Case: Shapoorji Pallonji &amp; Company Limited &amp; Another Vs. Maharashtra State Power Generation Company Limited &amp; Another

2. Respondent No.1 is a wholly owned Government of Maharashtra Company and is engaged in the business of generation of power in the State of Maharashtra. Respondent No.1 issued notice of tender for Balance of Plant Package on EPC basis for Chandrapur T.P.S. Expansion Project 2 x 500 MW at Chandrapur, Dist: Chandrapur, Maharashtra. The scope of the work involved was design, engineering, manufacture, assembly, testing work, inspection at works, transportation including insurance, supply, receipt and handling at site, civil and structural works, erection, testing and commissioning of Balance of Plant Package along with supply of mandatory spares for the said expansion project. Tender notice was governed by the Commercial and General Conditions of Contract which was separately made available to all tenderers along with it. The tender documents were put to sell between 17th November, 2008 to 6th December, 2008 and last date for submission thereof and opening of Cover No.1 was 20th January, 2009.Petitioner No.1 is a company incorporated under the provisions of the Companies Act and is engaged in the business for which the tenders have been invited. The PetitionerCompany submitted its tender documents on 14th May, 2009 and on that day itself Cover No.1 submitted by the bidders including that of the Petitioners, were opened and the same were scrutinized in accordance with the General Conditions of Contract particularly Clause 26. On 21st May, 2009 the Petitioner Company were called upon to furnish audited financial reports for preceding 3 years in respect of its two consortium partners /members M/s. Paharpur Cooling Towers Ltd. and M/s. Flowmore Pvt. Ltd., New Delhi. These documents were submitted by theon the same day i.e. 21st May, 2009. According to the Petitioner No.1, it submitted its acceptance to clarifications on Assumptions and Clarifications observed by the Respondents on 4th June, 2009. On 6th June, 2009, the Respondent faxed a letter to the Petitioner Company requiring it to depute its representative to collect unopened Price Bid in Cover No.2 submitted by the Petitioner Company along with bid proposal on or before 10th June, 2009. The Petitioner Company, through its Advocates, served a letter upon the Respondent inter alia while referring to Clause 29.4 of the General Conditions of the tender document stated that out of the seven bidders the Respondents had treated four bidders including the Petitioner Company asand had opened the Price Bids in Cover No.2 of three bidders. It is at this stage that thefiled the present Writ Petition challenging the correctness of issuance of letter, by Fax, dated 6th June, 2009 by which thewas called upon to collect their Price Bid. The Fax letter dated 6th June, 2009 reads asSTATE POWER GENERATION CO.ate 6 June 2009Fax/Courier0226623or Building, 1st Floor,Ramjibhai Kamani Marg,Ballard Estate, Mumbai400 038.Attn: Shri S.C. Dixit, Director (Operations)Design: Design, Engineering, Manufacture, Assembly, Testing at Works, Civil and Structural Works, Erection, TestingCommissioning of Balance of Plant Package on EPC Contract basis for Chandrapur TPS Expn. Project 2x500Your Bid Proposal No. P9505 dtd.t is requested to depute your representative to collect unopened Price Bid in Cover No. Two submitted along with your Bid Proposal referred at (2) above on or before 10.06.2009 from this office.ThankingC. s.w.r.to. According to thethe above impugned letter dated 6th June, 2009 is liable to be quashed and the Respondents need to be directed by an appropriate writ to consider its Price Bid as per the terms and conditions of the tender document. The letter had been issued arbitrarily without assigning any reasons. The impugned letter suffers from infirmity. It is also in violation of the principles of natural justice inasmuch as no opportunity or show cause notice was given to thebefore rejecting its Price Bid. While referring to the judgment of the Supreme Court in the Tata Cellular v. Union of India, (1994)6 SCC 651  , it was contended that though the Government or its instrumentalities have freedom of contract but such a freedom is to be regulated by the principles of fair play and the decision must not only be tested by application of principle of reasonableness but must be free from arbitrariness and not affected by any bias or inequity or actuated by mala fides. Since the order suffers from these infirmities, the Court has to exercise its power of judicial review to interfere.The Respondents, upon notice, had filed reply affidavit. With the consent of the Counsel appearing for the parties and keeping in view the urgency in the matter, the same is taken up for hearing and final disposal at the admission stage itself.Beside this, after hearing the arguments for some time, the Court vide its order dated 17th June, 2009 had directed the Respondents to produce the records in Court as well as examine the Bids comparatively with the financial bid of theThe said order reads asIn this case, we had heard the arguments for some time. Thereafter we had directed the Respondents to produce the record in Court. The original record was produced. When the case was called out again, for the reasons best known to the officers of both the Respondents, the original papers were not produced. The