1 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.432 OF 2005 WITH WRIT PETITION NO.457 OF 2005 W.P.NO.432 OF 2005 M/s.Promuk Hoffman International Ltd., ) a Public Limited Company incorporated ) under the provisions of the Companies Act, ) 1956 (Act 1 of 1956 ), having its registered ) office at 284, Swapnalok Complex, ) 92, S.D.Road, Secunderabad 500 003 ) represented herein by its Authorised ) Signatory Shri C.S. Nagraj, aged 47 years, ) residing at Hyderabad, Andhra Pradesh. ).. Petitioner Vs. 1. State of Goa, through its ) Chief Secretary, having Office ) at Secretariat, Porvorim, ) Bardez-Goa. ) 2. The Director of Transport, ) Directorate of Transport, ) Government of Goa, Junta House, ) Panaji-Goa. ) 3. M/s.Shimnit Utsch India Pvt.Ltd., ) a Private Company incorporated ) under the provisions of the Companies ) Act, 1956, having its Registered ) Office at 8th Floor, Regent Chambers, ) Nariman Point, Mumbai – 400 021. ).. Respondents -- S/Shri S.R.Kakodkar, Senior Advocate with S.Ravi and M.S.Sonak, Advocates for the petitioner. 2 Shri S.S.Kantak, Advocate General with Ms R.Chodankar, Addilitional Government Advocate for respondent Nos.1 and 2. Shri Sunil Manohar with Ms U.Dahanukar, Shri Saket Singh, Ms Neha Bhide, Shri D. Lawande and Shri Amey Kakodkar, Advocates i/b Kaitan & Jayakar for respondent No.3. W.P.NO.457 OF 2005. M/s.Hind Industries Ltd., ) a public limited company incorporated ) under the Companies Act, having its ) Registered Office at A-1, Phase-I, ) Okhla Industrial Area, New Delhi 110 020, ) represented herein by its Managing Director, ) Shri Sirajuddin Qureshi, residing at 69, ) Siddharth Enclave, New Delhi 110 014. ).. Petitioner Vs. 1. State of Goa, through its ) Chief Secretary, having Office ) at Secretariat, Porvorim, ) Bardez-Goa. ) 2. The Director of Transport, ) Directorate of Transport, ) Junta House, 18th June Road, ) Panaji-Goa. ) 3. M/s.Shimnit Utsch India Ltd., ) a Company registered under the ) Companies Act, 1956, and having its ) Registered Address at 8th Floor, ) Regent Chambers, Nariman Point, ) Mumbai – 400 021. ) 3 4. M/s.Real Mazon India Ltd., ) a Company incorporated under the ) Indian Companies Act, having its ) office at 34 Rama Road, ) New Delhi 110 015. ) 5. M/s.Tonnjes Eastman Securities ) Pvt.Ltd., a company incorporated ) under the India Companies Act, 1956, ) having its Registered Address at ) C-117, Sarita Vihar, ) New Delhi – 110 076. ).. Respondents -- S/Shri S.G.Dessai, Senior Advocate with V.R.Tamba, Advocate for the petitioner. Shri S.S.Kantak, Advocate General with Ms R.Chodankar, Addilitional Government Advocate for respondent Nos.1 and 2. Shri Sunil Manohar with Ms U.Dahanukar, Shri Saket Singh, Ms Neha Bhide, Shri D. Lawande and Shri Amey Kakodkar, Advocates i/b Kaitan & Jayakar for respondent No.3. -- CORAM : R.M.S.KHANDEPARKAR & N.A.BRITTO, JJ DATED : 14TH FEBRUARY, 2006. JUDGMENT : ( PER R.M.S.KHANDEPARKAR, J ) 1. Since the common questions of law and facts arise in both these petitions, they were heard together and are being disposed of by this common judgment. We have heard at length S/Shri S.K. Kakodkar and S.G. Dessai, Senior Advocates for the respective 4 petitioners and Shri S.S. Kantak, Advocate General for the respondent Nos.1 and 2 and S.V. Manohar, Advocate for the respondent No.3. 2. In both these petitions, the petitioners challenge the rejection of their bids at the pre-qualification stage. The bids were submitted by the petitioners in answer to the notices issued by the 1st respondent inviting tenders from eligible manufacturers for supply of high security registration plates for all types of vehicles in the State of Goa. The petitioners' tenders have been rejected on the ground that the same were not substantially responsive in terms of the tender documents. 3. Writ Petition No.432 of 2005 is by Promuk Hoffman International Limited, a public limited company incorporated in pursuance of and in culmination of a joint venture agreement drawn between Promuk Associates and M/s.EHA Hoffman KG, a German Company, for the purpose of manufacture and supply of high security car licence plates among some other products. M/s. EHA Hoffman KG, a German Company is stated to be pioneer in manufacture of high security vehicle registration plates, electronic vehicle systems etc. and is operating in more than 30 countries worldwide in the said field. The petitioners in this petition is hereinafter called as “the 5 Promuk Hoffman”. 