was approved by the TAC. The petitioner replied to the aforesaid letter meeting all the queries made by the second respondent. The NVBDCP also sent its reply vide letter dated 26.5.2010 stating that the product of the petitioner is registered with the CIB and RC with all specifications as per the registration certificate. It was further mentioned therein that the TAC only approves the use of the product as per the specifications and changes made by the CIB. It is contended that the correspondence would show that the TAC has no role in approving the storage temperature range of the product. Temperature and other parameters are to be approved by the CIB and RC. It is set forth that the registration certificate issued to the petitioner by the CIB and RC specified „Use Recommendation‟ under a separate heading from „Storage Temperature Range‟ and thus, the distinction is quite clear. It is the case of the petitioner that to circumvent the aforesaid clarification issued by the NVBDCP vide letter dated 26.5.2010, the second respondent on 27.5.2010 wrote a letter to the Director, NVBDCP seeking a clarification with regard to the earlier letter whether it is stated by the NVBDCP that each and every change made by the CIB and RC in a registration certificate is consequently required to be approved by the TAC. When the matter stood thus, on 4.6.2010, the petitioner communicated to the second respondent highlighting that it had satisfactorily replied to the queries raised by the second respondent by letter dated 21.5.2010 and if there is any pending issue, the said respondent should communicate to the petitioner before taking any decision on the bid submitted by the petitioner. WP(C) 4196/2010 Page 7 of 52 5. As is evident from the factual matrix, the respondent No.2 vide letter dated 8.6.2010 rejected the technical bid of the petitioner as non-responsive without giving any reason for the same. It is averred that the respondent No.2 did not open the financial bid and has taken the view that the technical specifications in the tender document that the product should be TAC approved requires the modification in the storage temperature range of the petitioner‟s product to be approved by the TAC even though the same is not in the domain of the TAC. Reference has been made to the modifications in the storage temperature as regards the petitioner‟s product to highlight that the same is more than the range specified in the tender document. It is put forth that when the product of the petitioner was approved to be used in the National Programme in the year 2005, the approved storage range of the temperature of the product was 15OC to 25OC and when a clarification letter has been issued by the NVBDCP on 9.6.2010 that the TAC only approves the use of the product as per the specifications or “changes made in the use” by the CIB and nothing more than that, there was no justification to take the same as a ground to reject the technical bid. It is contended the conduct of the respondent No.2 is extremely arbitrary and discriminatory and it contravenes the instructions issued vide Office Memorandum of Ministry of Health and Family Welfare dated 29.8.2007 which provides that in case of a single responsive tender, retendering should be ordered with broad based similar specifications but in the case at hand, the second respondent instead of ordering for retendering has deliberately awarded the contract in favour of WP(C) 4196/2010 Page 8 of 52 the respondent No.7 with mala fide intentions. It is urged that the petitioner fulfilled all the technical criteria and parameters as set out in the tender documents but the second respondent has rejected the same on flimsy grounds. The ground which has been taken recourse to by the second respondent which basically pertained to the approval of the storage temperature range of the product by the TAC was never a part of the tender document and, hence, the whole approach is mala fide and perverse. It is also asseverated that it was obligatory on the part of the respondent No.2 to seek clarification from the petitioner before taking any decision as per the terms and conditions of the IFB and not reject his bid in extreme haste which smacks of arbitrariness. The respondent No.2 sought to modify the conditions prescribed in the IFB as far as the supply to the extent of 25% of the quantity concerned in respect of the petitioner by treating that the change in the storage temperature range constituted change in the composition of the petitioner‟s product. As the product of the petitioner can be stored between the temperature range of 1.9OC to 44.9OC, the requirement as per the tender which is 42.5OC is met with and, therefore, there was no warrant to reject the technical bid. It is alleged that the respondent No.2 has acted mala fidely and also against the public interest inasmuch as the financial burden is more on the acceptance of the bid of the respondent No.7, for the petitioner‟s financial bid is much lower. 6. In this backdrop, prayer has been made for issue of a writ of certiorari for quashment of the decision taken by the respondent No.2 rejecting the WP(C) 4196/2010 Page 9 of 52 technical bid of the petitioner which has been communicated to it by letter dated 8.6.2010 and also further quash the acceptance of the financial bid of the respondent No.7 and to issue a writ of mandamus to accept the technical bid of the petitioner and open the financial bid and award the contract as per the terms and conditions of the contract. 