Case: M/s. CRRC Corporation Ltd Vs. Metro Link Express for Gandhinagar &amp; Ahmedabad (Mega) Company Ltd

3. The pleaded facts though encompass various facets, those having a direct bearing on the issue raised, only would be alluded to.4. Thehas introduced itself to be an amalgam of M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd., both claimed to be the worlds largest and oldest suppliers of rail transport equipments with most complete product lines and leading technologies with their business activities enfolding R&D design, manufacture, repair, sale, lease and technical services for railway rolling stock, EMUs, metro coaches, urban rail transit vehicles, engineering machinery, consulting services etc. along with several subsidiaries under their full control. On 09.03.2015, these two entities namely; M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd. got merged after securing the approval of the concerned state authorities, as a result whereof, all assets of these two integrant corporations, together with liabilities, businesses, qualifications, staff, contracts along with all rights and obligations stood transferred to thew.e.f. 01.06.2015. Following such assimilation, thewas, as a joint stock limited company incorporated in the Peoples Republic of China with limited liability and owned and controlled by the Chinese Central Government. As a consequence of such merger, the subsidiaries of M/s CSR. Corporation Ltd. and M/s CNR. Corporation Ltd., became the subsidiaries of theand their names were changed as well. According to the appellant, thereafter it successfully participated and was awarded various international contracts, based on the experience of its subsidiary companies.5. On 15.01.2016, the respondent company (hereinafter to be referred to also as "MEGA") invited tenders/bids for the project "Design, manufacture, supply, installation, testing, commissioning of 96 nos. of standard gauge cars and training of personnel" and organized ameeting, amongst others on 12.03.2016 inviting all prospective bidders. The last date for submission of the bids was eventually fixed on 25.05.2016.6. As per the tender conditions, the offer was to be made in three envelopes, to be submitted simultaneously, as hereunder:(i) First Envelope calledn Requirement Bid".(ii) Second Envelope"Technical Bid"(iii) Third Envelope"Price Bid"7. In response to the notice inviting tender, the appellant and three others namely; (i) Consortium of Bombardier Transportation India Pvt. Ltd. & Bombardier Transportation GmbH; (ii) M/s. Hyundai Rotem Company (HRC) and (iii) Consortium of Alstom Transport India Ltd., & A1stom Transport SA, offered their bids by the date fixed.8. As per the tender prescriptions, an affirmative determination of the eligibility and qualification criteria, on the basis of the particulars furnished in the first envelope was to be thefor the opening of the envelopes containing the "technical bids" and the "price bids" in that order applying the same test. Prior thereto,meetings were held, as referred to hereinabove, in which representatives of various participating bidders attended and submitted their queries for clarifications as per clause No.7 of Instructions to Bidders, which were accordingly deliberated upon. Clarifications, as sought for, were furnished accordingly. The appellant has averred that it did submit the envelopes, as required, containing all essential documents/certificates, as mandated fulfilling, amongst others, the requirements of the General/Specific Experiences. On 25.05.2016, as scheduled, the envelopes containing the "InitialRequirement Bid" of the four bidders were opened and thereafter on 09.06.2016, the respondent raised 16 queries and required the appellant to submit its response thereto.9. The queries, amongst others, related to the norm of experience as contained in clause 2.4 of Section III of the Tender Documents. It is inessential to detail the queries and the replies offered by the appellant, having regard to the focused contentions raised before us, as would be referred to shortly hereinafter. Suffice it to state, as claimed by the appellant, it did adequately and completely answer the queries and supplemented the same with contemporaneous records.10. It was thereafter that the appellant came to learn that the respondent on 15.10.2016 had rejected its "InitialRequirement Bid" and thus had disqualified it for further participation in the tender process. The appellant thereafter unsuccessfully pleaded with the respondent corporation by filing various representations and requests and the same having failed to evoke any affirmative response, sought refuge of the legal process. Prior thereto, it was served as well with a caveat application filed by the respondent in the High Court mentioning about its disqualification following the rejection of its "InitialRequirement Bid" .11. Theapart from raising preliminary objection to the maintainability of the writ petition filed by the appellant, pleadingof necessary parties, i.e. the surviving tenderers in the fray, asserted that the project was financed through budgetary resources of State of Gujarat, Government of India and Japan InternationalAgency (for short hereinafter to be referred