4. Writ Petition No.457 of 2005 is by M/s.Hind Industries, a public limited company stated to have been involved in the manufacture of high security registration plates. The said public limited company has entered into a joint venture agreement dated 3rd February, 2005 with M/s.Muschard Technikvertrieb – Germany and Wilhelm Grewe OHG- Germany. Both the German Companies are stated to have expertise in manufacture of high security vehicle registration plates and is in joint venture business of manufacturing, supplying and exporting various products and is operating worldwide. The petitioner in this petition is hereinafter called as “Hind Industries”. 5. Sometimes, in the third week of September, 2005, the respondent No.1 issued notice inviting tenders from eligible manufacturers to produce high security registration plates for all types of vehicles in the State of Goa and the bidders were required to submit their bids in three parts i.e. in three envelopes. The First envelope to contain pre-qualification details and the documents, the second to contain technical bids and the third to contain financial bid. In all, five bidders including the petitioners submitted their 6 respective tenders in three envelopes within the time specified in the said notice. 6. On 18th October, 2005, the pre-qualification bids submitted by all the five tenderers were opened in presence of the representatives of the bidders. After opening the bids, they were circulated amongst the representatives of all the bidders present on the occasion and their comments thereon were invited. After receipt of the comments from the petitioners in relations to the bids submitted by others, the Committee which was constituted on 12th August, 2005 to oversee the tender process and analyse the bids, in its meeting held on 21st and 25th October, 2005, after taking note of various points in respect of the tenders submitted by each of the five bidders and after evaluating them, decided to disqualify the petitioners herein. Pursuant to the said decision, the respondent No.2 under a letter dated 3rd November, 2005 informed the petitioners that the Committee on high security registration plates, after having evaluated the pre-qualification bids of the petitioners, had decided to reject their bids as not being substantially responsive in terms of tender document. 7. While it is the case of the Promuk Hoffman that it had 7 orally demanded to know the reasons for its disqualification, the Hind Industries did address a letter dated 10th November, 2005 requesting the respondents to divulge the precise reasons for which its bid was rejected. The respondent No.2 under its letter dated 14th November, 2005 addressed to the Hind Industries informed that its bid was rejected on three grounds as were described in the said letter. 8. Being dissatisfied with the decision of rejection of their bids at the pre-qualification stage, both the petitioners have filed the present petitions. Various grounds were canvassed across the bar for assailing the said decision, and the reported decisions are also sought to be relied upon in support of the contentions. We shall deal with those contentions and refer to those decisions in the course of this judgment. 9. The law on the point of scope of judicial review in tender matters is well settled. The Apex Court in the matter of Air India Ltd. v. Cochin International Airport Ltd. & Ors., reported in (2000)2 SCC 617, after taking note of the fact that the law relating to the award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government had been settled by 8 the decision of the Apex Court in Ramana Dayaram Shetty v. International Airport Authority of India, [(1979) 3 SCC 489], Fertilizer Corporation Kamgar Union (Regd.) v. Union of India, [(1981)1 SCC 568], CCE v. Dunlop India Ltd., [(1985) 1 SCC 260], Tata Cellular v. Union of India, [(1994) 6 SCC 651], Ramniklal N.Bhutta v. State of Maharashtra, [(1997) 1 SCC 134], and Raunaq International Ltd. v. I.V.R.Construction Ltd., [(1999) 1 SCC 492], held that :- “.................... the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. 9 The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.“ ( Emphasis supplied ) 10. While dealing with the subject of judicial review of a decision of public authority, the Apex Court taking note of the Wednesbury's principles of reasonableness, as was propounded in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, reported in 1947(2) All England Law Reports 680, it was held as under: - “(1) It is open to the court to review the decision- maker's evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. 