C.W.P.No.7162 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No.7162 of 2006 Date of decision : 28.3.2008 Madhucon Projects Ltd. ....Petitioner through Mr. Ashok Aggarwal, Senior Advocate with Mr. Gurminder Singh, Advocate & Mr.Manpreet Singh, Advocate Versus State of Haryana & others ... Respondent no.1 through Mr. Rameshwar Malik, Addl.Advocate General, Haryana Respondent no.2 through Mr.Rajiv Atma Ram, Senior Advocate with Mr.Kamal Sehgal, Advocate Respondent Nos.3,5 & 6 through Mr. M.L.Sarin, Senior Advocate with Mr.Rohit Khanna, Advocate CORAM : HON'BLE MR. JUSTICE VIJENDER JAIN, CHIEF JUSTICE HON'BLE MR.JUSTICE MAHESH GROVER .... 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? ... C.W.P.No.7162 of 2006 -2- VIJENDER JAIN, CHIEF JUSTICE The petitioner - M/s Madhucon Projects Ltd. has filed the present petition, inter-alia, praying for the issuance of a writ in the nature of certiorari quashing the Letter of Acceptance dated 15.11.2005 (Annexure P-16) and the consequential Concession Agreement dated 31.1.2006 (Annexure P-22), which has been issued in favour of respondent No.3 – M/s K.M.P.Expressways Ltd., as it has been done in complete contravention of the tendering process carried out by respondent Nos.1 and 2. The Concession Agreement executed in favour of respondent No.3 pertains to the construction of an express highway project which has been baptised with a name as 'Manesar-Kundli- Palwal Express Highway'. The Haryana State Industrial Development Corporation – respondent No.2 issued a Request for Qualification, which is a complete booklet of information inviting Expression of Interest from various contenders who were interested in executing the aforesaid project. The eligibility conditions, criteria of evaluation, the outline of the Concession Agreement and other related information was provided in the said document which has been termed as 'Request for Qualification'. The salient features of this document Annexure P-1 (Request for Qualification), which ultimately have also become the rallying point of the arguments of the petitioner, are as below :- “1. The Haryana State Industrial Development Corporation (HSIDC) invites applications for C.W.P.No.7162 of 2006 -3- pre-qualifications from parties interested in design, engineering, construction, development, finance, operation and maintenance of the Kundli-Manesar-Palwal Express Highway Project (the “Expressway Project”) for a pre agreed concession period (the “Concession period”). 2. ................. ................ ................. 3. An agreement will be drawn up between HSIDC and a selected bidder on real toll basis (the “ Concession Agreement”). Revenues from the proposed tolling of the Expressway Project will accrue to the special purpose company undertaking the project (the “Project Company” or the “Concessionaire”). 4. .................. ................... ................... 5. All RFQ submissions would be evaluated in terms of financial and technical capability of the Consortium (sole applicant, if applicable). Financial and technical thresholds have been fixed at 50% of the estimated construction cost. Detailed information on full evaluation criteria and methodology are available in the RFQ document.” “2.2 Eligible Applicants The Applicant may be a single entity or a group of entities (hereinafter referred to as Consortium), C.W.P.No.7162 of 2006 -4- coming together to implement the Project. The term Applicant used hereinafter would therefore apply to both a single entity and a Consortium. The purchaser of the RFQ document must be the Applicant itself or a member of the Consortium submitting the Application. The Applicant should submit a Power of Attorney as per the format enclosed at Annex 3, authorizing the signatory of the Application to commit the Applicant. Applications submitted by a Consortium should comply with the following additional requirements : a. .............. ............... ................ b. .............. ................ ................ c. ............... ................ ................ d. The application should include a description of the roles and responsibilities of individual members. The information in Form 4 'B' and 4'C' ( at page 25and 26 respectively), shall be required to be supported by an Affidavit of each member of the Consortium for verification of the contents made therein; The form of Affidavit is given at Annexure 4'E'. e. ............. ............... ................ f. Members of the Consortium shall nominate one member as the Lead Technical C.W.P.No.7162 of 2006 -5- Member and one Member as the Lead Financial Member. Alternatively, the members of the Consortium can nominate one Member as the Lead Member. The nomination(s) shall be supported by a Power of Attorney; as per the format enclosed at Annex 4 signed by all the members. The Lead Technical Member and the Lead Financial Member or the Lead Member, as the case may be, shall be required to meet the criteria specified in Clause 3.7; (g) Members of the Consortium shall enter into a Memorandum of Understanding (the “MoU”) for the purpose of making the Application and submitting Proposal in the event of being short-listed. The MoU shall, inter-alia, also convey the intent to form a joint venture company, with shareholding commitment(s) in accordance with Clause 3.7 of this RFQ document, which would enter into the Concession Agreement and subsequently carry out all the responsibilities as Concessionaire in terms of the Concession Agreement, in case the Concession to undertake the Project is awarded to the Consortium. The MOU shall also clearly outline the proposed roles and responsibilities C.W.P.No.7162 of 2006 -6- of each member at each stage and shall commit the minimum equity stake as required under Clause 3.7.” 2.3 Change in Consortium composition: No change in the composition of a Consortium after RFQ submission will be permitted by HSIDC and even during the Proposal Stage. (Emphasis supplied). E. Short Listing and Notification 2.27 After the evaluation of applications, HSIDC would announce a list of applicants who have been pre qualified for participating further in the process. The pre qualified parties will be notified in writing by HSIDC not later than forty five (45) days from the Application Due Date. At the same time, HSIDC would notify the other Applicants that their Applications have been unsuccessful. 2.28 The Pre-qualified Parties will be requested to submit a detailed Proposal in the form and manner to be set out in the RFP document.” Three corporate houses, namely, the petitioner Madhucon Projects Limited, Apollo Enterprises Limited and D.S.Constructions Limited formed a consortium by the name of Madhucon-Apollo-DSC Consortium and made a bid for the project pursuant to the Request for Qualification (Expression of Interest) C.W.P.No.7162 of 2006 -7- invited by the respondent No.2. The consortium was found to be the lowest bidder at L1 and was declared successful by respondent No.2 on the basis of both financial and technical evaluations conducted by it. The Letter of Acceptance (LOA) and a Concession Agreement was executed in favour of respondent No.3 i.e. M/s K.M.P. Expressways Ltd. which has given rise to the grievance of the petitioner, as according to him, his name was omitted by respondent Nos.5 and 6 while floating the Special Purpose Vehicle (SPV) in the name of respondent No.3 even though he was a part of the original consortium which had made a successful bid for the grant of contract. This, according to the petitioner, was done for extraneous and mala fide considerations and thus rendering the decision making process carried out by respondent No.2 as being tainted and liable to be struck down by this Court for the reasons which have been encapsulated in the contentions raised by the learned counsel for the petitioner which we proposes to delineate hereafter. It was contended by the learned counsel for the petitioner with elaborate reference to the provisions of Annexure P-1 Request for Qualification, Annexure P-2 the Memorandum of Understanding, Annexure P-4 Request for Proposal, Annexure P-5 the Memorandum of Understanding for the Consortium and Annexure P-15 Letter of Acceptance that all the terms and conditions detailed in these documents lay down that it was the consortium which could have made a bid and once the consortium did so with the respective roles of the component companies delineated, the same could not be C.W.P.No.7162 of 2006 -8- changed as has been done by omitting the name of the petitioner from the ultimate Special Purpose Vehicle formed in whose favour the respondent No.2 has awarded the contract. It was contended that the terms of the Memorandum of Understanding for the Consortium are as below :- “NOW THEREFORE the parties agree to enter into this MOU as follows:- 1) On such terms and conditions as may be mutually decided among the parties that : a) MADHUCON, APOLLO AND DSC be a Lead Technical Member, LFM and Member of the consortium (herein referred to as LTM,LFM and M, respectively; b) The lead Financial Member shall be responsible for coordinating and arranging with the parties to file RFQ for the Project and thereafter on being awarded the project take steps to finalize the Detailed Project Report, coordinating/arranging/finance at competitive and viable rates for the Project on the best effort basis jointly with other members of consortium and shall also be responsible for financial management, funds and creation of the Finance documents of the Project. c) The Lead Technical Member shall be responsible for day-to-day coordination and contact with the GOH/HSIDC in the pre award stage and shall be responsible for coordination, advising on Construction, Designing, Preparation of Detailed Project Report and C.W.P.No.7162 of 2006 -9- provide technical support in respect of design, drawings, execution of project, quality control and similar aspects of the project. Also play advisors role in designing and selecting technical standards for the project in consultation with HSIDC, once the project is awarded in clear compliance with the duly executed Concession Agreement for the Project. d) .............. ..................... ..................... 2) ............... ..................... ...................... 3) ............... ....................... ...................... 4) The Consortium shall within a reasonable time on being awarded the project and in any case prior to the implementation of the Project form a Joint Venture Company as a Special Purpose Vehicle (SPV) to domicile the Project, which will be managed through its Board of Directors and the parties represented therein, in the ratio of their shareholding, read with Clause 8,9 & 10 of this MOU, and in such an event this MOU shall continue only till such time as the SPOV is formed and has signed the Concession Agreement to implement the Project and subsequently carryout all the responsibilities as per the terms thereof. The Core Group formed by the consortium may become Committee of Directors of a completely new Committee of Directors may be formed to take over the activities of the Code Group once the Board of Directors (Board) is formed in the SPV and C.W.P.No.7162 of 2006 -10- such Board approves of the same after its due diligence as it may deem fit. 5) ................ ...................... ....................... 6) ................ ...................... ........................ 7) The parties shall be jointly and severally be liable in all events for the execution of the Project strictly as per terms of the Concession Agreement, in the post award stage. 8) The Parties have noted the requirement of the Equity Share Holding as per the RFQ Document and agree to the following minimum equity shareholding stipulated therein as follows: Shareholding in % MADHUCON(Lead Technical Member)34(Thirty Four) APOLLO (Lead Financial Member) 33(Thirty Three) DSC (Member) 33(Thirty Three)” While referring to the said clauses of the Memorandum of Understanding, learned counsel for the petitioner contended that the petitioner was the only lead technical member and therefore according to clause 1(c) he was responsible for the day-to-day coordination and contact with the HSIDC and the Govt. of Haryana in the pre award stage and responsible for coordination, advising on construction, designing, preparation of detailed project report and provide technical support in respect of design, drawings, execution of project, quality control and similar aspects of the project while playing advisor's role in designing and selecting technical standards C.W.P.No.7162 of 2006 -11- for the project in consultation with HSIDC after the award of the project. A prominent role being expected of the lead technical member, which is the petitioner, no contract, much less a project of this magnitude, could have possibly been executed without the assistance of the lead technical member and therefore the award of contract to respondent No.3 was completely illegal. With some vehemence reference was also made to the Request for Proposal, a document which is on record as Annexure P- 4, to contend that the bidder in this case was a consortium, namely, Madhucon-Apollo-DSC and Clause 1.7 of this document clearly forbade a change in the composition of the consortium. Besides, all the terms were referred to the bidder and the successful bidder, which was consortium, and once the bidder and the successful bidder is the consortium, the contract could not be awarded in favour of any other person in which the components of the original consortium were not reflected. “1.5.1 The Bidder will be required to incorporate a Special Purpose Vehicle (SPV) to domicile the Project prior to the start of implementation of the Project. 1.5.2 The equity holding of a single entity/aggregate holding of the Consortium Members (in case of Consortium) and their Associates in the issued and paid up equity share capital of the Concessionaire shall not be less than (a) 51% (fifty one percent) during the Construction Period and for 3 (three) years following C.W.P.No.7162 of 2006 -12- Commercial Operation Date (COD) and (b) 26% (twenty six per cent) during the balance Operation Period; 1.5.3 Any dilution in the equity holding of the Special Purpose Vehicle (SPV) as provided in this clause shall be with he prior written approval of HSIDC. 1.6 ................. 1.7 Change in Composition of the Bidder In case a Bidder is a consortium, change in the composition of the Bidder will not be permitted by HSIDC.” .................. ................... ................ 1.31 Notification The successful Bidder would be notified in writing by HSIDC. HSIDC shall endeavour to issue the LOA to the Successful Bidder by the date mentioned against issue of Letter of Acceptance in the Schedule of Bidding Process. .................... ................... ................ 