Case: NTPC Limited Vs. Ansaldo Caldaie Boilers India P. Ltd. &amp; Another

2. Following international competitive bidding procedures, the Appellant had invited bids for the supply and installation of Steam Generator package for captive coal-based Thermal Power Projects in different areas. The bid of the Respondent No.1 was rejected by the Appellant by its letter dated 5th January, 2011, as the same did not meet the minimum qualifying requirements set out in the Bid documents. Furthermore, the Qualified Steam Generator Manufacturer, Ansaldo Caldaie, Italy, proposed by the said Respondent, did not have the necessary minimum qualification, as was required in terms of the Bid documents.3. The main issue which arises for consideration in this Appeal is whether Ansaldo Caldaie, Italy, can be said to be a Qualified Steam Generator Manufacturer within the definition set out in the detailed Invitation for Bids. The said invitation for bid contained the qualifying requirement for Bidders in Clause 7 of the Tender Document. Clause 7.1.0 provided that the Bidder should meet the qualifying requirements of any one of the qualifying routes stipulated under Clause 1.1.0 or 1.2.0 or 1.3.0 or 1.4.0 or 1.5.0. In addition, the Bidder was also required to meet the requirements stipulated under Clause 7.6.0 and 7.7.0, together with the requirements stipulated under Section ITB.4. Route 1 permits a Qualified Steam Generator Manufacturer to join the bidding process provided that it should meet the qualifying requirements of any of the qualifying routes indicated in Clause 7 of the tender documents. In Clause 7 of the tender documents, five different routes have been enumerated which could be taken by the tenderers, namelyas a Qualified Steam Generator Manufacturer; or(ii) as an Indian Steam Generator Manufacturer; or(iii) as an Indian subsidiary company of a Qualified Steam Generator Manufacturer; or(iv) as an Indian Joint Venture Company for manufacturing Super Critical Steam Generators in India between an Indian Company and a Qualified Steam Generator Manufacturer; or(v) as an Indian Joint Venture Promoter holding at least 51% stake in a Joint Venture Company for manufacturing Super Critical Steam Generators in India between an Indian Company and a Qualified Steam Generator Manufacturer.Indisputably, none of the parties which responded to the invitation adopted Routes 1 or 3. Bharat Heavy Electricals Ltd. adopted Route 2, while Route 4 found favour with Larsen & Toubro, MHI and the Appellant, while BGR took recourse to Route 5. Route 4 contained in Clause 7.4.0 relates to Indian Joint Venture Companies for manufacturing of Super Critical Steam Generators in India between an Indian Company and a Qualified Steam Generator Manufacturer. For the sake of reference, Clauses 7.4.1 and 7.4.2 which formed part of Route 4 are extracted hereinbelowRoute 4 : Indian Joint Venture (JV) Company for manufacturing of Super Critical Steam Generator in India between an Indian Company and a Qualified Steam Generator Manufac-turer7.4.1 The Bidder shall be a Joint Venture (JV) Company incorporated in India under the Companies Act 1956 of India, as on the date of techno-commercial bid opening, promoted by(i) an Indian Company registered in India under the Companies Act 1956 of India and(ii) a Qualified Steam Generator Manufacturer meeting requirements of clause 7.1.1, created for the purpose of manufacturing in India supercritical steam generator sets covering the type, size and rating specified. If the JV Company is incorporated as a public limited Company then it should have obtained certificate for Commencement of Business in India as on the date of techno-commercial bid opening.The Qualified Steam Generator Manu-facturer shall maintain a minimum equity participation of 26% in the JV Company for a lock-in period of 7 years from the date of incorporation of JV Company or up to the end of defect liability period of the contract whichever is later.One of the promoters shall be a majority stakeholder who shall maintain a minimum equity partici-pation of 51% in the JV Company for a lock in period of 7 years from the date of incorporation of JV Company or up to the end of defect liability period of the contract whichever is later.In the event that the majority stake holder in the JV Company is an entity other than the Qualified Steam Generator Manufacturer, it should be an Indian Company and should have executed, in the last 10 years, large industrial projects on EPC basis (with or without civil works) in the area of power, steel, oil & gas, petrochemical, fertilizer and/or any other process industry with the total value of such projects being Rs.10,000/- million or more. At least one of such projects should have a contract value of Rs.4,000/- million or more. These projects shall be in successful operation for a period of not less than one year as on the date of techno-commercial bid opening.7.4.2 The Bidder shall furnish a DJU executed by him, the Qualified Steam Generator Manufacturer and other JV promoter having 25% or higher equity participation in the JV Company, in which all the executants of DJU shall be jointly and severally liable to the Employer for successful performance of contract as per the format enclosed in the bidding documents. The joint deed of undertaking shall be submitted along with techno-commercial bid, failing which the Bidder shall be disqualified and his bid shall be rejected.In case of award, each promoter having 25% or higher equity participation in the JV Company will be required to furnish an on demand bank guarantee for an amount of 0.5% of the total contract price of the Steam Generator Package in addition to the contract performance security to be furnished by the Bidder.As mentioned hereinbefore, the bid filed by the Respondent No.1 was rejected by the Appellant by its letter dated 5th January, 2011, as the same did not fulfil the qualifying requirements of Route 4, extracted hereinabove.

Court's reasoning:
25. From the terms and conditions contained in the MOU, it appears to us that it was the intention of the Appellant that the Qualified Steam Generator Manufacturer would have to be the manufacturer of the evaporator itself and could not have outsourced the manufacture thereof to a third party, since the evaporator controlling the pressure of the Steam generated is a vital and crucial component of the Steam Generator itself. The Appellant, which will be the ultimate user of the Generator, must be presumed to be conscious of the competence of the tenderer to "provide" the evaporator in keeping with the requiredare unable to uphold the decision of the Division Bench of the Delhi High Court quashing the letter dated 5th January, 2011, issued by the Appellant herein, informing the Respondent No.1 that its Techno-commercial Bid had been rejected on the ground that it did not meet the minimum requirement set forth in item No.4 of Section III of the Tender Documents. The High Court while interpreting the provisions of Clause 7.1.1 of the Tender Documents was influenced by the use of the phrase "manufactured/got manufactured" while considering the fact that although, Ansaldo Caldaie, Italy, was being projected as the Qualified Steam Generator Manufacturer, Siemens A.G. was shown as the technology owner/licensor of the evaporator which was offered by the Respondent No.1. In other words, the evaporator being offered by the Respondent No.1 was one which had been manufactured not by the Qualified Steam Generator Manufacturer, but by a third party, which was not contemplated in the aforesaid condition of the Tender Documents.27. The importance of the above condition is manifested in the functioning of the Steam Generator which handles High Pressure Steam for the purpose of turning the turbines for generating electricity. The design and engineering of the evaporator and the boiler itself has to be such as to withstand the very high temperatures and pressures generated. The importance of the variable pressure operations is of great importance as far as generation and wastage of energy is concerned. The importance of the evaporator in controlling pressure during operations is to automatically regulate the flow of water, generation of pressure and temperature of the steam to the desired