case was again passed on and the Respondents were directed to produce the record in Court. Now the records have been produced.The bid has been opened. The learned Counsel appearing for the said Respondents have also given us the figures given by the three parties whose technical bid was found to be in order by them.We may notice that this we have done only for the purpose of finding out certain facts and without prejudice to the rights and contentions of the parties that the financial bid of the Petitioners could even be considered or not.4. Stand over to 18th June, 2009.The above order was made primarily with an intention to know that if the financial Bid of thewas not the lowest the entire matter then would be academic and need not be examined by the Court. However, when the Bids were opened, the counsel appearing for the Respondents also filed the Price ScheduleThe financial bid submitted by the Petitioner Company appeared to be much lower to that of the other Bidders. The Petitioners Bid appeared to be Rs.1522,59,42,428 ( price without taxes) while the other lowest Bid of M/s. BGR Energy System Ltd., Chennai is Rs.1599.45 crores. It is in these circumstances that we have heard the parties further on merits of the case.As already noticed, the reply affidavit filed on behalf of the Respondents particularly Respondent No.1 stated that technical bid of thewas found to bewith that of four other Bidders and therefore, the question of opening the Financial Bid of thedid not arise. It was for this reason as per tender conditions the Respondent No.1 issued the letter dated 6th June, 2009. It must be noticed that though in the letter impugned before us the reasoning was not given but in thefiled on behalf of Respondent No.1 reasons have been given which, according to it, are based on record. The technical/financial bid of thewas found to befor three reasons. Firstly, there was violation of Clause 9.4 of Section 1 of the Instructions to Bidders inasmuch as one of the consortium partners of the Petitioners viz. M/s. Paharpur Cooling Tower Ltd., Kolkata, was also consortium partner of another Applicant Bidder M/s. Thyseen Krup Industries India Pvt. Ltd., Pune. Thus, 2 Bids were submitted by the Applicant which was not permissible. Secondly, the Petitioners did not meet the requirement of experience of completing water system in terms of Clauses 4.1 and 4.2 as they i.e. the consortium partners, had executed work for only one River Water Pump along with bypass piping for Augmentation work of Koradi TPS in March, 2003 and all Koradi Units were commissioned before 1987. Thus, M/s. Flowmore Pvt. Ltd., New Delhi, and M/s. Indure Pvt. Ltd., New Delhi had not jointly carried out the complete work of water system as stipulated by clause 4.1(b). Similarly, in terms of Clause 4.1, the Bidder should have executed contracts on Engineering, Procurement and Construction (EPC) basis for at least one no coal based/lignite based/ gas based combined cycle power plant of installed capacity not less than 100 MW which had been commissioned during the last 12 years in India and had been in successful operation of a period of not less than one year as on the date of Bid opening. The scope of work of such reference plant should have necessarily included Engineering Supply, Installation (with all associated Mechanical, Electrical, CivilStructural Works ), Testing and Commissioning on Turnkey basis of either Main Power Plant Equipment (BoilerGenerator or Gas TurbineSTG) with all associated integral basis of either OR Coal/Lignite Handling Plant, Ash Handling Plant, Cooling Tower and Water System (Raw Water / DM Plant/Circulating Water System/ Auxiliary Cooling Water System) of a coal/lignite based Power Plant.To this, rejoinder has been filed by the Petitioner Company which has denied the ground that the Petitioners bid wasand has given certain details showing that it had adequate experience. It was also contended on its behalf that various letters were exchanged between the parties before opening of Price Bid and at no point of time, the above defects were pointed out by the Respondents, as the Respondents did not raise any objection during that period. No doubt certain letters including the letters dated 21st May, 2009, 30th May, 2009 and 4th June, 2009 were exchanged between the parties. These letters as already noticed, the Respondents had asked for audited financial report for the preceding 3 years in respect of consortium partner of the Petitioners M/s.Parharpur Cooling Tower Pvt. Ltd., Kolkata, and M/s. Flowmore Pvt. Ltd., New Delhi, which was submitted by the Petitioners and subsequently on the examination of those documents and other material, later on, it was found by the Respondents that the Petitioner Company had committed breach of Clause No.9.4 and 4.1.(b) respectively, which resulted in issuance of letter, by fax, dated 6th June, 2009. In our view, mere fact that some letters were written by the Respondents would in no way amount to treating it as a bar against the Respondents from rejecting the Bid at a subsequent stage. It cannot be disputed that the Bids were being examined and process of examination was on. It is only on 6th June, 2009 that it was noticed by the concerned Authorities and the same was acted upon.Scope of judicial review in relation to technical matters is very limited one. The Court cannot sit as an Appellate Expert Body and find out whether there is breach of any terms or conditions relating to experience and as to whether the same have been satisfied or not, particularly when it relates to

