State Of Kerala vs M/S Zoom Developers P.Ltd.& Ors

3. Government of Kerala (GoK) vide G.O. No. 9/07/F&PD dated 9.3.2007 decided to invite bids for the Development of International Deepwater Seaport and Container Transshipment Terminal at Vizhinjam under Public-Private Partnership. Vide G.O. dated 15.6.2007 GoK decided on the key provisions in the Request For Proposal ("RFP" for short) documents for the bidding of the above Project. A competitive bid process was thus initiated by M/s Vizhinjam International Seaport Ltd. ("VSL" for short). VSL was the Sponsor. IL & FS Infrastructure Development Corporation ("IDC" for short) was the Project Advisor. Accordingly, on 8.8.2007, Press Notification was issued by M/s VSL inviting RFP for the development of the Project. On 23.1.2008 a Bid Opening Committee was constituted vide G.O. of the same date. Thirty-three firms obtained the RFP documents. Vide G.O. dated 19.2.2008, Bid Evaluation Committee headed by the Chief Secretary was also constituted to Evaluate the Bid Proposals. Ultimately, bids were received from the following five Consortia by 31.1.2008 (which was the last date stipulated for receiving the Bids), they were:

4. The bidders were required to submit their proposals in four covers, namely, the Outer Cover (containing details of the bidder, power of attorney in favour of the lead member, consortium agreement entered amongst the members of the consortium, legal opinion, security of Rs. 50 million in the form of bank guarantee etc.), Cover-1 (Statement of Qualification), Cover-2 (Technical Proposal) and Cover-3 (Financial Proposal). In this case, evaluation was done in three stages. In the first stage, there was evaluation of Outer Cover and Cover-1 to check the admissibility of bids and evaluation of qualifications as stipulated in the RFP. It may be noted that evaluation of the Technical Proposal had to be done only of those bidders who met the "Qualification Criteria" (vide second stage). The third stage contemplated evaluation of the Technical Proposal. As stated above, only five bids were received. These bids (Outer Cover and Cover-1) were opened on 31.1.2008 by the Bid Opening Committee. The said firms were found to have satisfied prima facie the requisite requirements. The bids were accepted by the Bid Opening Committee for further scrutiny. The bids submitted were considered at the meeting of the EC on 25.2.2008. In the said meeting it was observed that, with regard to the bid submitted by the consortium led by M/s Zoom Developers Pvt. Ltd. ("ZDL" for short), the Power of Attorney and the Consortium Agreement were unstamped and they needed to be stamped. It was further pointed out by the EC that the lead member in terms of the RFP, namely, M/s ZDL was required to hold a minimum equity of 26% in the Special Purpose Company ("SPC" for short), which has not been expressly mentioned in the Consortium Agreement. The EC further pointed out to M/s ZDL that one of the consortium member, namely, M/s Portia Management Services Ltd. ("PMS" for short) had signed the consortium agreement on behalf of Peel Ports Ltd. ("PPL" for short) but M/s PPL is not a member of the consortium. Additional information regarding the financials of M/s PMS (on its own) and of M/s ZDL were also called for. On 25.2.2008, accordingly the EC granted ten days time to remove the above defects. M/s ZDL sought extension of time. Ultimately, time was extended up to 4.4.2008. In short, meetings of the EC took place on 25.2.2008, 13.3.2008, 8.4.2008 and 6.5.2008. By 2.4.2008, M/s ZDL submitted all the relevant documents duly updated. It may be noted that M/s Universal Legal, Bangalore, were appointed as Legal Advisor of the Project by the EC.

5. As stated above, on 2.4.2008 M/s ZDL submitted their modified documents. On 4.4.2008 the said M/s Universal Legal furnished their opinion that the Consortium Agreement submitted by the Consortium led by M/s ZDL had complied with the requirements of the RFP and that they had removed all defects pointed out to them by the EC and accordingly the EC may consider their Bid Proposals. However, in the third meeting held on 8.4.2008, the EC after having considered the documents submitted by the Consortium led by M/s ZDL came to the conclusion that in the modified consortium agreement dated 11.3.2008, M/s PMS has signed the consortium agreement on its own whereas in its original consortium agreement dated 4.10.2007, M/s PMS has signed the consortium agreement on behalf of M/s PPL. Accordingly, the opinion of the Law Secretary (Invitee to the Meeting) was sought. The Law Secretary opined that the modified consortium agreement dated 11.3.2008 cannot be treated as a part of the Original Proposal as the modified consortium agreement stood entered into by a new member, namely, M/s PMS, without the authorization of M/s PPL. According to the Law Secretary, there was one more defect. There was no provision in the modified consortium agreement to the effect that the consortium members shall be jointly and severally liable for the execution of the Project and that the only expression used was joint and several "responsibility", which, according to the Law Secretary, was a concept different from joint and several "liability". This opinion of the Law Secretary was placed before the EC in its meeting held on 6.5.2008 in which meeting the EC concluded that the Bid submitted by the consortium led by M/s ZDL was "non-responsive"/"non- admissible" in terms of the RFP. Accordingly on 24.5.2008, GoK issued Government Order approving the proposal given by Lanco Kondapalli Power Pvt. Ltd., Hyderabad (hereinafter referred to as "Lanco led Consortium"). Thus, the Bid Proposal of the consortium led by M/s ZDL came to be rejected.

