IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER THURSDAY, THE 4TH DECEMBER 2008 /13TH AGRAHAYANA, 1930 W.A.No.1460 of 2008 --------------------------------------- AGAINST THE JUDGEMENT IN W.P.(C).NO.15570/2008, DATED 3.7.2008 .................... APPELLANT/ PETITIONER:- ---------------------------------------- M/S. ZOOM DEVELOPERS PVT. LTD., 5TH FLOOR, “C” BLOCK, DEVCHAND HOUSE, SHIVSAGAR ESTATE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400 018, REPRESENTED BY ITS VICE PRESIDENT MR. MINOO PARDIWALLA. BY SR. ADV. SRI. M.K. DAMODARAN, ADV. SRI. SANTHOSH MAHEW, & ADV. SRI. SATHISH NINAN. RESPONDENTS/ RESPONDENTS:- ---------------------------------------------------- 1. STATE OF KERALA, REPRESENTED BY SECRETARY TO GOVERNMENT, PORTS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. VIZHINJAM INTERNATIONAL SEA PORT LTD., 115, 3RD FLOOR, TRANS TOWERS, VAZHUTHACAUD, THIRUVANANTHAPURAM - 695 014, REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER. 3. IL & FS INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED, 1ST FLOOR, AUM PLAZA, #76, 3RD CROSS, NEAR HOTEL BALLAL RESIDENCY, RESIDENCY ROAD, BANGALORE - 560 025, REPRESENTED BY ITS SENIOR VICE PRESIDENT, SAIBEL K. DE. - 2- W.A.No.1460 of 2008 4. LANCO KONDAPALLI POWER PVT. LTD., LANCO HOUSE, 141 AVENUE, 8 BANJARA HILLS, HYDERABAD, ANDHRA PRADESH, REPRESENTED BY ITS MANAGING DIRECTOR. 5. PORTIA MANAGEMENT SERVICES LTD., MARITIME CENTRE, PORT OF LIVERPOOL, L - 21, ILA, U.K., REPRESENTED BY ITS POWER OF ATTORNEY HOLDER, MINOO PARDIWALLA. R1 BY ADVOCATE GENERAL SRI. C.P. SUDHAKARA PRASAD I/B SENIOR GOVT. PLEADER SRI. T.B. HOOD. R2 BY ADV. SRI. GOPALAKRISHNA KURUP. R3 BY SR. ADV. SRI. V. CHITAMBARESH & ADV. SRI. JACOB SEBASTIAN. R4 BY SR. ADV. SRI. RAJEEV NAYYAR & ADV. SRI. PAUL ABRAHAM VAKKANAL. R5 BY ADV. SRI. GILBERT GEORGE CORREYA. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 14.11.2008, THE COURT ON 04.12.2008 DELIVERED THE FOLLOWING:- H.L. DATTU, C.J. & A.K. BASHEER, J. ..................................... WA No.1460 of 2008 .................................... Dated this, the 4th day of December, 2008 JUDGMENT H.L. DATTU, C.J. The primary question involved in this Writ Appeal is whether the respondents action in rejecting the tender document submitted by the Appellant for construction of the International Deepwater Seaport and Container Transshipment terminal at Vizhinjam, Kerala' is justified or not? 2. The appellant had approached this Court in Writ Petition (C) No. 15570 of 2008. The learned single judge vide judgment dated 03.7.2008 has dismissed the writ petition. That judgment is under challenge in this appeal. 3. RELEVANT FACTS:- To appreciate the contentions raised in this proceedings, it is appropriate to set out the facts as stated in the memorandum of Writ Petition, counter affidavits and other documents submitted before the Court. 4. Pleadings in the memorandum of Writ Petition:- The averments in the memorandum of Writ Petition is that as per Exhibit P1, the 2nd respondent on behalf of the 1st respondent, invited 'Request for Proposal' (RFP) to develop a 'Deepwater Seaport and Container WA No.1460/08 2 Transshipment Terminal at Vizhinjam, Kerala' (the Project). Qualification Criteria for prospective bidders is submitted as Exhibit P2. Date for submission of bid was fixed as 31.01.2008 by Exhibit P3. The RFP issued to the petitioner is produced as Exhibit P4, wherein the details of the project and procedure for bidding are detailed. The RFP submitted by the petitioner's consortium is produced as Exhibit P5, wherein it is stated that said Consortium's lead member is Zoom Developers, and its members are Portia Management Services and Peter Frankel and Partners. Exhibit P6 is the statement of qualification submitted by the petitioner and Exhibit P7 is its technical proposal. Including the petitioner, five Consortium submitted RFP before the due date and time. Lead members of the other Consortium are:- 1. Apollo Enterprises Ltd., Isle of Man, UK 2. Nagarjuna Construction Co. Ltd, Hydrabad, India 3. Videocon Industries Ltd. Mumbai, India and 4. Lanco Kondapalli Power Pvt. Ltd., Hydrabad, India. 5. The 3rd respondent - Advisor to Respondents 1 and 2, on 3.3.2008 issued Exhibit P9 letter to the petitioner with reference to the bid, inter alia pointing out, that, i. The power of attorney for nomination of Lead Members needs to be stamped in accordance with law; ii. In the Consortium Agreement, the signatures of Mr. Peter Martin of Peter WA No.1460/08 3 Frankel and Partners and Mr. Minoo Pardiwala of Zoom Developers have not been notarized; iii. The Consortium Agreement needs to be stamped in accordance with law; iv. It needs to be mentioned more expressly in the consortium Agreement that the Lead Member shall hold a minimum equity of 26% in the SPC; v. Portia Management Services has singed Consortium Agreement on behalf of Peel Ports Limited, but Peel Ports Limited is not a