*THE HON’BLE SRI JUSTICE NOOTY RAMAMOHANA RAO +WRIT PETITION NO. 7676 OF 2008 %Dated 13.06.2008 # M/s. Doshion Limited ..... PETITIONER VERSUS $ 1. Hyderabad Metropolitan Water Supply & Sewerage Board, Transmission Circle, S.R.Nagar and others ...RESPONDENTS ! Counsel for Petitioner: Mr. B.VENKATADRI ^ Counsel for Respondents : MS. M.VENKATESWARI < GIST: > HEAD NOTE: ? Cases referred: IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE THIRTEENTH DAY OF JUNE TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO : 7676 of 2008 Between: M/s. Doshion Ltd., Regd. Office : Plot Nos. 24,25 & 26, Phase-II, G.I.D.C. Vatva, Ahmedabad-382 445. ..... PETITIONER AND 1. Hyderabad Metropalitan Water Supply & Sewerage Board, Transmission Circle, S.R.Nagar, Hyd.-500 038. Rep. by its Managing Director. 2. Hyderabad Metropalitan Water Supply & Sewerage Board, Transmission Circle, S.R.Nagar, Hyd.-500 038. Rep. by its Chief General Manager ( Engg.) 3. Mantech Constructions , a Partnership firm, Rep. by its Partner, 3-342/1, 30/A, Lakshmi Nagar, Near VSK High School, Kukatpally, Hyd.-72. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ of order or direction more particularly one in the nature of writ of Mandamus declaring the action of respondents 1 & 2 in awarding the letter of Intent pertaining to bid No.2/CGM(E)/Tr.Cir./Boot/Amr/07-08, dated 14-02-2008 to the respondent No. 3 as illegal, high handed, arbitrary and violative of Art.14 and 19(1)g of Constitution of India, and consequently direct the Respondents 1 & 2 to award the Letter of Intent pertaining to bid No.2/CGM(E)/Tr.Cir./Boot/Amr/07- 08, dated 14-02-2008, to the petitioner. Counsel for the Petitioner:MR.B.VENKATADRI Counsel for the Respondent No.: MS.M.VENKATESWARI The Court made the following : THE HON’BLE SRI JUSTICE NOOTY RAMAMOHANA RAO W.P.NO.7676 OF 2008 ORDER: 1. This writ petition has been instituted seeking a writ of mandamus to declare the action of respondent Nos.1 and 2 in awarding the Letter of Intent pertaining to bid No.2/CGM(E)/ Tr.Cir./BOOT/AMR/07-08, dated 14th February 2008 to respondent No.3 as illegal. A consequential relief is also solicited to direct respondent Nos. 1 and 2 to award the Letter of Intent in favour of the writ petitioner. 2. The case of the writ petitioner company is that it had acquired certain degree of skill and expertise in manufacturing and marketing water management technologies and related services to industrial units within and outside India. Respondent No.2 had floated a tender notice on 14th February 2008, inviting bids on BOOT basis (Build, Own, Operate and Transfer), for Automatic Meter Reading (AMR) of about 149 connections in O&M Division No. VIII, Patancheru for remote meter reading through GSM or RFID technology and acquiring readings into a hand held auto reader seamlessly without using any wire or cable and which can be transferred into a computer/ server. Initially, the last date for submission of the bids was fixed as 14th March 2008 at 03.00 pm., but however, at the pre-bid meeting, which took place on 4th March 2008, it has been decided to extend the date for submission of the bids up to 03.00 p.m. on 24th March 2008. The bidders are required to submit separately two bids; one for technical evaluation and the other, the financial bid in Cover A and Cover B respectively. The mandatory conditions required to be complied with have been spelt out in the bid documents. Important to notice amongst them are the conditions that, the validity period of the bids shall not be for less than 120 days and that the bidder, if he stipulates his own condition or conditions, the bid is liable to be rejected and the bidder is required to quote the total amount in figures as well as in words and that the prices quoted by him shall be firm and no variation shall be allowed on any account. In para 6.1 of the bid documents, instructions have been passed on to the bidders as to the components of their bids. It has been specified that Cover B shall contain Rate per month including service charges, maintenance for 60 months. Para 8.0 has spelt out that the prices quoted shall be firm and no variation shall be allowed on any account and that the bidders shall not quote more than one alternative rate for any item. Bids having more than one alternative rates for the same items are liable to be rejected. Para 15.0 of the bid documents has set out the norms for award of the contract. It has been spelt out that the contract will be awarded to the qualified and responsive bidder offering the lowest evaluated bid or bids in conformity with the specifications. It has been set out as under: “Award of Contract: Notification of Award will be made in writing to the successful bidder. The contract will be awarded to the qualified and responsive bidder offering the lowest evaluated Bid or Bids in conformity with the specifications subject to the provisions of Clause 13. A responsive Bid is one which accepts all the terms and conditions of the Bid documents without any major modifications. A major modification is one which affects in any way the price, quality, quantity or completion of works which limits in any way, any responsibilities or liabilities of the Bided or any rights of the Board, as specified in the Bid documents. The Board may waive any minor informality in a Bid, which does not constitute a major modification. In the event of the Bid being accepted, full amounts of Contract deposits, Legal & Stationary charges must be paid and the Contract must be signed within 28 days after receipt of such intimation of acceptance of offer, by the proprietor/Limited company/all the partners of the firm or the signatory holding a power of Attorney. Postponement of the payment of the full security deposit or the execution of the contract will not be permitted by any reason.” Para 20 has set out the factors, which will be taken into consideration for rejection of the bid and it has been pointed out that if the bidder does not submit the bid as per mandatory conditions, his bid is liable to be rejected. Appendix B of the bid document has indicated the following: Contract Period : 4 months for project implementation period and 60 months for the BOOT period. Free Maintenance :12 months from Period or guarantee the date of Period completion of work 3. The general conditions of the contract have been spelt out in detail in Section III of the bid documents. Special conditions have been spelt out in Section IV. The period of contract/completion has been noted as four months for implementation of the project and five years for BOOT period. Technical specifications have been spelt out in Section V. Para 2 of Section V describes the general scope of work as under: “The work involves Supply, installation and maintenance of water meters of various sizes as per the specifications given by the HMWSSB for a total “post-installation period” of 5 (five) years and for recording of monthly readings of such installed meters in the project area on a Build Own Operate Transfer(BOOT) basis.” 4. It will be relevant to notice at this stage as to the period of contract specified therein, which is as follows: “The contractual period shall consist of an installation period of 4 months, which could be extended by the CGM Transmission circle at the request of the bidder and a subsequent maintenance period of 60 (sixty) months (including monsoon) for maintenance and reading of meters. Thus the total contract period will be 64(sixty four) months. The installation period of first 4(four) months will be for supply; testing and installation of water meters including their necessary maintenance and reading & the remaining 60 months will be for maintenance & recording of monthly readings of such installated water meters. The maintenance and AMR period of 60 (sixty) months shall commence after the complete supply, installation & commissioning of al the water meters. At the end of 64 months the bidder shall leave the installation to the engineers of HMWSSB on an as is where is basis and HMWSSB is at liberty to call for bids for maintenance of the same. The successful bidder of this contract will also be eligible to bid subject to the bid conditions that may be imposed at that point of time.” Para 3.1 thereof dealt with the terms and conditions. Important amongst them are the following: “3.1 For submission of bids The financial bid should indicate separately the maintenance and service fee that the bidder would charge HMWSSB on a monthly basis for 64 months for installing and maintaining the meters and acquiring the readings at a frequency of at least once a week in case of RF and as often as required in case of GSM. i. the rates quoted should be firm for the entire period of supply, installation & maintenance, against the order. Alternate quotes will not be allowed.” Para 3.8 has also spelt out the scope of the work for Automatic Meter Reading to the following effect: “3.8 Scope of work for automatic meter reading: The bidder shall submit a detailed scheme for remote reading of water meters to be installed. The scheme shall be exhaustive & distinctive, elaborating about instruments/gadgets & all other paraphernalia & methodology adopted. It shall be suitable & compatible with any type, size of water meter. It shall be inclusive of design, supply & installation of necessary instrumentation system & all the required staff for recording readings, its maintenance, etc. its software output format shall be compatible with HMWSSB billing system. The bidder shall make arrangement to export or import the data from the HMWSSB database & enable exchange of the customer billing data to and from the HMWSSB database.” Specific instructions to bidder have also been incorporated. Section VI dealt exclusively with the financial bid. Section VI Financial Bid (part 2) Automatic Water Meters for 149 Connections in O&M Div.No. VIII, Patancheru through GSM/RFID Technology on BOOT basis (BOOT period in 60 months) S.No. Item Amount per month (A) (B) (c) 1 O&M of AMR meters and bills disbursement including recovery towards capital cost and maintenance and repairs etc., per month In figures In words (Emphasis is supplied) 5. It is not in dispute that on 27th March 2008, bids have been opened by respondent Nos. 1 and 2 and apart from the petitioner and unofficial respondent No.3, one other firm M/s ICSA (India) Limited has also submitted its bid. All the three firms have been found to be technically qualified to enable their financial bids to be considered. Respondent No.3 has offered its financial bid at the rate of Rs.3,36,000/- per month, while the other firm, M/s ICS (India) Limited has offered Rs.4,31,610-50 Ps. per month. The petitioner had made its offer on an annual basis and on a graded scale for the five years period as under: Rs.4,50,000/- per month for the first year Rs.3,50,000/- per month for the second year Rs.3,00,000/- per month for the third year Rs.2,50,000/- per month for the fourth year Rs.2,41,667/- per month for the fifth year. Respondent Nos. 1 and 2 have evaluated the financial bids of the three bidders and found the offer of respondent No.3 in a sum of Rs.2,01,60,000/- as the lowest and the offer of M/s ICSA(India) Limited in a sum of Rs.2,58,96,600/- as the next lowest. The graded scale offer made by the writ petitioner has been found as non- responsive by respondent Nos. 1 and 2 and consequently, the Letter of Intent has been issued in favour of respondent No.3. It is this decision of respondent Nos. 1 and 2 in treating the financial bid of the writ petitioner as non-responsive that gave rise to the present lis. 6. Sri D. Prakash Reddy, learned Senior Counsel appearing for the writ petitioner has contended that the total amount offered by the writ petitioner, being Rs.1,91,00,004/- is less by Rs. 10 lacs than that of respondent No.3 and respondent Nos. 1 and 2 having committed in para 15 of Section I of the bid documents that the contract would be awarded in favour of the bidder offering the lowest evaluated bid, have, therefore, violated these ground norms and have capriciously allowed the contract in favour of respondent No.3, notwithstanding the offer of respondent No.3 not being the lowest. He has also contended that the decision of respondent Nos. 1 and 2 in treating the financial bid of the writ petitioner as non-responsive is arbitrary and whimsical. Learned Senior Counsel would contend that the bidders are required to submit their offers for a period of 60 months and, therefore, it is not necessary or even essential for the bidder to give its offer/bid in equal amount for all the 60 months. Learned Senior Counsel would expand the contention and submit that the financial bid offered by the writ petitioner for the entire period of contract; namely the five year period if looked at, is less by 10 lacs of rupees than that of respondent No.3 and since both the petitioner as well as respondent No.3 have been found to be technically qualified and since they have complied with all other mandatory requirements, the consideration, therefore, for awarding the contract should have been based wholly upon the financial advantage which respondent Nos. 1 and 2 would ultimately derive. Therefore, the contract should have been awarded in favour of the writ petitioner and thus, respondent Nos. 1 and 2 should have attempted to save a sum of Rs.10,00,000/- to a public institution. He, therefore, contends that the decision of respondent Nos. 1 and 2 to treat the financial bid of the writ petitioner as non-responsive is not only unjust but is also contrary to the larger public interest besides being contrary to the very norms of evaluation and award of contract spelt out in the bid documents. Above all, the decision, in this regard taken by Respondents 1 and 2 is plain and simple arbitrary decision lacking both in fairness and logic. 