10 (2) A decision would be regarded as unreasonable if it is partial and unequal in its operation as between different classes.” Precisely, therefore, the challenge to the decision of rejecting bids of the petitioners at the pre-qualification stage has to be considered without ignoring the above mentioned limitations. In other words, what is essentially to be considered in both the petitions is whether the rejection of bids by the respondents on the ground that their bids are not substantially responsive in terms of tender document can be regarded as arbitrary and unreasonable. Undoubtedly, the point will have to be answered taking into consideration the various contentions sought to be raised in the matter. 11. Considering the subject matter of tender in the case in hand, it is necessary, at the outset, to take note of the decision of the Apex Court in the matter of Association of Registration Plates v. Union of India & Ors., reported in (2005) 1 SCC 679, which was relating to a dispute concerning the terms and conditions of the notices inviting tenders for supply of high security registration plates for motor vehicles issued by various State Governments on the basis 11 of the guidelines circulated by Central Government for implementing the provisions of the Motor Vehicles Act, 1988 and Central Motor Vehicles Rules, 1989. The main grievance of the petitioner therein was that all the notices inviting tenders which were issued by various State Governments contained conditions were tailored to favour companies having foreign collaboration and that the same was to encourage creation of monopoly in favour of a few parties having connection with foreign concerns. While rejecting various contentions sought to be raised in that regard, the Apex Court had observed that the object of the new scheme is to curb the increasing menace of vehicle thefts and their usage in commission of crimes like murder, dacoity, kidnapping, etc., and the Central Government on the recommendations of its Technical Committee had devised a system of high security registration plates which will ensure public safety and security. Inter alia, it was also observed that the insistence of the State to search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. While taking note of the fact that it was not controverted that the technical “know-how” for the manufacture of high security registration plates presently is available outside India and that technically and financially, competent indigenous manufacturers are mostly those who are in collaborations with foreign companies engaged in such manufacturing activities, it 12 was observed that “keeping in view the nature of the contract and job involved, particularly its magnitude and the huge investment for infrastructure required, attempt to select such manufacturer – maybe having collaboration with foreign companies and experience in foreign countries – cannot be held to be a deliberate attempt on the part of the State authorities to eliminate indigenous manufacturers.” The contention regarding creation of monopoly was also rejected holding that selecting one manufacturer through a process of open competition is not creation of any monopoly. It was also held that certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. 12. As regards the Promuk Hoffman's case is concerned, the rejection of its bid has been on two grounds. Firstly that the petitioner did not disclose the required information regarding the partnership with foreign company for the manufacture of high security licence plates with necessary details and clarity as also the documents submitted along with the tender did not contain any legal document regarding financial commitment by UTL to the petitioners, besides that the role of UTL in manufacture and supply of the product was not disclosed. Secondly, annexures and certificates regarding 13 work experience in security features are not as per the requirement of tender documents. 13. As regards the Hind Industries, their disqualification was firstly because though the Hind Industries claims to have a joint venture between Hind Industries, M/s. Muschard Dechnikvertrieb- Germany and M/s. Wilhelm Grewe OHG- Germany, there is also a fourth party by name Saigal Tubest. There is collaboration between Hind Industries termed as “Joint Venture-I” and Saigal Tubest termed as “Joint Venture-II” to enable the former to set up a unit to manufacture security number plates and therefore the tender enclosures submitted by the petitioner disclosed joint venture of four parties which is contrary to the tender conditions. Secondly, the bank solvency certificate which was enclosed by Hind Industries was addressed to Transport Commissioner of Rajasthan and not to the respondent No.2. Thirdly, in respect of security features experience, they were all self-attested and supplied by private agencies and did not satisfy the mandatory requirement of tender conditions. 