Case: Union Of India  Vs. Hbl Nife Power Systems Ltd

undergo thirteen tests as stipulated in Annexure P-2. Ministry of Defence/Navy authorities cannot accept the final product without being fully associated with the development of the product right from the stage of procurement of raw material to the stage of final product. As per the policy, RFP could be issued only to a firm which is duly registered with DGQA for supply of the product after development of the product under the aegis of DGQA. Having regard to the requirements of a highly critical spare part like submarine batteries, the Government has framed the policy for issuance of the development indent, developing the source and registration with DGQA. It is pertinent to note that in the writ petition, policy itself was not under challenge. In fact, in the writ petition, respondent-company itself prayed only for issuance of request for proposal under the policy. The High Court did not keep in view the policy of the Government and the mandatory requirement of DGQA being associated with the development of submarine batteries which is a critical defence spare part. 11. If the country wishes to play a substantial role in the Indian Ocean and Arabian Sea, India must ensure high standards of defence power comparing with the neighbouring countries and it should have modernized submarines. Modernized submarines require submarine batteries with high sophisticated standard under the aegis of DGQA. The Government cannot put the life of its defence personnel and submarine worth crores of rupees to risk simply because the respondent claims to have the capability and can supply submarine batteries. For such defence critical spare parts like submarine batteries, there cannot be any open advertisement inviting tenders. Advertisements are issued calling for tenders only for common use items which are normally available in the open market with a wide range of sources. Submarine batteries do not fall under this category of common use items. The respondent cannot claim any vested right to be issued a development indent or RFP or a supply order simply because it has made investments to manufacture submarine batteries. Straightway RFP cannot be issued to the respondent by ignoring the procedure for issuing a development indent and testing the batteries. 12. As the matter was pending for over a decade, we have asked the appellant-Union of India about the subsequent development of the second source for supply of submarine batteries and for the status of the respondent. In response, on instruction Mr. S.W.A. Qadri, onbehalf of the appellant has filed elaborate written submission. It is stated that after grant of stay order dated 16.12.2005 by this Court against the impugned order, the appellant initiated a case for development of an alternate vendor for submarine batteries seeking development indents from IHQ (N)/DEE as per directives of Ministry of Defence vide ID No.3536/04/D(N-I) dated 08.02.2005. Accordingly, open tender was issued in newspapers on 29.05.2006 wherein several firms including the respondent responded. For development of a second source of Type-I batteries, development order was placed on the respondent HBL Ltd. on 22.03.2007, as per which the firm was to develop four Type-I cells at a cost of Rs.11.16 lakhs with a delivery schedule of eighteen months. The prototype batteries manufactured by respondent-HBL failed to meet DGQA’s stipulated standard for relevant discharge (C2) test. Thereafter, on 12.07.2011, a meeting was held with the participants of DEE and M/s. HBL representatives. Post detailed deliberation, the respondent was asked to manufacture four cells afresh and present them for type testing. Test of batteries was completed at the factory premises in June 2012 and batteries were transferred to BCF, Sewri in January 2013. However, on receipt at BCF, Sewri, visible bulging was observed in all batteries and lead tape discontinuity in one battery during first maintenance charge. During analysis in February 2013, bulging was found to exceed permissible limit of 12 mm on all batteries post first full charge. However, respondent opined that the bulging was due to improper packaging whilst transporting batteries from the premises (Hyderabad) to Mumbai. Thereafter, respondent firm–HBL agreed on certain conditions for manufacturing of four new prototype cells with a lead time of three-six months and agreed to complete manufacturing of test cells by February 2014. However, there was delay on the part of the respondent and finally the trial of test cells was completed on 14.11.2014 and the trials were validated by CQAE, Secunderabad. Test cells were received at BCF, Sewri in January 2015. Charging/discharging trials commenced wherein charging parameters were examined and found to be satisfactory. In this regard, in the written submission filed by UOI, it is stated as under:- “8. …The performance report forwarded by ASD (Mbi)/BCF wherein all parameters of the cells were examined, indicates satisfactory test results. In view of the satisfactory completion of indigenization efforts by respondent herein (M/s. HBL, Hyderabad) the firm was nominated as IHQ MOD (N) approved vendor for supply of Type-I submarine batteries for EKM submarines on 28.05.20159. ..the next procurement case shall have an additional qualified vendor for Type-I submarine batteries to increase the market competence for both technical and financial aspects.” Though the subsequent developments may not be relevant to determine the issue, we have referred to the written submission in extenso for the sake of completion. 