Member of Consortium; vi. Necessary documentations from the various consortium Members authorizing the signatories of the different documents have not been submitted along with the Bid. Petitioner was also requested therein to submit the Annual Reports of all the three parties of the consortium ie; of Zoom Developers, Portia Management Services (its own) and Peter Frankel & Partners. They are further requested therein to collect the original documents for taking necessary action to meet the above requirements and also requested to resubmit the necessary documents with ten days. 6. The petitioner, vide Exhibit P10, sought extension of time till 24.03.2008 for complying with Exhibit P9 and also sought time to execute a 'fresh agreement'. WA No.1460/08 4 7. The petitioner vide Exhibits P11, P12, P12(a), P12(b), P13 and P14, responded to 3rd respondent with reference to Exhibit P9 and furnished some details / documents. As evident from Exhibit P15, the 3rd respondent again asked the petitioner to get the old Power of Attorney and the Consortium Agreement stamped in accordance with law. To comply this, they sought time till 04.04.2008. Vide Exhibit P16 and vide Exhibit P17, time was granted as a last chance. Petitioner swiftly acted in terms with Exhibit P15 as evident from Exhibits P18, P19, P20 and P21. Further correspondence were there between petitioner and 3rd respondent as per Exhibits P 22 and P23. It is averred that on 15.05.2008, the petitioner from Exhibit P24 news paper item learnt that the respondents have selected the 4th respondent as the 'successful bidder'. Thereafter, when they contacted the Minister for Ports, it is asserted that they were informed, that, the bid of petitioner was not considered for the reason that they “changed Consortium Partners”. It is further averred that the financial bid submitted by the petitioner was more competitive and that the action of respondents 1 to 3 are illegal and arbitrary. 8. In the Writ Petition filed, petitioner had sought for a declaration, to declare that the stand taken by the respondents treating the proposal submitted by the petitioner's consortium as non responsive is arbitrary and illegal and violation of Article 14 and 19(1)(g) of the Constitution of India and to direct the respondents to open the technical bid and financial bid WA No.1460/08 5 submitted by the petitioner and to award the tender for the consortium which has submitted the most competitive bid. 9. When the Writ Petition came up for consideration on 03.6.2008, the learned single judge had directed the State Government 'to place on record the report of the High Level Committee and the 3rd respondent was directed to place on record its evaluation report regarding the petitioner's bid'. These directions were complied with and the necessary documents were produced before the Court. 10. Pleadings in the counter affidavit filed by 2 nd respondent : In the counter affidavit filed, it is stated, that, in response to Exhibit R2(a), 33 firms had obtained the RFP documents and out of them only 5 firms submitted the RFP. It is stated that the Bidders were required to submit their proposals in four covers. The outer cover shall contain covering letter, details of bidder, power of attorney for lead member of consortium, consortium agreement entered among the members of the consortium, legal opinion that the consortium agreement is valid, current litigation status, proposal security of Rs. 50 million in the form of Bank guarantee and the amendments sought to draft license agreement, if any. Cover 1 is the 'Statement of Qualification', Cover 2 is the 'Technical Proposal' and Cover 3, the 'Financial Proposal'. It is further stated that the evaluation was done in three stages - 1st Stage is evaluation of Outer Cover and Cover 1 to check the responsiveness of bids and WA No.1460/08 6 evaluation of qualifications vis.a.vis the stipulated qualification criteria. 2nd Stage is evaluation of the technical proposal of only those bidders who meet the 'qualification criteria' and 3rd Stage is evaluation of the Financial Proposal of Technically qualified bidders who score minimum 70 points out of 100 points in the technical evaluation. As stated above, only five bids were received. These bids (Outer Envelope and Envelope 1) were opened on 31.01.2008 at 17.00 hours by the Bid Opening Committee constituted vide GO. (Rt) 49/08/F&PD dated 23.01.2008 in the presence of bidders' representatives. All the five bidders have submitted valid Proposal Security of Rs.50.00 million in form of Bank guarantees, Consortium Agreements and other documents as per the RFP and found the said firms are prima facie qualified. Minutes of the Bid Opening Committee is produced as Ext.R2 (b). The bids were accepted for further scrutiny. The Bid Evaluation Committee (“EC” for short) constituted as per GO (Rt) 112/08/F&PD dated 19.02.2008, met on 25.02.2008, 13.03.2008, 08.04.2008, 06.05.2008, 07.05.2008 and on 14.05.2008. 