Court's reasoning:
12. We have to therefore examine the present case in light of the above principle. The Petitioners in the present case had submitted that the Court should interfere with the tender process on the ground that the Respondents have acted arbitrarily and in any case the breaches or non compliance stated to be not in conformity with the terms of contract are of such a meager nature that they can safely be overlooked even in accordance with law. Reliance has been placed by the learned counsel appearing for the Petitioners on the judgment of the Supreme Court in the case of Poddar Steel Corporation v. Ganesh Engineering WorksOrs., (1991)3 SCC 273  , where the Court held that minor technical irregularity can be waived like requirement of depositing earnest money with the tender either in cash or by demand draft drawn on State Bank of India and the Bankers cheque had been submitted. Reliance is placed on the following observations of the Supreme Court.It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank clause 6 of the tender notice was not obeyed literally, but the question is as to whether the said noncompliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categoriesthose which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in C.J. Fernandez v. State of Karnataka, (1990)2 SCC 488   a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view. The High Court has, in the impugned decision, relied upon Ramana Dayaram Shetty v. International Airport Authority of India, (1979)3 SCC 489   but has failed to appreciate that the reported case belonged to the first category where the strict compliance of the condition could be insisted upon. The authority in that case, by not insisting upon the requirement in the tender notice which was an essential condition of eligibility, bestowed a favour on one of the bidders, which amounted to illegal discrimination. The judgment indicates that the court closely examined the nature of the condition which had been relaxed and its impact before answering the question whether it could have validly condoned the shortcoming in the tender in question. This part of the judgment demonstrates the difference between the two categories of the conditions discussed above. However it remains to be seen as to which of the two clauses, the present case belongs.After stating above principles, the Supreme Court in that case has found that the case fell under the second category, and therefore, it was not essential to follow the terms and conditions of the contract strictly or rigidly. On facts, Poddar Steel Corporations case (supra) has no application to the facts of the present case. In the case in hand, according to the Respondents, it is not a formal or a mere irregularity in depositing the money but is based on two vital factors which have rendered the technical bid of the Petitionersare substantial terms which requires strict construction. The two being, (i) eligibility for applying and (ii) experience in the specialized field.In addition to the above Clauses in terms of Clause 4.6, the bidder has to provide satisfactory evidence that the Bidder, or, where applicable, the consortium members have adequate financial stability and status to meet the financial obligations pursuant to the works covered in the Bidding documents and have adequate capability and capacity to perform the work properly and expeditiously within the time specified. Under Clause 9.3, the Owner has been vested with the discretion to reject or accept any bid or bids at its sole discretion and any such action shall not be called into question and the Bidder shall have no claim in that regard the Owner. The Owner is not bound to give any reasons for the rejection of the bid. As far as this clause is concerned, it has been worded strongly by the Respondents, surely the discretion vested under this clause has to be exercised properly and should be free from element of arbitrariness.According to learned counsel appearing for the Petitioners on the collective reading of Clause 4.2 with Clause 9.4, there is no prohibition on one of the consortium members being member of another bidder. The restriction is primarily on the Applicant which means that they as a collective body cannot submit more than one bid. We are unable to accept this contention of the Petitioners. There is clear restriction that the bid documents are not transferable and not more than one bid for the work shall be submitted by one bidder or one formal bidder. This itself indicates that one bidder can be an individual or collective of members who have decided to bid together as a unit. The consortium member would be one Applicant and any or all of them cannot submit another bid. This has to be understood and interpreted keeping in mind that these are commercial transactions and intent of these two rules is to avoid one party submitting more bids than one for the same work. This restriction which unambiguously is spelled out in the General Conditions of Contract in the tender document shall stand frustrated if the contention of the Petitioners is to be accepted. In fact to us, it appears that it would be against the commonly understood and enforced principles of law. In any case, even if the two interpretations