Case: Montecarlo Ltd Vs. Ntpc Ltd

1. The respondent, NTPC Limited, had issued separate invitation for bids for development and operation of three coal mines, viz., Dulanga Coal Block, Chatti Bariatu and Talaipalli in the State of Odisha. Online bids were invited on Single Stage Two Envelope Bidding basis (Envelope-I: Techno-Commercial Bid and Envelope-II: Price Bid). There was stipulation for Reverse Auction from the eligible bidders. It was also stated in the Invitation For Bids (IFB) issued on 22.01.2016 that the bids shall be received on 17.03.2016 and Envelope-I, that is, Techno-Commercial Bid will be opened on 17.03.2016. The date of opening of Envelope-II, that is, Price Proposal shall be intimated separately. Clause 5 of the IFB stipulated Qualifying Requirements (QR). Clauses 5.1 and 5.1.2 dealt with technical criteria. 2. The respondent had also issued Instructions To Bidders (ITB) which contain clauses as to how the proposal shall be conducted. Clause 6.3.1 of ITB deals with Preliminary Examination of Techno-Commercial Proposals. We think it appropriate to reproduce the same:- 6.3.1 Preliminary Examination of Techno-Commercial Proposals: (a) OWNER will examine the Project Proposals to determine whether they are complete, whether required securities have been furnished, whether the documents have been properly signed and whether the bids are generally in order. (b) Prior to the detailed evaluation, OWNER will initially determine whether each Techno Commercial Proposal is of acceptable quality, is generally complete and is substantially responsive to the bidding documents. For purposes of this determination, a substantially responsive Proposal is one that conforms to all the terms, conditions and specifications of the bidding documents without material deviations, objections, conditionalities or reservations. A material deviation, objection, conditionality or reservation is one (i) that affects in any substantial way the scope, quality or performance of the contract; (ii) that limits in any substantial way, inconsistent with the bidding documents, the Owners rights or the successful Bidders obligations under the contract; or (iii) whose rectification would unfairly affect the competitive position of other Bidders who are presenting substantially responsive Proposals. (c) OWNERs determination of a Techno Commercial Proposals responsiveness is to be based on the contents of the Techno Commercial Proposal itself without recourse to extrinsic evidence. If a Techno Commercial Proposal is not substantially responsive, it will be rejected by OWNER, and may not subsequently be made responsive by the Bidder by correction of the nonconformity3. Clauses 6.3.2 6.3.2.1, 6.3.2.2 and 6.3.4 provide for Evaluation of Responsive Techno-Commercial Proposal, Evaluation of Qualification Proposals, Evaluation of Technical Proposals and Clarification Meeting. Clause 6.3.5 deals with the steps where the responsive Techno-Commercial Proposal which meets the QR specified in Chapter 7 and Technical Requirements specified in Chapter 8 of REF Documents and stipulates that they shall be considered for Price Proposal Phase of the Bidding Process. It has also been provided therein that the bidders who meet QR specified in Chapter 7 and Technical Requirements specified in Chapter 8 of REP documents shall be terms as shortlisted bidders. Chapter 7 of ITB deals with technical criteria. Clauses 7.1.1 and 7.1.2, being significant, are extracted below:- 7.1.1 The Bidder should have, in the preceding 7 (seven) years reckoned from the date of opening of the Techno-commercial Bids developed & operated single coal/lignite mine having coal/lignite reserves of at least 150 million tonnes & annual capacity of at least 6 MTPA and produced at least 2 million tonnes of coal/lignite from such mine. OR 7.1.2 The Bidder should have, in the preceding 7 (seven) years reckoned from the date of opening of the Techno-commercial Bids, operated and produced: a) At least 23 Million SCM of aggregated volume of overburden and/or coal/lignite from a maximum of seven open cast mines of Coal/Lignite, in any year. b) At least 11.5 Million SCM of composite volume of overburden and coal/lignite from single open cast mine in any year, out of which at least 3 million tonnes shall be coal/lignite. The qualifying works at clause 7.1.2(a) can be from same mine or different mines including the mine considered to meet qualifying requirement at clause 7.1.2(b)4. At this stage, it is necessary to refer to Notes appended to Clause 7.3.3 that deals with route-3. Notes are as under:- i. The word operated means that the Bidder should have performed