to as "JICA"). It also mentioned that through international competitive Bidding, the General Engineering Consultant, which is a consortium of four renowned companies, had been appointed to provide independent expert professional advice regarding the preparation of tender documents, evaluation of tender offers etc. for works related to the Ahmadabad Metro Rail ProjectPhase I, i.e. the project in hand. While generally admitting the facts pertaining to the issuance of the notice inviting tender on 15.01.2016 and the participation of the four bidders including the appellant, MEGA, however, categorically asserted that in course of themeetings, it was clarified in response to a pointed query, that the experience of subsidiary companies/group companies will not be taken into account in any case and that if the parties are desirous of such experience being counted, the subsidiary companies/group companies would have to form a Joint Venture (hereafter referred to also as "JV") or a Consortium.12. According to it, the first envelope containing the "InitialRequirement Bid" of the participating bidders were opened in presence of their representatives and on the next date, those were forwarded to the General Engineering Consultant (for short, hereinafter referred to as "GEC") for evaluation thereof and submission of report in connection therewith. The GEC, in turn, vide its letter dated 09.06.2016 submitted its interim report recommending that further clarifications be sought for from the respective bidders, on the points as outlined therein. It was thereafter that the respondent forwarded 16 queries to the appellant inter alia on the aspect of experience, as contemplated in clause 2.4 of the Evaluation and Qualification Criteria of the tender documents.13. It is the stand of the MEGA that the appellant, instead of furnishing the clarifications as sought for, submitted additional details, thereby virtually revising its original offer and further endeavoured to make up the deficiency in its experience, as prescribed, by falling back on the experience of its so called subsidiary companies. According to MEGA, as the subsidiary companies of the appellant, retained their independent existence as separate legal entities, their experience, in terms of the relevant tender norms, could not be counted to be that of the appellant as it (appellant) did submit its offer as a single entity and neither as a joint venture nor as a consortium with its subsidiary companies. Though in its reply, the MEGA also expressed its reservation with regard to the appellants stand alone financial credentials, it is unnecessary to refer thereto, as the same did not figure in course of the rival exchanges in the appeal.14. The GEC, according to the MEGA, after scrutinizing the bid documents together with the clarificationsbefore it, opined that the appellant was found to beto the requirements of clauses 2.3 and 2.4 of Section III relating to "Evaluation and Qualification Criteria" of the "Tender Document". It would be sufficient for the present purpose to extract the relevant excerpt of the findings of the GECclauses 2.4.1 and 2.4.2 for immediateEligibility and Qualification Criterion of Tender Document in questionGist of Finding arrived at by GEC..........2.4.1.....................General ExperienceExperience in the role of prime contractor(single entity or JV member), Subcontractor, or management contractor for at least last ten (10) years starting 1st January, 2006........................................CRRC does not meet this criterion. Since the Parent Company cannot claim experience of its Subsidiary Company even if it has 100% ownership as long as a company is a separate legal entity. CRRC has submitted its offer as a sole Bidder. It has also not submitted any intent of forming a joint venture/consortium with its Subsidiary Company, supported by a letter of intent in terms of ITB para 4.1.As permeeting clarification issued to all bidders The subsidiary company/group company may bid together with the parent company as a DV/consortium member for parents/group company experience to be taken into account.2.4.2(a)Specific ExperienceA minimum number of two (2) similar contracts that have been satisfactorily and substantially completed as a prime contractor considered in favour considered of CRRC (single entity or JV member) between 1st January, 2006 and the Bid submission deadline.CRRC does not meet this criterion, since the execution/completion of any contract by its Subsidiary companies cannot be considered in favour of CRRC.This report dated 28.07.2016 of the GEC was thereafter forwarded to JICA for its concurrence and the latter gave its "no objection" and instructed MEGA to proceed with the technical evaluation of the bids of the remaining bidders and to finalize the process early.16. Accordingly, the remaining three bidders were declared to be qualified at the stage of "InitialRequirement Bid" by discarding the appellant, as it failed to fulfill the requirements contemplated in clause 2.3 "Financial Situation" and clause 2.4 "Experience" of Section III of the "Evaluation and Qualification Criteria" of the "Tender Document".17. According to MEGA, the appellant was intimated of its disqualification