of such a clause was possible, the interpretation which has been given by the author of the clause would normally be accepted unless the same was opposed to public policy or law. Interpretation put forward by the Respondents certainly does not fall in that category. In any case, a Division Bench of this Court in the case of M/s. Lanco Infratech Limited v. Mormugao Port Turst, 2009(3)BCR 353 held as under:18 These are commercial transactions and it normally will have to be left for the parties to interpret such a clause. It is apparent that there is no concluded contract between the parties. It is only an offer for consideration and the meaning and connotation given to the expression used in these clauses would normally have to be construed as the person inviting offer understands it, unless, of course, with the exception if such an interpretation was patently absurd or was contrary to law. Neither of these situations exist in the present case. The approach of the Respondent that the intended members of the Consortium application to have a direct experience in eligible project relating to Port Sector cannot be termed as an absurd interpretation of a meaning which will be opposed to public policy or public interest. It is a settled rule of law that in commercial transactions, the Court would not substitute its view in preference to the meaning given to a clause inviting tenders unless it was absolutely essential to do so and the ends of justice would demand such substitution.Another important document which has bearing on the matter in issue before us is theConsortium Agreement entered into between the Petitioners/Applicants and its members who submitted one bid. It has been stated in the recitals of the said Agreement that the parties have indicated/expressed their willingness to cooperate with each other in respect of preparing and submitting jointly to MAHAGENCO bid for the Project and in the event of a contract being awarded to the parties by MAHAGENCO, the Parties agree jointly to carry out the EPC execution of the Project in accordance with the said Contract. It has been further stated in the recitals of the said Agreement that SPCL, INDURE, PAHARPUR and FLOWMORE hereby agree to form a consortium to jointly bid for the Project under a single bid and in the event of the said single bid submitted by the parties being accepted by MAHAGENCO, to enter into the Contract and to execute the same to the satisfaction of Tender Specifications. The Parties shall cooperate with each other to the maximum extent in order to secure the successful bidding for the Project and thereafter upon its acceptance by MAHAGENCO to execute it successfully.Besides the above, it has also been recorded in the said Agreement that the parties have formed a consortium for the purpose of undertaking the Bidding Process and if the Bid is successful, for implementing the Project. In other words, all of them joined hands together as a single unit and thus are one party. If one such party participates in the bid with reference to a joint venture and agrees to the terms and conditions which clearly demonstrates oneness in identity and execution then we really wonder whether they or any of them could form part of another consortium or joint venture. The spirit of the restriction is obvious that one bidder or any of its entity cannot submit another bid either in its individual capacity or even as a member of another consortium. Thus, we do not find any legal infirmity in the approach of the Respondents in finding the bid of the Petitioner Company ason this ground. The other ground stated by the Respondents for rejecting the technical bids of the Petitioner beingis with regard to the requisiteAccording to theRespondents, in terms of Clause 4.2, it is mandatory for all the consortium partners should jointly meet the requirement of Clause 4.1(b). However, the Petitioners consortium has failed to comply with the requirements of clause 4.1(b) as M/s. Flowmore Private Limited has executed work for only one River Water Pump alongwith bypass piping for augmentation work of Koradi TPS in March 2003. All Koradi Units are commissioned before 1987 as such M/s. Flowmore Pvt. Ltd. And M/s. Indure have not jointly carried out the complete work of water system as stipulated by clause 4.1(b). M/s. Indure have carried out Cooling Water pipeline work atThermal Power Station (UP). M/s. Flowmore Private Limited had submitted satisfactory completion certificate towards their work experience in respect of designing, manufacturing, supplying, erection and commission of the number of Cooling Water Pumps of Richur TPS Units one and two of Karnataka Power Corporation Ltd. in 1986. The said commissioning of work is in the year 1986 and in prior to 12 years of the opening date of the present bid and therefore the said certificate was invalid for the purpose of the present bid. This, however, is not admitted by the Petitioners. In thethey have given some details. It now would amount to travelling into various disputed facts which would require the Court to go into the factual details and examination of larger documents which may even requires some kind of evidence to substantiate the pleas. The Petitioners have relied upon various performance certificates of the years 2003, 2005 and 2008, respectively. But whether these documents were submitted along with tender or not and what is their effect