7. A counter affidavit has been filed by the respondent No.2 contending inter-alia that in terms of the tender, the said respondent analyzed the bid of the petitioner as per Clause 7 of Section II of the tender (Instructions to Bidders) and as per the said clause, the petitioner was required to supply complete documents with its bid to the tender and the said documents were subject to the complete satisfaction of the purchaser. As per Clause 7.2(b), the bidder/petitioner was required to satisfy the criteria stipulated in Section VII (Qualification Criteria) of the tender document. To satisfy the said condition, it was incumbent on the petitioner to submit documentary evidence in proof of the fact that it had actually supplied to the extent of atleast 25% of the tendered quantity of the tendered product in any one year during the last three years prior to the date of bid opening. The said proof was required to be submitted to the respondent No.2 as per the performance statement but the petitioner failed to comply with the said mandatory requirement and chose to submit the work order/consignments issued in its favour. The petitioner failed to attach the certificate as per the tender requirement from the said alleged purchasers/consignees confirming that the said larvicide was actually supplied by the petitioner/bidder and the same WP(C) 4196/2010 Page 10 of 52 was duly accepted by the purchasers/consignees to their entire satisfaction. It is also contended that another condition which finds mention in the tender is that the product should be stable when stored at ambient temperature (not exceeding 42.5OC), but the petitioner got changes made in the condition No. 5 of its registration certificate on 27.11.2009 from the CIB whereby the storage temperature range was modified from 1.9 OC to 44.9 OC. Based on the details given by the petitioner in the bid documents, its performance was not found to meet the qualification criteria of satisfactory supply of 25% of the product by the petitioner. Alternatively, it is put forth that prior to 27.11.2009, even if the satisfactory supply of the product of the petitioner is calculated for any one year of the past three years prior to the date of bid opening, it still failed to qualify due to non-submission of the required documents from the respective purchasers/consignees of the product. The petitioner was called upon to submit copies of the orders for the required quantity, if any, received by him after 27.11.2009 along with the certificate confirming the said supply and acceptance by the purchaser/consignee, but the petitioner failed to submit the same which led to rejection of the Techno- commercial bid as non-responsive. Emphasis has been laid on Clause 7.3 of the Instructions to Bidders to highlight that the petitioner has not satisfied the qualification criteria and, therefore, its bid has been rightly rejected. 8. It is the stand of the respondent No.2 that the bid of the respondent No.7 had been approved and a formal contract had already been entered into with the respondent No.7 on 5/8.6.2010 as it had acted fairly and in a WP(C) 4196/2010 Page 11 of 52 transparent and justified manner. It is its further stand that the said respondent has not acted in haste by placing at least three months requirement order for the present to meet out urgent requirement of larvicide for effective control of mosquito breeding for prevention of malaria and dengue during summer and rainy season in Delhi region keeping in view the Commonwealth Games which is going to be organized in the month of October, 2010. It is denied that the petitioner submitted the requisite documents with the Techno-commercial bid. The petitioner did not submit the satisfactory performance certificate documentary proof that it had supplied more than 25% of the quantity of the specified product as per Section VII of the tender. It is further put forth that the content of the letter dated 26.5.2010 has been erroneously interpreted by the petitioner. The clarification was sought as the CIB changed the storage temperature range on 27.11.2009 and that compelled the respondent No.2 to seek the clarification. It is set forth that the product of the petitioner required TAC approval as per the registration certificate and as per the tender and, accordingly, clarification was sought from the respondent No.6 which was replied by the respondent No.6 by letter dated 26.5.2010 the contents of which are self explanatory. It is contended that the stand urged that the petitioner was not intimated the reasons for non-acceptance of its Techno- commercial bid is not tenable as it was not obligatory on the part of the second respondent to seek any further clarification from the petitioner as the tender conditions were plain and clear. The ground of treating the respondent No.7 in a different manner on extraneous considerations has been WP(C) 4196/2010 Page 12 of 52 categorically denied. It is the stand of the respondent that the bid process is completely fair, transparent, competitive and justified and does not require any interference in exercise of power of the judicial review. 