by letter dated 02.11.2016. It has maintained that the impugned action is strictly in accordance with the tender norms and being objective and transparent, is unassailable.18. Referring to clause 4.1 of Section I of the "Tender Document", the appellant, in reiteration, pleaded that the clarification referred to by MEGA excluding the experience of the subsidiary/group companies from being accounted for in absence of a joint venture or consortium was in respect of a query in a totally different context and was wholly inapplicable to its bid. According to the appellant, the query was raised by a subsidiary company before the respondent as to whether it could avail the experience of its parent/group company and in response thereto, it was explained that if a subsidiary company did wish to use the experience of the parent company, the parent company or the group company should form with it a Consortium or a JV, as the case may be. The appellant thus insisted that it having submitted its bid, as a single entity being the holding company of its subsidiaries and had claimed the experience of its fully owned subsidiaries, the clarification relied upon by the GEC and acted upon by MEGA to oust it (appellant) from the process as disqualified, was patently flawed. It further stood by its responses to the queries made, contending that those adequately did answer the same and demonstrate that its bid was fully compliant of the essential tender conditions.19. The High Court on an analysis of clause 2.4 of the "Evaluation and Qualification Criteria" contained in Section III of the "Tender Documents", in the backdrop of the rival orientations founded on the pleaded facts and the documents in support thereof, held that while a holding company may control its subsidiary companies, which may have the requisite experience, as the subsidiary companies would not be required to execute the work, the holding company cannot avail the benefit of their experience. It was of the view that since the subsidiaries have an identity separate from the holding company, they ipso facto, by virtue of they being subsidiaries of the holding company, do not become a party to the contract and are in no manner liable to the employer for the execution thereof. It distinguished the contingency, where a J.V. or a Consortium of different companies/ persons is formed, each constituent whereof would be liable for execution of the contract. It was of the estimate that in such a formation of a J.V. or a Consortium, the benefit of experience of the constituent companies would be available to the J.V. or a Consortium and not otherwise. In essence, it thus held that theon a stand alone basis, did not possess the requisite experience, as laid down in the tender conditions and that it was not permissible for it to avail the experience of its subsidiaries to make up such deficiency. As a community of interest in the performance of the work between the appellant and its subsidiary companies, was absent, the impugned action of disqualifying it for lack of experience in terms of clause 2.4 of the "Evaluation and Qualification of Criteria" could not thus be faulted.

Court's reasoning:
34. A plain reading of clause 4.1 reveals that a bidder can be a single entity or a combination of such entities in the form of a J.V. or a Consortium under an existing agreement or with the intent to enter into such an agreement supported by a letter of intent. Thus a single entity has been construed to be a valid bidder for all intents and purposes.35. Having regard to the magnitude of the project as well as the experience and expertise essential for the quality execution thereof, there seems to be no justification to infer, at the first place, to exclude a government owned entity with its 100% wholly owned subsidiaries to be ineligible to participate in the process. A single entity, in our comprehension, would assuredly include such a government owned entity along with its 100% wholly owned subsidiaries. This is more so on the touchstone of otherwise imperative facilitation of a broad based participation of entities with competing worth and capabilities, in the overall interest of the timely and quality execution of a public project.36. As recorded in Consortium of Titagarh Firema Adler SPA (supra), theis a government owned entity with 100% wholly owned subsidiaries as a composite unit, so much so that the experience of any one of its constituent 100% wholly owned subsidiaries would be construable as its experience. It was proclaimed that the petitioner (respondent no.2 therein) was a Government Company and the owner of its subsidiary companies and that the concept of "government own entity" could not be given a narrow construction so as to exclude its subsidiaries with their experience and that there was no necessity for the formation of a joint venture and consortium for the Government own entity to avail the benefit of the experience of its subsidiary companies. That the acceptance of the petitioner (respondent no.2) therein in the context of the work awarded to it was in accord with public interest, having regard to the overall commercial concept and the demand of expertise, was underlined as well. Noticeably, the process of merger of