13. The aforesaid discussion and also the written submission as to how the respondent developed the batteries over a period of time reiterate that the development of second source could only be as per the guidelines of DGQA and under the supervision and inspection of the officials of the DGQA and not independently. The High Court did not keep in view the policy of the Government in purchasing the critical spare parts for the defence and in particular, in developing submarine batteries under the aegis of the Defence Ministry and the High Court erred in directing the appellants to issue an advertisement giving details about the technical specifications for submarine batteries and in selecting the product submitted in response to the advertisement and the impugned order is not sustainable.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]As the matter was pending for over a decade, we have asked the appellant-Union of India about the subsequent development of the second source for supply of submarine batteries and for the status of the respondent. In response, on instruction Mr. S.W.A. Qadri, onbehalf of the appellant has filed elaborate written submission. It is stated that after grant of stay order dated 16.12.2005 by this Court against the impugned order, the appellant initiated a case for development of an alternate vendor for submarine batteries seeking development indents from IHQ (N)/DEE as per directives of Ministry of Defence vide ID No.3536/04/D(N-I) dated 08.02.2005. Accordingly, open tender was issued in newspapers on 29.05.2006 wherein several firms including the respondent responded. For development of a second source of Type-I batteries, development order was placed on the respondent HBL Ltd. on 22.03.2007, as per which the firm was to develop four Type-I cells at a cost of Rs.11.16 lakhs with a delivery schedule of eighteen months. The prototype batteries manufactured by respondent-HBL failed to meetstipulated standard for relevant discharge (C2) test. Thereafter, on 12.07.2011, a meeting was held with the participants of DEE and M/s. HBL representatives. Post detailed deliberation, the respondent was asked to manufacture four cells afresh and present them for type testing. Test of batteries was completed at the factory premises in June 2012 and batteries were transferred to BCF, Sewri in January 2013. However, on receipt at BCF, Sewri, visible bulging was observed in all batteries and lead tape discontinuity in one battery during first maintenance charge. During analysis in February 2013, bulging was found to exceed permissible limit of 12 mm on all batteries post first full charge. However, respondent opined that the bulging was due to improper packaging whilst transporting batteries from the premises (Hyderabad) to Mumbai. Thereafter, respondent firm–HBL agreed on certain conditions for manufacturing of four new prototype cells with a lead time of three-six months and agreed to complete manufacturing of test cells by February 2014. However, there was delay on the part of the respondent and finally the trial of test cells was completed on 14.11.2014 and the trials were validated by CQAE, Secunderabad. Test cells were received at BCF, Sewri in January 2015. Charging/discharging trials commenced wherein charging parameters were examined and found to be satisfactory. In this regard, in the written submission filed by UOI, it is stated as…The performance report forwarded by ASD (Mbi)/BCF wherein all parameters of the cells were examined, indicates satisfactory test results. In view of the satisfactory completion of indigenization efforts by respondent herein (M/s. HBL, Hyderabad) the firm was nominated as IHQ MOD (N) approved vendor for supply of Type-I submarine batteries for EKM submarines on 28.05.20159. ..the next procurement case shall have an additional qualified vendor for Type-I submarine batteries to increase the market competence for both technical and financial aspects.The aforesaid discussion and also the written submission as to how the respondent developed the batteries over a period of time reiterate that the development of second source could only be as per the guidelines of DGQA and under the supervision and inspection of the officials of the DGQA and not independently. The High Court did not keep in view the policy of the Government in purchasing the critical spare parts for the defence and in particular, in developing submarine batteries under the aegis of the Defence Ministry and the High Court erred in directing the appellants to issue an advertisement giving details about the technical specifications for submarine batteries and in selecting the product submitted in response to the advertisement and the impugned order is not sustainable.