14. The decision to reject the bids of the petitioners was followed by a letter dated 3rd November, 2005 whereby the petitioners were informed about the same as under :- 14 “No.D.Tpt/EST/1493/2002(Part)/2005/2049 Government of Goa, Director of Transport, Panaji – Goa. Dated : 3rd November, 2005. To, Promuk Haffman International Ltd., 204, Swapnalok Complex, 92, S.D.Road, Secunderabad – 500 003. Fax No.(040)55325521, 23327983 Sub: Bid for High Security Registration Plates. Sir/Madam, This is with reference to your bid for High Security Registration Plates submitted on 18/10/2005. In this regard, I am directed to inform you that the Committee on High Security Plates, after having evaluated your pre-qualification bid had decided to reject the bid as not being substantially responsive in terms of the tender document. Consequently, your EMD alongwith the Envelope No.2 and 3 are unopened and are returned herewith. Yours faithfully, Sd/- (R.Mihir Vardhan) Director of Transport Encl: as above.” 15 15. The first ground of challenge is that communication regarding the rejection of the bid did not disclose reasons for rejection, and therefore, it violates the principles of natural justice and fair play which are necessary concomitants under Article 14 of the Constitution, and therefore, the impugned communication under letter dated 3rd November, 2005 is bad in law. 16. It is not in dispute that consequent to the decision to reject the bid, it was informed to the petitioners under the letters dated 3rd November, 2005. The contents of both the letters were same and the same disclose that the bids were rejected for not being substantially responsive in terms of tender conditions. However, according to the petitioners, it does not amount to communication of the reasons for rejection and in that regard, heavy reliance was placed in the decision of the Apex Court in the matter of M/s. Star Enterprises and Ors. v. City and Industrial Development Corporation of Maharashtra Ltd & Ors., reported in 1990(3) SCC 280 on behalf of the petitioners. 17. It is not in dispute that, as far as Hind Industries is concerned, it had specifically inquired about the details relating to 16 the reasons for rejection and they were duly supplied with the same. As far as Promuk Hoffman is concerned, apart from mere oral contention that they had orally asked for the reasons in detail, there is nothing on record to substantiate that contention. The fact that the letter dated 3rd November, 2005 did disclose that the rejection of bid was on account of the same being not substantially responsive in terms of the tender document is not in dispute. Obviously, therefore, it cannot be said that the letters dated 3rd November, 2005 did not disclose any reason for rejection of the bid. In fact, it did disclose the reason for rejection of the bid to be that the bids submitted by the petitioners were not substantially responsive in terms of tender document. In case, the petitioners wanted to know the details about the decision of the Committee in that regard, certainly nothing prevented the Promuk Hoffman to inquire about the same, as was asked for by the Hind Industries. It is pertinent to note that such details were immediately furnished to the Hind Industries when they were asked for. The reason disclosed in the letter dated 3rd November, 2005 is strictly in consonance with the decision of the Committee as is revealed from the resolution of the said Committee in relation to its meeting held on 21st and 25th October, 2005. The discussion regarding deficiency in the tender documents submitted by the petitioners revealed from the recitals of the resolution of the 17 said Committee and further the resolution itself clearly reveals that rejection was on the ground that the bids submitted by the petitioners were not in compliance with the essential terms and conditions of the tender document. Apparently, therefore, by no stretch of imagination, it can be said that the decision on the point of rejection was not available on record prior to issuance of letter dated 3rd November, 2005. There is nothing on record which could even remotely suggest that the said decision was not available on record prior to communication dated 3rd November, 2005. 