M/s. CNR Corporation and M/s. CSR Corporation and the integration thereof along with their subsidiaries to metamorphosise into theis borne out by the coeval records.37. In that view of the matter, the status and the entitlements of theas already adjudicated in Consortium of Titagarh Firema Adler SPA (supra), as a single entity bidder in the present tender process would also by the yardstick of simple logic and analogy be available to it. Absence of the words "government owned entity" in clause 4.1, presently under consideration, is of no consequence. The plea of the respondent that the tender conditions involved demand a different perspective in the overall conceptual framework thereof, lacks persuasion. Significantly, in clause 4.1 involved in Consortium of Titagarh Firema Adler SPA (supra), "government owned entity" had been contemplated as one of the bidders in contradistinction to "private entity" and "any combination of such entities" in the form of a joint venture (J.V)..... The expression used in the present clause being "single entity", understandably, it is inclusive of a private as well as a government owned entity. The unit envisaged as a single entity is thus independent of any combination or formation in the form of a J.V. or a Consortium and thus is visualised to be one integral and composite whole. In such a logical premise, a government owned company with its 100% wholly owned subsidiaries has to be comprehended as a single entity, eligible to bid in terms of clause 4.1 of the tender conditions and is to be regarded as single, coherent and homogeneous existence and not a disjointed formation.38. The queries and the clarifications, relatable to the discord, as presented, also in our discernment, do not substantiate the plea of MEGA in any manner whatsoever. The foundation of its rejection of the appellants bid is the clarification to the query mainly at serial No. 50. It is patent therefrom that it was in response to a query made by a subsidiary company to allow for its benefit, the experience of the parent company/group companies to meet the qualification requirement with regard thereto. It was in that context that the clarification furnished was that the subsidiary company/group companies may bid together with the parent company as J.V./Consortium member, for parent/group companys experience to be taken into account. This clarification was extended and appliedthe appellant qua clauses Nos. 2.4.1, 2.4.2(a), 2.4.2(b) and 2.4.2.(c) to disqualify it on the ground that on stand alone basis, it was deficient in the experience prescribed and that it could not have availed of the experience of its subsidiaries companies. As rightly contended on behalf of the appellant, we are of the view that this clarification has no application to its case and, therefore, the decision to disqualify it on this ground is apparently arbitrary, discriminatory, unreasonable, illogical andthus rendering the same irreversibly illegal, unjust and unfair. The improvement endeavoured by the respondent in its reply affidavit is belied by the records and is unacceptable. No other view or elucidation of the relevant clauses of the tender conditions is at all possible. The interpretation offered by the respondent and endorsed by the High Court in the contextual framework is thus patently impermissible and absurd.39. Not only the appellant as the record testifies had offered its responses to the clarifications sought for, its status as a government owned corporation, by no means, has been disputed by MEGA. Further, in the face of its demonstrated structural integrity and functional unity qua its subsidiaries with all consequential legal implications, the apprehension of MEGA that the subsidiary companies of the appellant, if necessity so arises, would not be available for the execution of the project, not being a party to the contract, to say the least, is speculative, unfounded, farfetched and wanting in reason and rationale. Whether the subsidiary companies of the appellant would be responsible for the execution of the work is evinced by the formational specifics and functional dynamics of the appellant and its wholly owned subsidiary companies, as noticed in Consortium of Titagarh Firema Adler SPA (supra) in the affirmative and does not call for further dilation. In the face of a forensic analysis of the decisions cited at the Bar in the above adjudication, it is inessential as well to retraverse the same.40. In the wake up of above determination, the impugned disqualification of the appellant on the ground of deficiency, in experience in terms of clause 2.4, is unsustainable in law and on facts being grossly illegal, arbitrary and perverse. As a corollary, the judgment and order of the High Court in challenge is alsoThe tender process in view of the above conclusion, would be furthered hereinafter as per the terms and conditions thereof and in accordance with law and taken to its logical end as expeditiously as possible. We make it clear that the present adjudication is confined only to the issue of disqualification of the appellant on the ground of experience on the touchstone of clause 2.4 of the "Eligibility and Qualification Criteria" of "Tender Document" and no other aspect.