WP(C) 7181/2009 Page 1 of 29 * IN THE HIGH COURT OF DELHI AT NEW DELHI + WRIT PETITION (CIVIL) 7181/2009 Reserved on : 5th March, 2009 Date of Decision : 8th April, 2009 NAVINYA BUILDCON PRIVATE LIMITED ...... Petitioner Through : Mr. Mukul Rohtagi with Mr. Rajiv Nayar, Sr. Advocates with Ms. Meghna Mishra, Mr. R.N. Karanjawal and Ms. Lakshmi Ramchandra, Advs. versus UNION OF INDIA & OTHERS ...... Respondents Through : Mr. Gaurav Duggal, Adv. for UOI. Mr. Prag P. Tripathi with Mr. Sandeep Sethi, Sr. Advocates with Ms. Arti, Ms. Shambhu Sharan & Ms. Udisha Sahay, Advs. % CORAM: HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE MR. JUSTICE SIDDHARTH MRIDUL 1. Whether reporters of local papers may be allowed to see the judgment? YES 2. To be referred to the Reporter or not? YES 3. Whether the judgment should be reported in YES the Digest? J U D G M E N T SIDDHARTH MRIDUL, J. 1. The Petitioner has filed the instant writ petition, inter alia, seeking writ of certiorari for quashing the letter dated 20th February, WP(C) 7181/2009 Page 2 of 29 2009 vide which the National Highways Authority of India (NHAI), Respondent No.3 herein have disqualified the Petitioner, and also seeking writ of mandamus to restrain the NHAI from inviting the second round of bids from the other bidders. 2. The brief facts as are relevant for determination of the present writ petition are as follows. (a) The NHAI decided to undertake development of six laning of Kishangarh-Ajmer-Beawar section of National Highway No.8 from Km. 364.125 to Km. 58.245 (length 93.56 Km.) in the State of Rajasthan under NHDP, Phase-III (Project) through public-private/ Public Sector Partnership (PPP) on Design, Built, Finance, Operate and Transfer (DBFOT) basis and decided to carry out the bidding process for selection of the bidder to whom the Project may be awarded. (b) The process of selection of bidders comprised of the following two stages:- (i) Pre-qualification of interested applicants as per parameters laid down in the Request For Qualification (RFQ). This was the qualification stage. (ii) The applicants declared successful at RFQ stage, subject to a maximum of six would be allowed to participate in the second stage of bidding, namely bid stage i.e. Request For Proposal (RFP). (c) In March, 2008 the NHAI invited applications for above Project through RFQ published in newspaper/website with an intention to pre-qualify and shortlist the applicants as WP(C) 7181/2009 Page 3 of 29 per the provisions of the RFQ document. The due date for submission of the RFQ was 8th May, 2008. The said date for submission was thereafter extended to 29th May, 2008 and subsequently to 19th June, 2008. (d) In response to the RFQ invitation, 23 firms, JVs, consortiums submitted the RFQ applications by the due date of submission. The Petitioner alongwith its consortium partner, Atlantia S.p.A of Italy submitted the RFQ on the due date to NHAI. (e) The duly constituted evaluation committee of the NHAI evaluated the applications submitted by all the 23 applicants and on the basis of evaluation, the NHAI shortlisted the following six applicants: Sl. No. Name of Applicant 1. Navinya-Atlantia Consortium 2. GVK-Leighton-Mitsui Consortium 3. HCC-Laing Consortium 4. Maytas-China railway 18th Bureau (Group) Corporation Ltd. 5. IJM-Abertis-IDFC JV 6. ISOLUX-SOMA Consortium (f) The above mentioned shortlisted applicants including the Petitioner were duly informed by the NHAI about their shortlisting in accordance with Clause 1.2.1 and Clause 3.5.2 of RFQ document by way of NHAI‟s letter dated 26th August, 2008 with an intimation that all the above shortlisted applicants are eligible for participation in the (ii) stage of bidding process subject to continuing WP(C) 7181/2009 Page 4 of 29 compliance to various provisions of the RFQ. It was clearly stipulated in the said letter dated 26th August, 2008 that the provisions of the RFQ would apply mutatis mutandis to this announcement regarding shortlisting and subsequent bidding. (g) Subsequently, the NHAI issued RFP document to the above shortlisted applicants with last date of submission as 14th October, 2008, which was extended from time to time and the last date of submission was 23rd December, 2008. (h) On the 23rd December, 2008 the NHAI opened the bids submitted by the parties and noticed that out of six shortlisted applicants the following four bidders had submitted their bids:- 1. M/s ISOLUX-SOMA Consortium 2. M/s HCC-Laning Consortium 3. M/s Mytas-China Railway 18th Bureau (Group) Corporation Limited. 