11. The bids submitted by all the bidders were considered at the meeting of EC dated 25.02.2008 and in its R2(d) minutes, it is observed with regard to the petitioner's bid, that, i. Power of Attorney Agreement needs to be stamped in accordance with law; ii. The Consortium Agreement needs to be stamped in accordance with law; WA No.1460/08 7 iii. It has not been expressly mentioned in the consortium agreement that the Lead member shall hold a minimum equity of 26% in the SPC as per the requirements of the RFP; iv. Portia Management Services has signed Consortium Agreement on behalf of Peel Ports Ltd but Peel Ports Ltd is not a member of the Consortium. 12. A copy of the points considered in respect of the petitioner is submitted as Exhibit R2(c) wherein it is inter alia noted that, i. Power of Attorney submitted by the petitioner has not been executed on stamp paper; ii. Consortium agreement is not submitted on stamp paper and iii. the petitioner sought two amendments to the draft license agreement. In the said meeting, additional information regarding Annual Reports were sought and also found that the financial statement of lead member was not submitted. Ten days time was granted to the petitioner for submission of details. It is stated that the petitioner sought extension of time till 24.03.2008 and then to 04.04.2008 for furnishing clarification. Since the bidding process was getting delayed, an ultimatum was issued to the petitioner on 27.03.2008 cautioning them to complete the formalities before 04.04.2008. 13. In the EC meeting held on 08.04.2008, petitioner's documents were evaluated and the 3rd respondent submitted its observations along with a note requesting to obtain consideration of law department on the WA No.1460/08 8 following aspects:- 1. Original Consortium Agreement is submitted without notary attestation for the signatures of Mr. Peter Martin of M/s Peter Frankel and Partners and Mr. Minoo Pardiwala of M/s Zoom Developers; 2. Consortium Agreement was not stamped in India; 3. Consortium Agreement contain anomalies such as -- i. not mentioned expressly that Lead Member shall hold a minimum equity of 26% in the SPC (instead of in the consortium). The amendment to RFP for minimum equity stake of the Lead Member to be 26% in the SPC instead of 26% in the consortium in the SPC was issued in 01.01.2008 while the consortium agreement was entered in October 2007. ii. Portia Management Services had signed consortium Agreement on behalf of Peel Ports, but Peel ports Ltd is not a member of the consortium (Portia Management Services is a subsidiary of Peel Ports ltd, but need to be authorized by Peel Ports Ltd). 4. Accordingly, we had pointed the above discrepancy to the Bidder together with the stipulations in RFP; 5. Towards clarifications to above, the Bidder furnished a Consortium Agreement dated 11.03.2008 drawing reference to Consortium Agreement dated 04.10.2007 submitted with the original bid documents and also superseding the same towards complying with the provisions of RFP. 14. Copy of the minutes of EC on 08.04.2008 is produced as Exhibit R2(e) and with reference to the bid submitted by the petitioner it is noted that the responsiveness of its bid needs to be ascertained keeping in view WA No.1460/08 9 of the agreement dated 04.10.2007 and in this circumstance EC thought it appropriate to obtain the opinion of Law Secretary before opening their technical bid. It was also decided to open the bids submitted by the Consortiums lead by Nagarjuna Construction Co. Ltd, Hydrabad, Videocon Industries Ltd. Mumbai, India and Lanco Kondapalli Power Pvt. Ltd., Hydrabad, India who submitted the responsive bids and met the stipulated Qualification Criteria. 15. The Evaluation Committee, again met on 06.05.2008 and a copy of the minutes is produced as Exhibit R2(f). In this meeting, Law Secretary also attended as a special invitee for the purpose of discussing the responsiveness of the bid submitted by the petitioner. Opinion of the Law secretary is as follows; "2.2.1. Certain defects pointed out (by) the Legal consultants in the original consortium agreement with reference to Notary attestation and stamping requirements have since been reported to be rectified. The same may be confirmed. 2.2.2. It is informed that the consortium agreement was entered into between the parties in October 2007. The amendments to the RFP has been issued only in January 2008 (fixing 26% of the minimum equity stake for the lead member in the SPC instead of 26% of the consortium in the SPC). Hence it is reported that consortium agreement dated 04.10.2007 submitted by the bidder has been superseded by a new consortium agreement dated 11.03.2008 so as to comply with the stipulations in the RFP. WA No.1460/08 10 Opinion The amendment made in the RFP can be carried out in the original consortium agreement executed in October 2007 itself by making suitable modifications to the deed through a supplemental agreement executed in October 2007 would not be lost. Now the consortium agreement dated 04.10.2007 is a non-entity. At the same time Consortium Agreement dated 11.03.2008 cannot be taken as submitted along with the bid proposal. 