the necessary activities of drilling, excavation, hauling etc. on its own or through sub-contracting. ii. The word developed means that the Bidder should have performed the necessary activities of Land Acquisition/assisted in Land Acquisition, Statutory clearances/assisted in Statutory clearances and carried out `Infrastructure development on its own or through sub-contracting5. Chapter 9 of the ITB deals with Evaluation Methodology for Techno- Commercial Proposal (Qualification Proposal and Technical Proposal). Clause 9.1 deals with Evaluation of Qualification Proposal and Clause 9.2 deals with Evaluation of Technical Proposal. They read as under:- 9. Evaluation Methodology for Techno Commercial Proposal (Qualification Proposal and Technical Proposal) 9.1 Evaluation of Qualification Proposal: The Techno-Commercial Proposal shall be scrutinized to establish responsiveness as per Clause 6.3.1. The Responsive Techno-Commercial Proposal shall be evaluated in detail to determine their fulfillment of Qualifying requirements specified in Chapter 7 of this RFP document. During the bid evaluation, NTPC may, at its discretion, ask the Bidder for a clarification of its Qualification Proposal including documentary evidence pertaining to only the reference mines declared in the Qualification Proposal for the purpose of meeting Qualifying Requirement specified in Chapter 7 of this RFP document. The request for clarification and the response shall be in writing and no change in the substance of the TECHNO-COMMERCIAL Proposal including substitution of reference mines in the Qualification Proposal by new/additional mines for conforming to Qualifying Requirement shall be sought, offered or permitted. The Qualification Proposals which meets the qualification criteria shall be considered for Technical Proposal Evaluation Phase of the Bidding Process. The Bidders who meet the qualification criteria shall be termed as Qualified Bidders. 9.2 Evaluation of Technical Proposal: The Technical Proposals shall be evaluated to determine their compliance with the Technical Proposal Requirements. For this purpose, NTPC shall use the supporting documents and/or information available with or obtained by NTPC. 9.2.1 During evaluation NTPC may seek clarification from the Bidders, may conduct discussions with the Bidders, and may ask the bidder to make Technical presentation. Technical proposal shall include details as has been sought vide Chapter 8. 9.2.2 The Technical Proposals without sufficient information as per the terms of Chapter 8 of this document shall be deemed Non Responsive Technical Proposal. 9.2.3 The Responsive Technical Proposals meeting the requirements to the satisfaction of Owner shall be considered for further detailed Technical Evaluation. [emphasis added] 6. Clause 9.3 provides how detailed evaluation of technical proposals submitted by the bidder shall take place. Clauses 9.3.1 and 9.3.2 which are relevant for the present purpose are reproduced below:- 9.3.1 The purpose of technical evaluation is to check responsive and assess the compliance with the requirements of NTPC. 9.3.2 To ensure effective evaluation of Technical Proposals the Bidders shall provide the necessary details as specified in Clause 8.4. The Technical evaluation will be for evaluating whether the Technical Proposal of the Bidder meets the following criteria. (a) Time Schedule to Achieve First Year Coal Production Target - NTPC shall evaluate the PERT chart submitted by the Bidder, to determine its completeness; reasonableness; and achievability. (b) Adequacy of the Equipment Plan - The Bidder shall submit an equipment plan giving details of the equipment that shall be used by the Mine Operator to provide Mining Services which shall be not less than the Minimum Equipment to be deployed as specified by NTPC at Schedule 6 of Project Agreement. NTPC shall evaluate the adequacy of equipment to meet the criteria imposed by NTPC in terms of quantity of production, quality of coal produced etc. [emphasis supplied]7. The controversy in the instant case basically pertains to whether the appellant meets the qualification criteria as provided under the heading Technical Criteria that occurs in Clauses 7.1 and 7.2 of QR. To appreciate the same, it is essential to have a look at the bid submitted by the appellant. The appellant had uploaded the proposal on 26.4.2016 by referring to three mines in support of its stand to meet the QR. The three mines that have been referred to in the proposal are (i) Mata No Madh, Lignite Mine, Kutch, GMDC (Mine 1); (ii) June Kundada OCP of Western Coalfield Limited (Mine 2) and (iii) Khadia OCP, Northern