7. Ms. M. Venkateswari, learned Standing Counsel for Hyderabad Metropolitan Water Supply and Sewerage Board would contend that the bidders are required to offer their bids taking “month” as the unit for the purpose of calculation, whereas the petitioner has taken the year as the unit and it has also adopted a non- uniform and a graded scale for his financial offer. According to the learned Standing Counsel, within the first two years, the writ petitioner has offered to retrieve more than 50% of the total contract value, whereas the Board had only intended to pay at the rate of 20% per year and thus accomplish 100% payment over the entire contracted period of 60 months. Hence, according to the learned Standing Counsel, the offer made by the writ petitioner has been considered and rightly decided as non-responsive. Learned Standing Counsel, would further submit that the rate that is required to be quoted by the bidders in their financial bid is “ on per month and not on per year basis”. Learned Standing Counsel would submit that while the Board intended an even distribution of the money payable by it before the ultimate transfer of the entire equipment installed by the bidder at the end of the five year contract period, instead the writ petitioner had resorted to a graded scale, as a result of which within the first two years itself, the Board is required to pay more than 50% of the contracted value, whereas the Board, expected only to pay 40% of the contracted value at the end of the second year of the period of contract, if a uniform measure is adopted. Learned Standing Counsel would further submit that the terms and conditions of the financial bids are understood in the trade circles as an offer to be made on a uniform basis and in the instant case, the unit for such offers has been specified as “per month” and hence, any other mode and method adopted by the petitioner is liable to be treated and construed as conditional offer and consequently, the decision taken by respondent Nos. 1 and 2 to treat the same as non- responsive cannot be faulted. 8. Sri D. Hanumantha Rao, learned counsel appearing for respondent No.3 would contend that the attempt on the part of the writ petitioner in making known its financial bid on a graded scale is very plain and simple exercise to retrieve substantial portion of the value of the contract right at the very initial stages of its currency and consequently, he intended to derive a greater advantage by adopting a circuitous method of graded scale offer. According to the learned counsel, during the very first year of the currency of the contract period, the writ petitioner has attempted to retrieve as much as Rs.54,00,000/- and thus he attempted to retrieve more than Rs.14,00,000/- than the offer made by respondent No.3 herein and this additional amount of Rs.14 lacs can be put to very effective redeployment, which would fetch him greater financial returns/advantage, though the cumulative total of the offer made by it might appear to be less by Rs.10 lacs than the offer made by respondent No.3. This hidden component of financial return, in fact makes him richer then the 3rd respondent. He, therefore, contends that the evaluation of the financial bid of the writ petitioner and the decision arrived at by respondent Nos.1 and 2 to treat it as non- responsive is a thoroughly justifiable one, which does not warrant any interference at the hands of this Court. 9. I have given my anxious consideration to the rival submissions. The general scope of the work for which the bids are called for by respondent Nos. 1 and 2 is on BOOT basis (Build, Own, Operate and Transfer). Therefore, the bidder must own the entire equipment and also install it at the very initial stage. He had to accomplish this project in four months period. There afterwards, for a period of 12 months, he has to operate and maintain the same to the satisfaction of respondent Nos. 1 and 2. This initial period of the 1st year of the contract period of 5 years is called “Guarantee period”. The project completion period is prescribed as four months, followed by a 60 month period of operation and maintenance of the equipment. It is, therefore, crystal clear that the bidder has to first own the equipment and build it by way of execution of the project. He had to operate the equipment and maintain the same before eventually transferring all its rights in favour of respondent Nos. 1 and 2 after the 60 month period. Though the contention canvassed by Sri D. Prakash Reddy, at first blush, appeared to be very attractive, but however, upon deeper consideration, it becomes clear that the bidders are required to give their offer “per month” as per Section VI of the bid documents, which dealt with the financial bid for the BOOT