14. As per the scheme of RFP, at the stage of Submission of Proposals, the bidders were required to furnish the names of the Lead Member and other members of the consortium. In this case, one of the members of the consortium was M/s PMS. While furnishing "Details of Bidders", the name of the consortium member was shown as PMS. Similarly, against the column "Brief Description of the Company", the name of M/s PMS was mentioned as the international arm of M/s PPL. Therefore, at the stage of Submission of Proposals, M/s ZDL had stated that M/s PMS was the member of its Consortium. There was one more column which was required to be filled-in by the bidders, namely, "Ownership of the Organisation". In this column, M/s ZDL indicated that M/s PMS was a consortium member which was the wholly subsidiary company of M/s PPL, UK. It may be noted that, under the Scheme of RFP, the bidders had to offer a firm commitment to form SPC to implement and operate the above Project in Kerala, should the Sponsor (M/s VSL) select one of the five bidders as Licensee. Therefore, the Proposal had to be made in a prescribed format. On reading the said Proposal, therefore, it becomes clear that on the date, namely, 31.1.2008, being the cut-off date (when the bids were opened), M/s PMS was the member-constituent of the consortium led by M/s ZDL. At this stage, one must keep in mind that Section 212 of the Companies Act, 1956 which makes it obligatory on behalf of the holding company to annex to its Balance Sheet the Balance Sheet and P&L account and other financial particulars of its subsidiary. Section 212 requires the legal relationship of holding company and subsidiary company to be disclosed to all its members. In the world of globalization, we have consortium agreements/ joint venture agreements. It appears from the particulars given by the consortium led by M/s ZDL that M/s PMS is a part of an international group of companies headed by M/s PPL, UK. The prescribed Form warranted Disclosure giving particulars of the consortium members. The particulars furnished indicate that the Lead Member was M/s ZDL. It is an Indian company. One of the consortium member was M/s PMS, which is incorporated in UK. It is the 100% subsidiary of M/s PPL, UK. This information also became necessary because the format required the Bidder to disclose "Ownership" of the member- company. Therefore, if one reads the Proposal of the Lead Member, M/s ZDL, in the form prescribed, which Proposal was of 31.1.2008, one finds that M/s PMS alone on its own was indicated as a member of the consortium and M/s PPL was not shown as the member of the consortium. However, the original consortium/joint venture agreement dated 4.10.2007 signed by the member-constituent of the consortium led by M/s ZDL stood signed by M/s PMS on behalf of M/s PPL, UK. Therefore, on 3.3.2008, IDC (Project Advisor) wrote to M/s ZDL inter alia pointing out the defect in the consortium agreement dated 4.10.2007 in the following words:

Thus, the Project Advisor treated the above irregularity in the execution of the consortium agreement dated 4.10.2007 as a curable defect for which time was given to M/s ZDL up to 4.4.2008. Further, the Project Advisor clearly understood the Proposal to have had been given by M/s ZDL as the Lead Member of the Consortium, whose constituent inter alia included M/s PMS and not M/s PPL. By the said letter, the Project Advisor also called for Annual Reports of three financial year of M/s ZDL and Annual Reports of last 3 years of M/s PMS (its own). This query indicates that the Project Advisor not only treated the above irregularity in the execution of the consortium agreement dated 4.10.2007 as the curable defect but it further shows that even, according to the Project Advisor, M/s PMS alone was the constituent member of the consortium led by M/s ZDL and it is for this reason that the Project Advisor called for the annual reports of M/s PMS (its own). This defect was cured by M/s PMS within the extended period. It is interesting to note that the question of "authorization" by M/s PPL,UK, was not raised by the Project Advisor in its letter dated 3.3.2008. That aspect was raised only by the Law Secretary who came to be Invited as a special invitee by the Chief Secretary in the meetings of the EC held on 8.4.2008 and 6.5.2008 (which is after the extended date 4.4.2008). It is not in dispute that M/s PPL, UK is the holding company of M/s PMS. M/s PMS is a subsidiary company. It is the separate legal entity. We are satisfied that at the stage of Submission of Proposal itself and right from the inception, it was M/s PMS, who alone was the constituent member of the consortium. The question of authorization raised by the Law Secretary, in his opinion, is clearly an afterthought. In fact, there is a contradiction in his opinion. If M/s PPL was the member of the consortium, as construed by the Law Secretary, there was no need for M/s PPL to authorize M/s PMS to execute the consortium agreement. On the other hand, if M/s PMS being the separate legal entity was a member of the consortium it had to sign the consortium agreement in its own capacity. The modified consortium agreement dated 11.3.2008 is supported by a Resolution. The said consortium agreement is in line with the Proposal submitted on 31.1.2008.

16. For the above reasons we hold that there was no change in the membership of the Consortium led by M/s ZDL.

Findings on Point No. (B):

22. For the aforestated reasons, we find no infirmity in the impugned judgment of the Division Bench of the Kerala High Court which has given a declaration to the effect that the Outer Cover and Cover-1 submitted by the consortium led by M/s ZDL is admissible/responsive in terms of RFP. Consequently, we declare that the Technical and Financial Proposals submitted by the said Consortium (respondent no. 1) are liable to be considered within 15 days from the date of this judgment.

23. Accordingly, the civil appeals stand dismissed with no order as to costs.