4. M/s Navinya Buildcon Pvt. Limited-Atlantia S.p.A. Consortium. (i) Here it is relevant to note that both the RFQ as well as the RFP contained a Clause pertaining to “Conflict of Interest”. The RFQ document in Clause 2.2 provided for eligibility of the applicants. Clause 2.2.1(c) defined “Conflict of Interest” as follows: “An applicant shall not have a conflict of interest (the “Conflict of Interest”) that affects the Bidding Process. Any Applicant found to have a Conflict of Interest shall be disqualified. An Applicant shall be deemed to have a Conflict of Interest that affects the Bidding Process, if: WP(C) 7181/2009 Page 5 of 29 (i) The Applicant, its Member or Associate (or any constituent thereof) and any other Applicant, its Member or Associate (or any constituent thereof) have common controlling shareholders or other ownership interest; provided that this disqualification shall not apply in cases where the direct or indirect shareholding of an Applicant, its Member or Associate (or any shareholder thereof having a shareholding of more than five percent of the paid up and subscribed share capital of such Applicant, Member or Associate, as the case may be) in the other Applicant, its Member or Associate, as the case may be, is less than one per cent of the paid up and subscribed share capital thereof; provided further that this disqualification shall not apply to a bank, insurance company, pension found or a public financial institution referred to in section 4A of the Companies Act. 1956; (emphasis ours) Or (ii) a constituent of such Applicant is also a constituent of another Applicant; or (iii) such Applicant receives or has received any direct or indirect subsidy from any other Applicant, its Member or Associate or has provided any such subsidy to any other Applicant; or (iv) such Applicant has the same legal representative for purposes of this Application as any other Applicant; Or (v) such Applicant has a relationship with another Applicant, directly or through common third party/parties, that puts either or both of them in a position to have access to each others‟ information about, or to influence the Application of either or each other; or (vi) such Applicant has participated as a consultant to the Authority in the preparation of any documents, design or technical specifications of the Project.” All the applicants at the RFQ stage also had to submit before the NHAI an undertaking as prescribed in Appendix-I to the RFQ document. In terms of the said requirement the Petitioner submitted an undertaking before the NHAI stating therein that the Petitioner did not WP(C) 7181/2009 Page 6 of 29 have any “Conflict of Interest” in accordance with the above Clause 2.2.1(c) of the RFQ document. (j) The RFP document contained a similar provision pertaining to “Conflict of Interest” as herein below: “2.1.14 A Bidder shall not have a conflict of interest (the “Conflict of Interest”) that affects the Bidding Process. Any Bidder found to have a Conflict of interest shall be disqualified. In the event of disqualification, the Authority shall forfeit and appropriate the Bid Security or Performance Security, as the case may be, as mutually agreed genuine pre- estimated compensation and damages payable to the Authority for, inter alia, the time, cost and effort of the Authority, including consideration of such Bidder‟s proposal, without prejudice to any other right or remedy that may be available to the Authority hereunder or otherwise. Without limiting the generality of the above, a Bidder shall be considered to have a Conflict of Interest that affects the Bidding Process, if: (i) such Bidder (or any constituent thereof) and any other Bidder (or any constituent thereof) have common controlling shareholders or other ownership interest; provided that this qualification shall not apply in cases where the direct or indirect shareholding in a Bidder or a constituent thereof in the other Bidder(s) (or any of its constituents) is less than 1% of its paid up and subscribed capital; or (emphasis ours) (ii) a constituent of such Bidder is also a constituent of another Bidder; or (iii) such Bidder receives or has received any direct or indirect subsidy from any other Bidder, or has provided any such subsidy to any other Bidder; or (iv) such Bidder has the same legal representative for purposes of this Bid as any other Bidder; or (v) such Bidder has a relationship with another Bidder, directly or through common third parties, that puts them, in a position to have access to each others information about, or to influence the Bid of either or each of the other Bidder; or (vi) such Bidder has participated as a consultant to the Authority in the preparation of any documents, design or technical specifications of the Project.” All the shortlisted bidders were required in terms of the WP(C) 7181/2009 Page 7 of 29 RFP documents to submit another undertaking as contained in Appendix 1 to the RFP document wherein the bidder had to declare that they did not have any “Conflict of Interest” in accordance with