2.2.3. Attention is invited to the consortium agreement dated 04.10.2007 wherein M/s Portia Management Services has signed as a party on behalf of M/s Peel Ports Ltd. It is reported that M/s Peel Ports is not a member of the consortium. But it is has been clarified that M/s Portia Management Services is a subsidiary of Peel Ports Ltd. However, no such authorization is found in this regard. 2.2.4. Now in the new consortium agreement executed on 11.03.2008 the party to the consortium ie M/s Peel Ports Ltd has disappeared. M/s Portia Management Services has come in the picture as a party to the consortium agreement. Since such a change has been made after submission of the original bid documents as a participating consortium in the Bid Process it has not been explained under whose authority such a change in the consortium has been made. 2.2.5. As per eligibility criteria for the Bidder as specified in the RFP (cl.3.5) it has been stated that all members of the shall be jointly and severally liable for the execution of the project in accordance with the terms of WA No.1460/08 11 the License Agreement and a statement to this effect shall be included in the Consortium Agreement. But instead of incorporating such a clause in the consortium agreement, it has been mentioned therein that the members of the consortium shall be jointly and severally responsible at every stage of the implementation of the project (cl. 7). It may be noted that 'liability' is different from 'responsibility'. " In view of this legal opinion of Law Secretary, Evaluation Committee unanimously concluded that the bid submitted by the petitioners is non responsive in terms of RFP provision. 16. Pleadings in the reply affidavit filed by petitioner: In the reply affidavit filed by the petitioner it is averred at the outset that the 'Law Secretary has been invited as a special invitee by the respondents in the meeting held on 08.04.2008 and 06.05.2008 and based on his opinion the evaluation committee which till that time found the petitioner to be qualified as per the RFP unanimously changed their opinion'. 17. In response to para 2.2.2. of Exhibit R2(f), it is averred that the consortium agreement is permitted to be submitted by the bidders in own format and the law secretary himself opined that amendment could be carried out by way of a supplementary deed; that had the 3rd respondent made any suggestion to the effect of change in percentage of equity, suitable modifications could have been made earlier; that the 3rd respondent was fully satisfied with the new consortium agreement as vide Exhibit P15, they asked WA No.1460/08 12 the petitioner to get the new agreement stamped in accordance with law; that it is factually wrong on the part of law secretary to note that 'in view of the supersession of the earlier consortium agreement for the new consortium agreement the consortium agreement dated 04.10.2007 is a non-entity' as he earlier approved the same as a supplementary agreement that complied with the provisions of law; that it is specifically admitted by the EC in cl.4.2(a) that all the bidders furnished the information "as asked for and within time" and thus they have admitted that all the documents were submitted in time. 18. In response to para 2.2.3. of Exhibit R2(f), it is stated that at no point of time was any authorization sought from petitioner regarding the fact that M/s Portia Management Services is a subsidiary of Peel ports Ltd; that a perusal of Exhibits P11 and P12(a) would make it clear that Portia Management Services is a part of Peel Ports Group and EC dated 25.03.2008 also confirms as per minutes of the meeting that Peel Ports Ltd is not a member of Consortium; that no clarification is sought from the petitioner with reference to the relationship between Portia Management Services and Peel ports; that Exhibit P9 was not taken note of or not considered by the Law Secretary before forming his opinion. 19. In response to para 2.2.4. of Exhibit R2(f), it is stated that the observation to the effect that Portia Management Services has come into picture as a party to the consortium agreement after the submission of bid WA No.1460/08 13 documents is not correct; that in the cover letter dated 31.01.2008 submitted by the petitioner it is specifically stated that Portia Management Services is shown as a consortium member and in the column (f) which deals with ownership the answer given is "wholly owned subsidiary of Peel Ports Ltd UK" and similarly in column 2 regarding brief description of the company it has been stated that "Portia Management Services is the international arm of Peel Ports"; that the reference in consortium agreement that 'Portia Management Services on behalf of Peel Ports Ltd' is only intended that the Portia Management Services is part of Peel Ports and the certificates annexed would show that the supporting documents are that of the Portia Management Services; that right from beginning it was M/s Portia Management Services which was the consortium member and not Peel Ports. 