is a matter which needs to be examined by expert body and not by the Court. Even to these facts stated in the rejoinder, awas filed by the Respondents where they have reiterated their stand and have categorically stated that M/s. Flowmore does not possess requisite experience. It is reiterated in thethat the Petitioner Company does not satisfy the requirement of Clauses 4.1 and 4.2 as they have submitted documents which are beyond 12 years and as such are not valid. In thethe Respondents have also dealt with various certificates and they had commented that these certificates either are only Letter of Intents and not a performance certificates or they pertain to pump installation or part of the system but none of the certificates is satisfying the requirement of the terms of the tender contained in clauses 4.1 and 4.2. It is also averred that in the joint experience claimed by the members of the Petitioners consortium does not satisfy the requirement. These are technical decisions taken by the expert committees based on the commercial principles. The Court can hardly go into the niceties of these aspects. The scope of the judicial review would be limited to examining whether the action of the Respondents is patently arbitrary, discriminatory or is violative of the basic rule of law. If a decision is just and fair then merely because it was possible dealing with the situation in somewhat better manner would not be a ground for judicial intervention. In the case of Directorate of EducationOrs. v. Educomp Datamatics Ltd.Ors., (2004)4 SCC 19  , the Supreme Court held asIt is well settled now that the courts can scrutinise the award of the contracts by the Government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favouritism. However, there are inherent limitations in the exercise of the power of judicial review in such matters. The point as to the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders has been examined in depth by this Court in Tata Cellular v. Union of India (1994)6 SCC 651  . After examining the entirethe following principles have been deduced: (SCC pp. 68788, para 94).The principles deducible from the above areThe modern trend points to judicial restraint in administrativeThe court does not sit as a court of appeal but merely reviews the manner in which the decision wasThe court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may beThe terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively byThe Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by malaQuashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.Similarly, in the case of M/s. Sahakar Agencies Pvt. Ltd. v. M/s. Maharashtra State Road Development Corporation, in Writ Petition (Loding) No.2584 of 2008 along with Writ Petition No.135 of 2009 decided on 17th March, 2009, a Division Bench of this Court categorically dealt with somewhat similar situation stating the principles that the standard criteria laid down in the notice of tender cannot be departed from arbitrarily unless there were compelling and justifiable reasons, the Court held asThe public law principles controlling the administrative actions of the public authorities are well settled. Right from the case of Ramana Dayaram Shetty vs International Airport Authority of India and others, (1979) 3 SCC 489  , the Supreme Court stated that standard of eligibility laid down in the notice of tender cannot be departed from arbitrarily as such departure from the standard will amount to denial of equality of opportunity to those who felt bound by the standard of eligibility and therefore did not submit their tender. The Supreme Court also held that relaxation of the standard of eligibility at the time of considering tender will amount to denial of opportunity to those who considered themselves ineligible.Applying these principles to the facts of the present case, we are unable to hold that the rejection of technical bid of the Petitioner Company is arbitrary or unjustifiable. Even if it was to be accepted that for the sake of argument, the Petitioners jointly possess the requisite experience while getting into nitty gritty of technical aspects, still the rejection on the first ground will have to be maintained by the Court. There is no doubt that certain letters were exchanged between the parties vide letter dated 21st May, 2009, the Respondents had asked the Petitioners to submit audited financial report for the preceding three years in respect of M/s. Parharpur Cooling Tower and M/s. Flowmore Pvt. Ltd. which were submitted by them vide their letter dated 21st May, 2009 itself and thereafter vide letter dated 30th May, 2009 certain further clarifications were sought and documents were called for which were submitted. Writing of these letters can in no way infer that technical bid submitted by the Petitioners was accepted by the Respondents. It has been specifically stated by the Respondents in their affidavit that it was only on scrutiny that the defects were noticed, scrutiny takes some time and during the course of scrutiny, if any apparent defect comes to their notice then they do call the party concerned to supply requisite documents as a principle of good business. This can neither by any deemed fiction of law be applied nor principles of estoppel can be brought into play by the Petitioners to persuade the Court to hold that the tender application had been accepted by the Respondents.