Clause 2.1.14 and 2.1.15 of the RFP document. In terms of the above requirement, even the Petitioner submitted an undertaking before the NHAI clearly stating that it did not have any “Conflict of Interest” as provided in Clause 2.1.14 of RFP document. (k) In the meantime before submission of the bid the Petitioner wrote a letter dated 8th October, 2008 to the NHAI with regard to Clause 2.1.14 of the RFP and inter alia pointed out that a similar clause had posed problems in the bid for re-development of New Delhi Station in the tenders invited by Indian Railways. It was brought to the notice of NHAI that the Railway Land Development Authority under the Ministry of Railways had modified the said clause and accordingly the limit of 1% cross holding was increased to 10%. Since the Petitioner did not receive a response to the letter dated 8th October, 2008, a further letter was addressed by the Petitioner to the NHAI on the 4th November, 2008. Vide this letter the Petitioner once again pointed out to the NHAI that the issue of “Conflict of Interest” as defined under Clause 2.1.14 of the RFP needed to be modified. Further the Petitioner drew the attention of NHAI that the above mentioned cross holding could happen without the knowledge of the bidder since it was not possible to check all such investment in all the WP(C) 7181/2009 Page 8 of 29 constituents at the time of submission of RFQ. On the 18th November, 2008, the Petitioner wrote to NHAI further to its letter dated 8th October, 2008 and 4th November, 2008 with regard to Clause 2.1.14 of the RFP and pointed out that no response had been received from NHAI so far. (l) On 28th November, 2008 NHAI wrote to the Petitioner stating that the Petitioner‟s letter dated 18th November, 2008 and other letters on similar issues with regard to the percentage of the common shareholding were under consideration. In the meantime, it informed the Petitioner that the last date of submission of RFP was the 3rd December, 2008 and further stated that in the meantime the Petitioner should abide by the provisions of the RFP document. (m) On the submission of the RFP document the NHAI received representations from rest of the three shortlisted bidders M/s ISOLUX-SOMA-Consortium by way of its letter dated 24th December, 2008, M/s Maytas-China railway 18th Bureau (Group) Corporation Ltd. by way of their letter dated 23rd December, 2008 and M/s HCC John Laing by way of its letter dated 26th December, 2008, representing to the NHAI that the consortium led by the Petitioner had M/s Atlantia as one of its members and consortium led by IDFC as M/s Abertis as a member. It further pointed out that Abertis being part of the consortium led by IDFC had 6.68% shareholding in Atlantia which was part of consortium led by the WP(C) 7181/2009 Page 9 of 29 Petitioner. Having disclosed the above facts the three bidders requested that the bid submitted by the consortium led by the Petitioner and IDFC should be rejected and they may be disqualified from bidding. (n) Before the NHAI could verify from the Petitioner the correctness of the above allegations made by the above three bidders, the Petitioner suo moto by its letter dated 8th January, 2009 addressed to the NHAI clarified the following:- “i. That they were aware of the representations made by the competitors regarding the “Conflict of Interest” and the factum of questioning the participation of the Petitioner. ii. Till the time the Petitioner was shortlisted to submit the proposal, they were not aware of the details of other applicants. iii. That they had made representations for modification of the “Conflict of Interest” Clause in the RFP document to avoid future complication in the Bidding Process. iv. That the Petitioner had received the response from Respondent No.3 wherein it was made clear that the Petitioner should continue to abide by the Clauses of RFP document and that the violation of the clause shall be dealt with as per provisions of RFP document. v. That the Petitioner had no “Conflict of Interest” with other three Bidders who have submitted their bids.” (o) The Petitioner was orally informed in the meeting between the Chairman of NHAI and the representative of the Petitioner company held on 23rd February, 2009 that the Petitioner‟s bid was rejected. In the meantime by the impugned letter dated 20th February, 2009 addressed to the shortlisted bidders NHAI informed the shortlisted bidders that it had decided not to accept the bid of the WP(C) 7181/2009 Page 10 of 29 Petitioner who had quoted the highest price due to non- adherence of the requirements of the RFP. NHAI further, in terms of Clause 3.3.3 of the RFP, requested the said bidders to match the bid of the Petitioner. The NHAI in the said letter stated that all the bids which will be received in the “second round of bidding” would be opened at 1130 Hours on the 27th February, 2009 in the presence of the bidders who choose to attend. 