9. A rejoinder affidavit has been filed by the petitioner to the counter affidavit filed by the respondent No.2 contending, interalia, that the said affidavit does not answer the issues raised by the petitioner, namely, that no reason was ascribed while treating the technical bid of the petitioner as non- responsive and, second, the directive issued by the Ministry of Health and Family Welfare dated 29.8.2007 with regard to the single responsive tender has not been dealt with. Highlighting on these two aspects, it is averred that in a Welfare State, when the competent authority rejects the bid, it has an obligation to explain the reason for the same and, second, the non-reply to the directive issued by the Ministry of Health and Family Welfare reflects the blatant bias, discrimination and malafide. It is asserted that the plea taken with regard to the non-fulfillment of the performance statement is totally erroneous inasmuch as the petitioner had duly and completely fulfilled the condition as it had supplied a total quantity of the product in question from April 2007 to March 2007 which is well excess of even the total tender quantity. Detailed enumeration has been made as to how the petitioner satisfied the said criterion and how it had filed the performance statement at the time of submitting the bid. It is urged that the certificate supplied subsequently by the respondent No.7 is not in conformity with the prescribed format of the performance statement. It is highlighted that there WP(C) 4196/2010 Page 13 of 52 is no requirement at all that the satisfaction certificates of the purchasers / consignees should be over 25% of the tender quantity in respect of any one year as the clause relating to the same only mentions “sizeable value both in quantity and cost”. It is urged that the respondent No.2 had afforded an opportunity to the respondent No.7 to submit the satisfaction certificate while the same had not been returned but similar opportunity was not afforded to the petitioner and that smacks of arbitrariness and discrimination. The determination of cut-off date qua the petitioner as 27.11.2009 is totally unacceptable as the product that was sought to be supplied remained the same and the modification in the storage temperature of the petitioner‟s product from 15OC - 25OC to 1.9 OC - 44.9OC was approved and endorsed by the CIB & RC and had nothing to do with the product. The plea of the respondent No.2 that the product should be stable when stored at an ambient temperature not exceeding 42.5OC and the petitioner got modification at a later stage is fundamentally a misreading of the terms and conditions of the tender specification specifically in para 2 of Section VI which when properly appreciated clearly indicates that there is a stipulation that the product should be stable when stored at an ambient temperature not exceeding 42.5OC but there is no requirement at all in para 2 of the Section VI that this particular feature or property of the product offered should be set out either in the TAC approval or in the CIB registration certificate. The petitioner‟s product is stable at an ambient temperature of 42.5OC and, therefore, the petitioner‟s bid could not have been rejected on that ground. The TAC approval is merely in respect of the capability of the use of the product WP(C) 4196/2010 Page 14 of 52 offered as a larvicide and the said approval has nothing to do with the condition of storage of the product in question. Quite apart from the above, it is contended that the performance statement need not be confined only to the items which are absolutely identical with the product but can include the products which are similar to those products as the employment terms have been implied in the terms and conditions of the tender. Reliance has been placed after the study conducted in 2002 in respect of the product of the petitioner that it was found to be stable at 42.5OC and, hence, the ground put forth by the respondent No.2 is absolutely unsustainable and, in fact, exposes total discrimination. Various other averments have been made with regard to the undue hasty action taken by the respondent No.2 though there was no urgency for opening of the tender bids. It is further urged that the comparison made by the said respondent as regards the product of the petitioner is not within its authority and it cannot clothe itself with the powers to analyse the bid. Thus, it is also put forth that the assertions made in the said counter affidavit in respect of the petitioner are totally unwarranted and, in fact, have no nexus with the controversy raised. 10. The respondent No.2 has not brought on record the letter dated 21.5.2010 written by it to the respondent No.7 whereas the communication dated 21.5.2010 to the petitioner has been brought on record. It is discernible from the said letter that the petitioner was only afforded an opportunity to supply performance certificate after the opening of the bid in respect of the supplies made after 27.11.2009 and not given any opportunity WP(C) 4196/2010 Page 15 of 52 to file documents to satisfy the factum of supply of 25% of the tender quantity for any one year in the last three years. Had such an opportunity been extended, it would have been in a position to comply with the said requirement. Thus, denial of equal opportunity tantamounts to total unfairness and if the same is done in the process of negotiation, it will also take the colour of arbitrariness. The documents that have been brought on record will go a long way to show that