period of 60 months. Section VI Financial bid (part 2) clearly indicated the value to be quoted for recovery of capital cost and maintenance and repairs per month. The bidders are required to quote the “Amount per month”. Therefore, the bidders are required to quote their recovery of the value per month basis. In other words, the bidders were called upon to give their offers “per month” for all the 60 months period of the maintenance period and not in any other fashion. In fact, with a view to provide an opportunity to the participants to solicit clarifications on any aspect of the matter, pre-bid meetings are convened. The writ petitioner has participated at the pre-bid meeting that took place on 7th March 2008 in the chambers of the Director (Technical) of the 1st respondent Board, but however, he has not solicited any such clarifications with regard to the terms specified in Section VI of the bid documents which dealt with the component of the financial bid. It has been amply made clear at para 6.1 of the bid documents, specifically pointing out that Cover B shall contain rate per month including service charges, maintenance for 60 months (emphasis supplied by me). It is obvious that, respondent Nos. 1 and 2 were looking for a firm price per month for all the 60 months period of the currency of the contract. They were not looking for quotations on an annual basis much less on any graded scale basis. 10. It is no doubt true that Sri D. Prakash Reddy, learned Senior Counsel is right in pointing out that the offer made by the writ petitioner is equally firm and that there are no variable components incorporated by it in its financial bid, but however, the offer made by the writ petitioner is on a graded scale and hence, it is not equitably distributed for the entire 60 month period of the contract. Learned senior counsel tried to justify the offer made by the writ petitioner as being in conformity with the requirements spelt out in the bid documents, by pointing out that the five year period for which the offer was made by the petitioner is in reality covers the entire 60 months period and hence, the offer is liable to be construed as for the entire 60 months period and it is a firm offer and hence, the decision to treat the offer of the petitioner as non-responsive is arbitrary. Let us pause here for a moment and consider the following illustration. The total offer of the petitioner was to the order of Rs.1,91,00,000/- as compared to Rs.2,01,60,00/- of respondent No.3. Out of Rs.1,91,00,000/-, if the petitioner has proposed to retrieve a sum of Rs.1,32,00,000/- during the very first month itself while for the balance 59 months, if it had proposed to recover a sum of Rs.1,00,000/-, thus totalling to Rs.1,91,00,000/-, would such an offer – an equally firm one without any variables - be still liable to be considered as responsive? The answer could be a plain “no”. In ordinary circumstances, a sum of Rs.1,00,000/- per month could not have been easily brushed aside as it is a substantial amount, but however, in the context of a 60 month period, any offer to recover Rs.1,32,00,000/- in the first month and the balance 59 lacs spread over the next 59 months is clearly liable to be construed as an attempt to recover the substantial value of the contract at the very initial stage itself. In principle, there is no distinction between the offer made by the petitioner and the offer set out in the above illustration. Therefore, the attempt of the writ petitioner to retrieve Rs.54 lacs during the first year and Rs.42 lacs during the second year and Rs.36 lacs during the third year of the currency of the contract and so on is clearly an attempt to retrieve highest return of the capital investment at the earliest. The learned Senior Counsel, when confronted with the situation, tried to explain it by pointing out that the expenditure, which is liable to be incurred by the bidders, during the first year, is bound to be more and during the subsequent years, the expenditure is bound to get substantially reduced as the equipment is only needed to be maintained and operated. This contention, perhaps, ignores the general scope of the work itself. Every bidder is required to accomplish the entire project within the first four months period after the award of the contract. There afterwards, operationalising and maintaining the equipment does arise. Therefore, all the bidders, uniformly and without any exception are required to make their capital investment during the first four months period after the award of the contract itself, but however, the bid documents, as noticed supra, required them to make their offer