3. Mr. Mukul Rohtagi, learned senior advocate appearing on behalf of the Petitioner made the following submissions. His first submission was that the condition with regard to the “Conflict of Interest” had been waived by the NHAI, since the Petitioner had already been shortlisted for the second stage. The second submission was that the conditions stipulated in the RFQ and the RFP are not mandatory and that the same should be read down so as to be read pragmatically. Mr. Rohtagi‟s third submission was that the Petitioner at the time of applying for the request for qualification was not aware of the fact that, Abertis which held 6.68% share in Atlantia, the Petitioner‟s partner, was one of the members of the consortium that had also applied in response to the RFQ. Further, it was contended by the Petitioner that the principles of natural justice had not been followed by the NHAI, inasmuch as, the Petitioner had not been informed of its disqualification prior to the remaining bidders being called to participate in the second round of bidding. The last submission made on behalf of the Petitioner was that since the consortium of which Abertis was a constituent did not participate in the second stage of bidding and did not submit its financial bid, therefore, the Petitioner WP(C) 7181/2009 Page 11 of 29 consortium did not incur any disqualification at the stage of the RFP. 4. On the other hand it was urged on behalf of the NHAI by Mr. Prag P. Tripathi, learned Additional Solicitor General, that the Petitioner had furnished an undertaking alongwith the RFQ to the effect that the Petitioner did not suffer from any conflict of interest inviting disqualification, and since the NHAI had proceeded on the basis of that undertaking furnished on behalf of the Petitioner, there was no question of there being any waiver. It was next urged on behalf of the NHAI, that the Supreme Court had clearly laid down that, the clauses of the terms and conditions of a tender have to be read in a pedantic manner and cannot be read down so as to be read pragmatically, as was sought to be urged by the Petitioner. It was next contended on behalf of the NHAI that even after the Petitioner consortium and the consortium of which Abertis was a constituent were shortlisted after the first stage, at no point of time did the Petitioner, as required by the terms and conditions of tender, inform the NHAI that it had incurred disqualification resulting out of the share holding of Abertis in Atlantia, the consortium partner of the Petitioner. It was therefore urged on behalf of the NHAI that the erroneous undertaking furnished by the Petitioner amounted to a material misrepresentation that rendered it liable for disqualification. It was lastly urged on behalf of the NHAI that, upon coming to know of the disqualification incurred by the Petitioner from the representations of the other bidders, before it could call upon the Petitioner to clarify the position, the Petitioner itself had vide its communication dated 8th January, 2008 admitted that Abertis had a share holding in Atlantia, a constituent of the Petitioner consortium WP(C) 7181/2009 Page 12 of 29 and that, therefore, there was no question of violation of the principles of natural justice in the NHAI disqualifying the Petitioner. 5. Before we come to the merits of the rival submissions made on behalf of the parties, it would be necessary and relevant to extract some of the other relevant clauses of the RFQ and the RFP: APPENDIX I Letter Comprising the Application for Pre-Qualification (Refer Clause 2.13.2) Dated: To, Mr S K Nirmal General Manager BOT (II) A National Highways Authority of India G-5&G-6, Sector 10, Dwarka New Delhi – 110 075 Sub: Application for pre-qualification for ***** Project. Dear Sir, With reference to your RFQ document dated *****, I/we, having examined the RFQ document and understood its contents, hereby submit my/our Application for Qualification for the aforesaid project. The Application is unconditional and unqualified. 2 All information provided in the Application and in the Appendices and Annexures is true and correct and all documents accompanying such Application are true copies of their respective originals. 3 This statement is made for the express purpose of qualifying as a Bidder for the development, construction, operation and maintenance of the aforesaid Project. 4 I/ We shall make available to the Authority any additional information it may find necessary or require to supplement or authenticate the Qualification statement. 5 I/ We acknowledge the right of the Authority to reject our Application without assigning any reason or otherwise and hereby waive our right to challenge the same on any account whatsoever. 