1.33.1 Within fifteen (15) days from the date of issue of the LOA, the Successful Bidder shall accept the LOA and return the same to HSIDC. The Successful Bidder shall execute the Concession Agreement within forty five (45) days of acceptance of LOA.” It was then contended that the Memorandum of Understanding for Consortium clearly brought out the role and liabilities of the respective members of the consortium, which is C.W.P.No.7162 of 2006 -13- reproduced as under :- “NOW THEREFORE the parties agree to enter into this MOU as follows :- 1) On such terms and conditions as may be mutually decided among the parties that a) MADHUCON, APOLLO and DSC be a Lead Technical Member, lead Financial Member and Member of the consortium (herein referred to as LTM, LFM and M) respectively; b) The Lead Financial Member shall be responsible for coordinating and arranging with the parties to file RFQ for the Project and thereafter on being awarded the project take steps to finalize the Detailed Project Report, coordinating/arranging/finance at competitive and viable rates for the Project on the best effort basis jointly with other members of consortium and shall also be responsible for financial management, funds and creation of the Finance documents of the Project. c) The Lead Technical Member shall be responsible for day-to-day coordination and contact with the GOH/HSIDC in the pre award stage and shall be responsible for coordination, advising on Construction, Designing, Preparation of Detailed Project C.W.P.No.7162 of 2006 -14- Report and provide technical support in respect of design, drawings, execution of project, quality control and similar aspects of the project. Also play advisors role in designing and selecting technical standards for the project in consultation with HSIDC, once the project is awarded in clear compliance with the duly executed Concession Agreement for the Project. d) The Member shall be responsible for coordination with Lead Finance Member to obtain necessary documents/preparation of documents for LFM for submission of RFQ/Bid/Award of Concession/Financial Closure and assist Lead Technical Member for general coordination, preparation of detailed project report and provide technical support in respect of design, drawings. Member shall also be responsible for execution of project, quality control and similar aspects of project. 2) ............ ................ ............... 3) ............... ................ ................ 4) The Consortium shall within a reasonable time on being awarded the project and in any case prior to the implementation of the Project from a Joint Venture Company as a Special Purpose C.W.P.No.7162 of 2006 -15- Vehicle (SPV) to domicile the Project, which will be managed through its Board of Directors and the parties represented therein, in the ratio of their shareholding, read with Clause 8, 9 & 10 of this MOU, and in such an event this MOU shall continue only till such time as the SPV is formed and has signed the Concession Agreement to implement the Project and subsequently carryout all the responsibilities as per the terms thereof. The Core Group formed by the consortium may become Committee of Directors or a completely new Committee of Directors may be formed to take over the activities of the Core Group once the Board of Directors (Board) is formed in the SPV and such Board approves the same after its due diligence as it may deem fit. 5) ................ ................. ................. 6) ................ .................. ................. 7) The parties shall be jointly and severally be liable in all events for the execution of the Project strictly as per terms of the Concession Agreement, in the post award stage. 8) The Parties have noted the requirement of the Equity Share Holding as per the RFQ C.W.P.No.7162 of 2006 -16- Document and agree to the following minimum equity shareholding stipulated therein as follows : Shareholding in % MADHUCON(Lead Technical Member) 34(Thirty Four) APOLLO (Lead Financial Member) 33(Thirty Three) DSC (Member) 33(Thirty Three) 9) ......... 10) Roles and responsibilities of each member of Consortium shall be followed as under: Key Role Responsibilities MADHU CON APOLLO DSC Bid preparation Yes Yes Yes Financial Closer Yes Yes Yes Design & Engineering Yes No Yes Construction Yes No Yes Project Management Yes Yes Yes O & M Yes Yes Yes With the aforesaid agreement having been executed by all the members of the consortium, the HSIDC awarded the contract to respondent No.3, a company formed for this purpose but in which the petitioner being one of the members of the consortium had been left out. The decision making process was therefore assailed as being tainted and for extraneous reasons. Learned counsel for the petitioner also referred to Annexures P-18, P-19, P-20 and P-21 which are the representations C.W.P.No.7162 of 2006 -17- highlighting the grievance of the petitioner and made to the respondents. The contentions of the learned counsel for the petitioner can thus be broadly summed up as below :- i) That the Request for Qualification (Expression of Interest) permitted the participation of a consortium. ii)The Request for Qualification and Request for Proposal did not permit any change in the consortium which made a bid in the event of its being declared a successful bidder; iii)Since the consortium was the bidder and was declared the successful bidder, no contract could be awarded in which the components of the