20. In response to para 2.2.5. of Exhibit R2(f), it is stated that the Law Secretary adopted a hyper-technical approach while drawing distinction between the words "liability" and "responsibility". 21. It is also stated in the reply that the fact that respondents proceeded with other three bids would show that they are not interested to consider the bid of petitioner; that the petitioner's case was taken up for consideration only on 06.05.2008 by which time the EC has already considered the technical bid of the other three consortium and had issued notice to them that their financial bid would be opened on 14.05.2008; that as per cl 21.3 of WA No.1460/08 14 Ext. P4 it has been clearly stated that the time and date of opening the financial proposals shall be informed to the eligible bidders giving minimum 7 days prior notice and therefore the meeting held on 06.05.2008 was an empty formality; that the entire bid evaluation process was completed with undue haste, since the Government wanted to include the awarding of Vizhinjam Project as their achievement since the 2nd anniversary of LDF government was on 16.05.2008 and this was highlighted as the Ministry's biggest achievement. 22. Additional Respondent: As per Order in IA 7587/2008, Portia Management Services Ltd was impleaded as Addl. 5th Respondent and they have also filed statement and reply essentially supporting the contentions of the Petitioner. 23. JUDGMENT OF THE LEARNED SINGLE JUDGE: The learned single judge, as evident from para 14 of the judgment, considers the correctness or otherwise of the opinion of the law secretary and proceeded to decide the case. The three points considered by the law secretary viz; i. Consortium Agreement dated 04.10.2007 was signed by the M/s Portia Management Services on behalf of M/s Peel Ports Ltd without any authorization; ii. new Consortium Agreement dated 11.03.2008 was singed by M/s Peel Ports Ltd and M/s Portia Management Services has disappeared. This change of member was made after submission of original bid without any authority and iii. Instead of making the joint and several 'liability' clause in the WA No.1460/08 15 Consortium Agreement, only a 'responsibility' clause was included by the petitioner's consortium. 24. The court has elaborately considered the jurisprudential difference between the terminologies 'liability' and 'responsibility' in paragraphs 15 to 26 and approves the opinion of law secretary after finding that petitioner's consortium is not permitted to make such changes in the agreement against cl. 3.5 of Section IV of RFP. It is also noted that there is fundamental difference between the words 'liability' and 'responsibility'. After considering the judgments in WB State Electricity Board v. Patel Engineering Co, 2001 (2) SCC 451, Tata Cellular v. Union of India AIR 1996 SC 11 and Air India Ltd. v. Cochin International Airport Ltd. 2000 (2) SCC 617, it is found that judicial interference in this case is not warranted and as such the action of EC cannot be interfered with. In paragraphs 27 to 29, the Court essentially considers the aspect relating to the change of parties in the new Agreement after submission of bid and found that it is not permissible in the context of the RFP and that the expression 'acting on behalf' does not permit substitution of parties. Opinion of Law Secretary was approved in this regard and also on these reasonings, the writ petition was dismissed. 25. RELEVANT PROVISIONS IN THE RFP: For a better understanding of the issue in hand, it is necessary to recapitulate the relevant provisions in RFP. WA No.1460/08 16 Section I: Invitation for Bids Clause 6: The selection shall be by way of a three stage bid evaluation process. All bidders shall furnish their proposals furnishing their qualification details, technical and financial particulars/proposals as per the instructions in Section IV of the RFP. These shall be evaluated based on the criteria set out in Section II and IV of the RPF. Section III: Scope of the Project Definitions: “Bidder” shall mean Applicant who has been issued RFP, to submit a Detailed Proposal. “Consortium” shall mean a group of Firms formed pursuant to the Consortium Agreement entered into by them for the purpose of submitting the Proposal and participate in the Bidding process and in the event of being successful, to implement the License Agreement through a Special Purpose Company to be formed and incorporated by them under the Companies Act, 1956. “Consortium Agreement” shall mean an agreement to be entered into amongst the Lead Member