6. We certify that in the last three years, we/ any of the Consortium Members have neither failed to perform on any contract, as evidenced by imposition of a penalty or WP(C) 7181/2009 Page 13 of 29 a judicial pronouncement or arbitration award, nor been expelled from any project or contract nor have had any contract terminated for breach on our part. 7. I/We declare that: (a) I/We have examined and have no reservations to the RFQ document, including any Addendum issued by the Authority. (b) I/ We do not have any conflict of interest in accordance with Clauses 2.2.1(c) and 2.2.1(d) of the RFO document; and (emphasis ours) (c) I/ We have not directly or indirectly or through an agent engaged or indulged in any corrupt practice, fraudulent practice, coercive practice, undesirable practice or restrictive practice, as defined in Clause 4.3 of the RFQ document, in respect of any tender or request for proposal issued by or any agreement entered into with the Authority or any other public sector enterprise or any government, Central or State; and (d) I/ We hereby certify that we have taken steps to ensure that in conformity with the provisions of Clause 4 of the RFQ document, no person acting for us or on our behalf has engaged or will engage in any corrupt practice, fraudulent practice, coercive practice, undesirable practice or restrictive practice. 8. I/ We understand that you may cancel the Bidding Process at any time and that you are neither bound to accept any Application that you may receive nor to invite the Applicants to Bid for the Project, without incurring any liability to the Applicants, in accordance with Clause 2.17.6 of the RFQ document. 9. I/ We believe that we/ our Consortium/ proposed Consortium satisfy(ies) the Net Worth criteria and meet(s) the requirements as specified in the RFQ document and are/ is qualified to submit a Bid in accordance with the guidelines for qualification of bidders seeking to acquire stakes in Public Sector Enterprises through the process of disinvestment issued by the GOI vide Department of Disinvestment OM No. 6/4/2001-DD-II dated 13th July, 2001 which guidelines apply mutatis mutandis to the Bidding Process. 10. I/ We declare that we/ any Member of the Consortium, are/ is not a Member of a/ any other Consortium applying for pre-qualification. 11. I/ We certify that in regard to matters other than security and integrity of the country, we have not been convicted by a Court of Law or indicted or adverse orders passed by a regulatory authority which could cast a doubt on our ability to undertake the Project or which relates to a grave offence that outrages the moral sense of the community. 12. I/ We further certify that in regard to matters relating to security and integrity of the country, we have not been charge-sheeted by any agency of the Government or convicted by a Court of Law for any offence committed WP(C) 7181/2009 Page 14 of 29 by us or by any of our Associates. 13. I/ We further certify that no investigation by a regulatory authority is pending either against us or against our Associates or against our CEO or any of our Directors/ Managers/ employees. 14. I/ We further certify that we are not disqualified in terms of the additional criteria specified by the Department of Disinvestment in their OM No.6/4/2001- DD-II dated July 13, 2001, a copy of which forms part of the RFQ at Appendix-IV thereof. 15. I/ We undertake that in case due to any change in facts or circumstances during the Bidding Process, we are attracted by the provisions of disqualification in terms of the guidelines referred to above, we shall intimate the Authority of the same immediately. (emphasis ours) 16. The Statement of Legal Capacity as per format provided at Annex-V in Appendix-I of the RFQ document, and duly signed, is enclosed. 17. I/ We understand that the selected Bidder shall either be an existing Company incorporated under the Indian Companies Act, 1956, or shall incorporate itself as such prior to execution of the Concession Agreement. 18. I/ We, hereby irrevocably waive any right which we may have at any stage at law or howsoever otherwise arising to challenge or question any decision taken by the Authority in connection with the selection of Applicants, selection of the Bidder, or in connection with the selection/ Bidding Process itself, in respect of the above mentioned Project and the terms and implementation thereof. 19. I/we agree and undertake to abide by all the terms and conditions of the RFQ document. (emphasis ours) In witness thereof, I/We submit this application under and in accordance with the terms of the RFQ document. Yours faithfully, Date: (Signature of the Authorised Signatory) Place: (Name and designation of the