successful bidder i.e. the consortium were not represented in the same form as it was conceived. iv)The contract could have been granted in favour of the successful bidder alone. v) No change was permissible according to the terms and the Request for Qualification and Request for Proposal. vi)The petitioner being the lead technical member was responsible to provide all technical assistance and further undertook all such responsibilities which have been detailed in the Memorandum of Understanding for the Consortium with a specific reference to Clause 1(a), (b), (c) & (d). The aforesaid contentions pertained to the challenge which was made qua the action of respondent No.2 to award the contract to respondent No.3. In so far as the role of respondent Nos.5 and 6 is C.W.P.No.7162 of 2006 -18- concerned, it was contended that a complete misrepresentation had been made by them to respondent No.2 and therefore the Concession Agreement executed between respondent Nos.2 and 3 was in complete violation of the terms as set out by respondent No.2 while asking for Request for Qualification, Request for Proposal and also in complete violation of the Memorandum of Understanding signed with the consortium. In support of his contentions learned counsel for the petitioner relied upon New Horizons Ltd. v. Union of India (1995) 1 SCC 478, West Bengal State Electricity Board v. Patel Engineering Co.Ltd. & Ors. 2001(2) SCC 451 and Ramana D.Shetty Versus International Airport Authority of India 1979(3) SCC 489. It was also vehemently contended by the learned counsel for the petitioner that since no change was permitted, the Letter of Acceptance, which is in favour of respondent No.3, was absolutely illegal and it could not be said that the contract had been awarded to a successful bidder, namely the consortium. On 5.10.2005 the consortium is said to have written to respondent No.2 expressing its willingness to reduce the period as reflected in their bid from 24 years and 3 months to 23 years and 9 months in the event of the contract being awarded to them, but surprisingly, according to the petitioner, within this short interregnum the contract was awarded to respondent No.3 on 14.11.2005. The entity of respondent No.3 is said to have come into existence on 9.11.2005. The letter of the consortium dated 5.10.2005 finds C.W.P.No.7162 of 2006 -19- mention in the Letter of Acceptance and that apparently respondent Nos.1 and 6 had been misrepresenting the facts to respondent No.2 as even vide Annexure P-16, which is a letter dated 15.11.2005, the respondent No.3 while acknowledging the award of the project to it referred to the Special Purpose Vehicle company (respondent No.3) as having been incorporated by the Madhucon-Apollo-DSC Consortium thereby acknowledging the fact that the petitioner continued to be a part of the consortium which was the successful bidder and any deviation in the award of contract to respondent No.3 by excluding the name of the petitioner was obviously and patently illegal. The aforesaid challenge met with the expected stiff resistance from respondent Nos.2,3,5 and 6. Learned counsel for the said respondents at the outset contended that there has been an acute suppression of facts that the petitioner did not disclose the contents of Annexure R3/5, which is a document purportedly executed on 5.10.2005 to which the petitioner was a signatory. In this document the name of the consortium has been mentioned as 'Madhucon- Apollo-DSC Consortium' whereas name of the Special Purpose Vehicle which was to be formed by the successful bidder pursuant to the Request for Proposal having been issued in favour of the consortium is mentioned as 'KMP Expressways Limited' and against column Nos.11 and 12 the following information was given by the consortium in which the petitioner himself is a signatory :- “11)Will the Consortium be : Yes already initiated and L.O.I. Incorporating an SPV issued in favour of SPV. for the Project? C.W.P.No.7162 of 2006 -20- 12)Present position of the : “KMP Expressways Limited” SPV. has been approved by ROC.” This document is dated 5.10.2005 and it is thereafter that respondent No.2 proceeded to execute the Concession Agreement in favour of respondent No.3. Besides, the petitioner did not disclose to this Court the communication dated 14.11.2005 addressed by respondent No.6 – D.S.Constructions Limited to the petitioner informing him the urgency to incorporate the Special Purpose Vehicle for which the petitioner himself had not been able to supply them the requisite documents due to his pre occupation with the survey by the Income-tax Department having been made on the premises of the petitioner's company. A reference to this survey is also made in the further communication. This very communication which also reflects a mutual agreement in which the members of the consortium agreed to proceed with the SPV with an express understanding that 34% of the issue and subscribed capital would be transferred in favour of the petitioner. It was also stipulated in this very communication that the respective shareholding