Coalfield Limited (Mine 3). As regards the Mine No. 1, the appellant declaring the scope of work in the aforesaid Mine had furnished the following details:- Sl. No.ParticularsMine 1 (Lignite Project, Mata No Madh, Kutch) 10Brief description of scope of workTurnkey mining Contract involving overburden/inter burden removal, excavation and/or loading of lignite from mines face and ancillary activities 11DrillingYes/No Carried out Drilling on our own or through subcontractingOur own/subcontracting ExcavationYes/No Carried out Excavation on our own or through subcontractingOur own/subcontracting HaulingYes/No. Carried out Excavation on our own or through subcontractingOur own/subcontracting8. As the proposal would reflect, the appellant had not provided the information that it had carried out the drilling in the aforesaid Mine, namely, Mata No Madh. The respondent-owner sent a communication on 17.5.2016 seeking certain clarification pertaining to the QR and other aspects. The High Court has referred to the said communication and we think it necessary to reproduce the same:- Ref:01/CS-7014-602(R1)-9-PAA Dated: 17.05.2016 To, M/s. Montecarlo Limited, 706, Ship Building, Near Municipal Market, C.G. Road, Navrangpura, Ahmedabad-380 009, Gujarat, India Kind Attn. Sh. Shekhar Shanna, Sr. General Manager Sub: Development and Operation of Dulanga Coal Block as per IFB No. 40051319; Bid Doc. No.CS-7014-802(R1)-9 Dear Sir, 1.0 This has reference to your Project Proposal (Techno-Commercial Bid) against IFB No.40051319 for the subject package. You are requested to furnish the following information with respect to the details/documents furnished in the bid for qualification requirement data: (i) Against QR requirement of Clause 7.1.2 of ITB:It is observed in the Contract Agreement dtd. 11.02.2014 submitted by the bidder in support of meeting qualifying requirement for Lignite project Mata No Madh, Kutch, Gujrat that the necessary activity of drilling as per stipulations of QR (sr.no. i of Notes) is not mentioned. The same may please be clarified with supporting documents. (ii) Against QR requirement of Clause 7.2 of ITB:Details of Other non cash expenses in Million for calculating Annual Cash Accrual for three year viz. 2013-14, 2014-15 & 2015-16 2.0 It is requested that the requisite information along with necessary documents be furnished to us at the earliest, preferably by 24.05.2016. 3.0 It may please be noted that seeking the above clarifications should not be construed that the bid submitted by you is considered techno commercially responsive and/or meeting the Qualification requirements (QR). 9. The response that was given by the appellant on 21.5.2016 is to the following effect:- A) Para 1.0 (i) of your above letter against QR of Clause 7.1.2 of ITB: We are attaching the followings: a) A certificate from GMDC (client of our Lignite Project at Mata No Math) Vide No.GMDC/MMLG/298/2016-17 dated 18.05.2016 mentioning our scope on this Turnkey Project which includes activities of Mine Planning, Quality Control, Drilling, Ripping, Dust suppression, Nala Diversion, preparation of Garland drain, dewatering of Monsoon and seepage water, preparation and monitoring of haul road for better hauling as required to complete the mining process. b) Certificates from Northern Coalfields Ltd. (NCL) and Western Coalfields Ltd. (WCL) are also attached herewith mentioning drilling as part of the Mining Process of these projects as ready reference: i) NCL Certificate No.GM/KSL/2016/460 dated 31.03.2016 ii) NCL Certificate No.GM/KSL/25 dated 24.04.2016 iii)NCL Certificate No.GM/KHD/OS/2016/43 dated 23.04.2015 iv)WCL Certificate No. WCL/MA/MGR/JKOC/2015/400 dated 04.12.2015 v) WCL Certificate No. WCL/MA/MGR/JKOC/2015/27 dated 14.04.2016 Further, as you are kindly aware that Indian Lignite deposits occur in the Tertiary sediments in southern and western parts of peninsular shield particularly in Tamilnadu, Rajasthan and Gujarat. The Overburden and interburden comprises of Clay, Claystone, mudstone and as well as lignite [Geologically younger sediments (Formations) then occurrences of Coal] which can be excavated by hydraulic Shovel dumper combination. As such, in lignite deposits of Tamilnadu, Gujarat and Rajasthan, Blast hole drilling is normally not required. B) Para 1.0 (ii) of your above letter against QR of Clause 7.2 of ITB: We are attaching the following: a) Financial certificate of last 3 years We hope that the above submission clarifies your points on QR requirement; If your require further clarification/information in this regard, kindly inform us. We shall be pleased to provide the same at your convenience. 