18. The decision of the Apex Court in Star Enterprises' case (supra) on the point of requirement of reasons and communication thereof to the concerned parties, was in a matter where a party had sought to challenge the rejection of its highest offer, without assigning any reason on the ground the same being arbitrary, unconstitutional and contrary to the rule of law. In the said case, it was not in dispute that the scheme provided that the authority had reserved the right to amend, revoke or modify the scheme at its discretion as well as to reject any or all offers of allotment without assigning any reason. The question which the Apex Court had occasion to consider in the said case was that whether when the highest offer in response to an invitation is rejected, would not the 18 public authority be required to provide reasons for such action ? While answering the said question, the Apex Court held that “as the State has descended into the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social audit, judicial control and review by opening of the public gaze; have necessitated recording of reasons for executive actions including cases of rejection of highest offers. That very often involves large stakes and availability of reasons for actions on the record assures credibility to the action; disciplines public conduct and improves the culture of accountability. Looking for reasons in support of such action provides as opportunity for an objective review in appropriate cases both by the administrative superior and by the judicial process.” Having observed so, the Apex Court in the facts of the case before it, ruled that “when the highest offers of the type in question are rejected, reasons sufficient to indicate the stand of the appropriate authority should be made available and ordinarily the same should be communicated to the concerned parties unless there be any specific justification not to do so.” Laying stress on the expression “unless there be any specific justification not to do so”, it was sought to be contended on behalf of the petitioners that when the authority does not communicate the reasons to the concerned party and when the matter is challenged in 19 the Court, it is necessary for the authority to disclose the specific justification for non-communication of the reasons. The respondents in the matters in hand having not disclosed any specific justification, according to the petitioners, the communication dated 3rd November, 2005 is bad in law and discloses arbitrary exercise of power in the course of the decision by the respondents. 19. The ruling by the Apex Court regarding the need for specific justification for non-communication of the reason was in a case where “when the highest offers are rejected” and not in each and every case. Undoubtedly, the ruling clearly specifies that the reasons sufficient to indicate the stand of the appropriate authority should be available on record and the same must be found recorded in the records prior to or at the time of the communication about the decision to the concerned party. Being so, in case where the decision apparently discloses that even highest offer has been rejected or similar such situation occurs, certainly necessity for communication of the reasons for the decision cannot be undermined. However, even in such cases, the authority is not invariably obliged to communicate the reasons and more particularly when there is any specific justification not to do so. In the case in hand, it is not the case of the petitioners that there was any such unusual circumstance 20 or occasion like refusal of highest offer or the like nature, nor it is the case of the petitioners that even when they requested for disclosure of the reasons, the same were withheld by the authority. On the contrary, there was prompt response to the letter by the Hind Industries inquiring about details of reasons, and that itself discloses that the reasons were very much available on record prior to the communication letter dated 3rd November, 2005. Mere non communication of all those reasons in detail in the facts and circumstances of the case therefore cannot be found fault with. The decision in M/s. Star Enterprises' case (supra) is clearly distinguishable and is of no help to the petitioners in the case in hand. The first ground of challenge therefore fails. 20. The second ground of challenge is that the procedure followed for disqualifying the petitioners and communicated under letter dated 3rd November, 2005 is de hors the terms of tender document in as much as that as per the clause 2.17.1, it is Director of Transport i.e. Respondent No.2, who could disqualify the bidder on the basis of evaluation of the information contained in the envelope No.1. However, the impugned communication discloses that a Committee on high security had evaluated and had resolved to reject the bids which is de hors the terms of the bid document, and 21 therefore, illegal.