10. To the said letter, a document issued by the Gujarat Mineral Development Corporation Ltd (GMDC) dated 18.5.2016 was enclosed. The said certificate reads as follows:- GMDC/MMLG/298/2016-17 Dated:18.05.2016 To Whom It May Concern This is to certify that the Turnkey Mining Contract involving Overburden/Inter burden removal, Excavation and/or Loading of Lignite from mining face and ancillary activities at Lignite project, Mata No Madh Vide Tender Notice No. (R1)/LP/01/13-14 dated 30.08.2013, has been awarded to M/s. Montecarlo Limited, having registered office at 7th Floor, Shilp Building, Nr. Municipal Market, C.G. Road, Navrangpura, Ahmedabad - 380009, Gujarat, India. Name of Work: Turnkey Mining Contract involving Overburden/Inter burden removal, Excavation and/or loading of Lignite from mines face and ancillary activities at Lignite project, Mata No Madh. Name of ContractorLOI No.Estimated Cost/ Contract Value Awarded Quantity Contract Period: M/s. Montecarlo Limited: GMDC/LP/13306/13-14 Dated: 15/01/2014: 663.04 Cr. : Over Burden (1109.00) Lac CUM Lignite (148.00) Lac MT : 28.01.2014 to 27.01.2019 The scope of Project is to carry out mining operation on Turnkey basis comprising of removal of over burden, inter burden and lignite and/or loading from mines faces using hydraulic showel and dumper combination and other activities like Mine Planning, Quality control, Drilling, Ripping, Dust suppression, Nala Diversion, preparation of Garland drain, dewatering of Monsoon and seepage water, preparation and monitoring of haul road for better hauling etc. as required to complete the mining process. Quantities Executed (year-wise) by M/s. Montecarlo Limited are shown below: Sr. NoPeriodOver Burden Removal (cum)Lignite Dispatched (MT)Total Work Done Amount (L) 128.01.2014 To 31.03.20141824674.03764791.18335923240 201.04.2014 To 31.03.201513754520.763210961.46135,57,06,36 4.00 301.04.2015 To 31.03.201614566445.221368861.6755,38,02.,253 .00 M/s. Montecarlo Limited successfully carried out Dewatering of Mine. Yearwise details are shown for dewatering by deploying high capacities of Diesel and Electrical operated pump: Sr. No.PeriodDewatering in Lac m3 101.04.2015 To 31.03.201665 This certificate is issued as per their request vide letter no. ML(P)/mn/4190/clt/2016-17/020 date: 18.05.16 for applying tender. 11. On the basis of the said communications, the respondent formed an opinion that the bid of the appellant was technically non-responsive. The reason for arriving at the said conclusion by the respondent was that the appellant did not have necessary experience of drilling for blasting purposes. As the appellant was regarded as technically non-responsive, it invoked the jurisdiction of the High Court challenging the said determination made by the respondent. It was contended before the High Court that the tender documents that contained QR was of the experience of a bidder in only drilling, excavation and hauling, etc. and not blasting or drilling for blasting purposes. It was further urged that the scope of work for Dulanga Mines projects which was taken into consideration by the respondent in evaluating the technical proposal of the petitioner as being non-responsive had been wrongly understood. The stand of NTPC before the High Court was that the assessment by the Technical Committee was absolutely justified and the writ petitioner therein did not meet the QR and, therefore, was treated as non-responsive12. The High Court referred to how tender documents that reflected the nature of mine operations, how blasting is an inherent part and drilling is differently understood in the sense that the appellant had understood. Thereafter, placing reliance on Tata Cellular v. Union of India, (1994) 6 SCC 651   and Michigan Rubber (India) Ltd. v. State of Karnataka and Ors., 2013(1) R.C.R.(Civil) 202 : 2012(5) Recent Apex Judgments (R.A.J.) 528 : (2012) 8 SCC 216 , it came to hold that the decision taken by the owner was correct and did not adversely affect public interest but subserved the public purpose. Being of this view, the High Court dismissed the writ petition. Hence, the present appeal by special leave.

Reasoning:
In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinized by the technical experts and sometimes third party assistance from those unconnected with the owners organization is taken. This ensures objectivity. Bidders expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or malafide or procedure adopted is meant to favour one. The decision making process should clearly show that the said maladies are kept at bay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints