M/S Ganpati RV-Talleres
Alegria Trc. P .Ltd Vs. Union of India & ANR. [2008] INSC 2119 (8 December
2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. OF 2008 (Arising out of
SLP (C) No. 19607 of 2008) M/s Ganpati RV-Talleres Alegria Track Pvt. Ltd.
...Appellant Versus Union of India and Anr. ...Respondents
Dr. ARIJIT PASAYAT,
J.
1.
Leave
granted.
2.
Challenge
in this appeal is to the judgment of a Division Bench of the Delhi High Court
dismissing the writ petition filed by the appellant. The writ petition was
filed challenging the order dated 7.3.2008 issued by the respondents by which
the appellant was communicated that he had not met the eligibility criteria of
the tender quoted by the respondents and, therefore, its commercial bid will
not be considered.
3.
Background
facts in a nutshell are as follows:
On 7.11.2007 a tender
for thick web switches was invited by the Ministry of Railways. The details of
the tender items were given in the Schedule of Quantities. As per Clause 2.8 of
the terms and instructions mentioned in the tender document, the tender was to
be in two packets systems i.e. (i) Technical Bid (ii) Commercial Bid, and that
the commercial bid will be opened subsequently only for those tenderers who
have been found successful in the technical bid as per clause 4.0. As per
Clause 4.1.1 of the tender document the tenderer must be ISO 9001 certified,
RDSO approved, for 1 in 12 curved switch manufacturers on the date of opening
of tender.
The Executive
Director Track (P) Railway Board, Delhi, vide his letter dated 14.11.2007
sought for various clarifications and document from the appellants. The reply
to aforesaid letter was given by the appellant along with relevant documents on
22.11.2007. The appellant pursuant to telephonic conversation on 21.1.2008
submitted a copy of inspection certificate of RDSO and also certified about its
composition i..e. joint venture (in short `JV') partners. Another
representation was made on 31.1.2008. The appellant received a letter dated
7.2.2008 intimating that in terms of para 2.8 the appellant's commercial bid
will be opened on 22.2.2008. The respondents vide its letter dated 13.2.08
informed the three of the other bidders whose technical bids were disapproved
and they were requested to collect their unopened commercial bids and bid
guarantee bonds amounting to rupees one crore. In continuation of the aforesaid
letter another letter dated 20.02.2008 was received by the appellant informing
that the opening of commercial bid stands postponed to 03.03.2008 due to
administrative reasons. Again a similar letter dated 28.02.08 was received by
the appellant intimating that the commercial bid which was scheduled for
opening on 03.03.08 is postponed till further notice. The respondents vide
letter dated 07.03.2008 stated that appellant's offer does not meet the
eligibility criteria and hence the commercial bid could not be opened.
Therefore, office
letter of even no. dated 07.02.2008 issued by the respondents earlier stands
cancelled. No reason for rejection was specified.
The appellant filed
the Writ Petition before the High Court on 11.3.2008 and the court issued
notice and stayed the supply of order on 12.3.2008. On 28.3.2008 the counter
affidavit was filed by the respondents stating therein the false and
unbelievable story of misrepresentation made by the appellant.
The respondents'
contention was that the case of the appellant was wrongly approved by the
respondents in the first chance due to misrepresentation made by the appellant
and only later on was mistake corrected. According to the appellant,
respondents have not disclosed anywhere in the counter affidavit as to what was
misrepresented and what was false in the appellant's representations which was
only made pursuant to the telephonic discussion with the respondents. The
appellant brought to the notice of the High Court the cartel formation by
filing the rejoinder affidavit on 7.4.2008.
The appellant also
stated before the High Court about the various gross irregularities overlooked
by the respondents by filing CM Application no.
5639 Of 2008. The
High Court did not consider them holding that these allegations are not part of
pleading.
The High Court
accepted the stand of the respondents that the appellant does not meet the eligibility
criteria indicated in the tender. With reference to Clause 2.8, 4.1.1, 4.1.2,
4.2 and 4.3 it was held that the view of the respondents that the appellant did
not fulfil the eligibility criteria cannot be faulted. Accordingly, the writ
petition was dismissed.
4.
In
support of the appeal, learned counsel for the appellants submitted as follows:
The appellant is the
pioneer in manufacturing of tendered item which is a modern technology item.
The appellant's manufacturing facility and prototype sample of the thick web
switches have been approved by RDSO as intimated by the RDSO vide their letter
dated 23.10.2007. The said letter was annexed with tender offer and was also
subsequently supplied again. It is a practice that the firm can proceed for
bulk production only after prototype samples are approved. In the instant case
subsequently RDSO, Lucknow has carried out the inspection of more than 350 sets
of thick web switches.
Moreover, as per
clause 1.5 of the tender document, those successful bidders who will install
CNC machine and will produce at least 75 Thick Web Switches will qualify to be
in the approved list of vendors for future tenders. Therefore, it clearly
implies that the appellant is RDSO approved manufacturer on two fronts i.e. for
Conventional curved switches in the name of the JV partner and for the Thick
Web Switches (new technology) in the tendered item.
It is not out of
place to mention that material produced for RVNI, as per their specification
was exactly the same as instant tender specification.
The appellant has a
CNC Plano-milling machine at its premises. CNC Machine is must for
manufacturing of TWS and it involves investment of about Rs. 5-6 crores. As per
respondents' admission only two other bidders have CNC Machine. All other bidders
have not even set up this machine.
As per Clause 4.1.4
(c) the government has given 270 days time to them.
Thus the bids of
those bidders who have not even produced a single TWS have been approved and
bid of the appellant has been rejected.
The action of the
respondents in subsequently rejecting the duly approved technical bid of the
appellant without assigning any reasons is highly illegal, malicious,
arbitrary, irrational and unjustified.
It is pointed out
that the bid was initially accepted, but on the basis of the representation of
two of the competitive bidders, totally different views were taken. It is
pointed out that in view of what has been stated by this Court in New Horizons
Ltd. and Anr. v. Union of India and Ors. (1995 (1) SCC 478) the view taken by
the respondents is erroneous.
5.
Learned
counsel for the Union of India, on the other hand, submitted that New Horizon's
case (supra) related to the experience of the joint venture partners and that
logic cannot be applied to the present case where the parameters are different.
So far as the factual position is concerned, it is to be noted that the
appellant annexed ISO 9001 certification of joint venture partners with the
tender offer. Though the ISO 9001 certification of the joint venture company
prior to the date of opening of tender existed, the same was not annexed with
the tender as the appellant was under the impression that submission of
certificate in the name of individual partners is sufficient and the
respondents had also never demanded the same. In respect of RDSO approval it was
pointed out that one of the joint venture partners i.e. M/s R.V. Rail Products
Pvt. Ltd. is also an existing RDSO approved manufacturer of conventional curved
switches i.e. 1 in 12 curved switches. The said certificate was enclosed with
the appellant's offer.
6.
The
concept of joint venture has been highlighted in paras 21, 22, 23, 24, 25 and
41 of New Horizon's case (supra) as follows:
"21. The
requirement with regard to experience, as stated in the advertisement dated
22-4-1993 for inviting tenders, as noticed earlier was in the following terms :
"The tenderer
should have the experience in compiling, printing and supply of telephone
directories to the large telephone systems with the capacity of more than
50,000 lines. The tenderer should substantiate this with documentary proof.
He should also
furnish credentials in this field."
The requirement of
experience was, however, differently worded in the notice for inviting sealed
tenders dated 26-4- 1993 which was attached to the tender documents which prescribes
the conditions to be fulfilled for submission of tenders and wherein it was
stated as under :
"The successful
tenderer will also submit copies of telephone directories printed and supplied
by them to the telephone systems of capacity more than 50,000 lines as
credentials of his past experience."
22. In the said
notice the expressions `tenderer' and "successful tenderer" have been
used. While the expression `tenderer' has been used in paragraphs 5, 7, 11 and
14, the expression "successful tenderer" is used in paragraphs 7,
9(a), 10 and 12.
Since paragraph 10
provides for execution of the agreement by the successful tenderer, the said
expression is intended to mean the tenderer whose tender has been found
suitable for acceptance. The use of the expression "successful
tenderer"
1.
2.
3.
4.
5.
6.
7.
instead
of the expression `tenderer' in paragraph 12, therefore, indicates that the
documentary proof, by way of credentials of past experience, has to be
submitted after the tender has been considered and is found suitable for
acceptance by the concerned authorities. This would mean that the past
experience is a matter which is to be considered after the tender has been
examined and evaluated and the tenderer whose tender is found acceptable is
required to submit documentary proof regarding his past experience. In other
words, a tender is not liable to be excluded from consideration on the ground
of non-eligibility on account of lack of past experience.
8.
This
inference is strengthened by paragraphs 8 and 11 of the notice dated 26-4-1993.
In paragraph 8 it is provided that a tender is liable for summary rejection if
it is submitted without the Demand Draft of Rs 5,00,000. Similarly in paragraph
11 it is provided that tender is liable to be excluded from consideration if the
income tax clearance certificate is not furnished with the tender. There is no
similar provision for excluding from consideration a tender on the ground of
failure to furnish with the tender the required material by way of credentials
of past experience. It means that the matter of past experience has to be
considered after the tender has otherwise been found to be suitable for
acceptance and a tender is not liable to be rejected at the threshold without
consideration on the ground that the tenderer lacks experience. The decision of
the Tender Evaluation Committee to exclude the tender of NHL from consideration
was, therefore, not warranted by the terms and conditions for submission of
tender as contained in the notice for inviting sealed tenders dated 26-4-1993.
23. Even if it be
assumed that the requirement regarding experience as set out in the
advertisement dated 22-4-1993 inviting tenders is a condition about eligibility
for consideration of the tender, though we find no basis for the same, the said
requirement regarding experience cannot be construed to mean that the said
experience should be of the tenderer in his name only. It is possible to
visualise a situation where a person having past experience has entered into a
partnership and the tender has been submitted in the name of the partnership
firm which may not have any past experience in its own name. That does not mean
that the earlier experience of one of the partners of the firm cannot be taken
into consideration. Similarly, a company incorporated under the Companies Act
having past experience may undergo reorganisation as a result of merger or
amalgamation with another company which may have no such past experience and
the tender is submitted in the name of the reorganised company.
1.
2.
3.
4.
5.
6.
7.
8.
9.
It
could not be the purport of the requirement about experience that the
experience of the company which has merged into the reorganised company cannot
be taken into consideration because the tender has not been submitted in its
name and has been submitted in the name of the reorganised company which does
not have experience in its name.
Conversely there may
be a split in a company and persons looking after a particular field of the
business of the company form a new company after leaving it. The new company,
though having persons with experience in the field, has no experience in its
name while the original company having experience in its name lacks persons
with experience. The requirement regarding experience does not mean that the
offer of the original company must be considered because it has experience in
its name though it does not have experienced persons with it and ignore the
offer of the new company because it does not have experience in its name though
it has persons having experience in the field. While considering the
requirement regarding experience it has to be borne in mind that the said
requirement is contained in a document inviting offers for a commercial
transaction. The terms and conditions of such a document have to be construed
from the standpoint of a prudent businessman. When a businessman enters into a
contract whereunder some work is to be performed he seeks to assure himself
about the credentials of the person who is to be entrusted with the performance
of the work. Such credentials are to be examined from a commercial point of
view which means that if the contract is to be entered with a company he will
look into the background of the company and the persons who are in control of
the same and their capacity to execute the work. He would go not by the name of
the company but by the persons behind the company. While keeping in view the
past experience he would also take note of the present state of affairs and the
equipment and resources at the disposal of the company. The same has to be the
approach of the authorities while considering a tender received in response to
the advertisement issued on 22-4-1993.
This would require
that first the terms of the offer must be examined and if they are found
satisfactory the next step would be to consider the credentials of the tenderer
and his ability to perform the work to be entrusted. For judging the
credentials past experience will have to be considered along with the present
state of equipment and resources available with the tenderer. Past experience
may not be of much help if the machinery and equipment is outdated. Conversely
lack of experience may be made good by improved technology and better
equipment. The advertisement dated 22-4-1993 when read with the notice for
inviting tenders dated 26-4-1993 does not preclude adoption of this course of
action. If the Tender Evaluation Committee had adopted this approach and had
examined the tender of NHL in this perspective it would have found that NHL,
being a joint venture, has access to the benefit of the resources and strength
of its parent/owning companies as well as to the experience in database
management, sales and publishing of its parent group companies because after
reorganisation of the Company in 1992 60% of the share capital of NHL is owned
by Indian group of companies namely, TPI, LMI, WML, etc. and Mr Aroon Purie and
40% of the share capital is owned by IIPL a wholly-owned subsidiary of
Singapore Telecom which was established in 1967 and is having long experience
in publishing the Singapore telephone directory with yellow pages and other
directories. Moreover in the tender it was specifically stated that IIPL will
be providing its unique integrated directory management system along with the
expertise of its managers and that the managers will be actively involved in
the project both out of Singapore and resident in India.
24. The expression
"joint venture" is more frequently used in the United States. It
connotes a legal entity in the nature of a partnership engaged in the joint
undertaking of a particular transaction for mutual profit or an association of
persons or companies jointly undertaking some commercial enterprise wherein all
contribute assets and share risks. It requires a community of interest in the
performance of the subject-matter, a right to direct and govern the policy in
connection therewith, and duty, which may be altered by agreement, to share
both in profit and losses. (Black's Law Dictionary, 6th Edn., p.839) According
to Words and Phrases, Permanent Edn., a joint venture is an association of two
or more persons to carry out a single business enterprise for profit (p.117,
Vol. 23). A joint venture can take the form of a corporation wherein two or
more persons or companies may join together. A joint venture corporation has
been defined as a corporation which has joined with other individuals or
corporations within the corporate framework in some specific undertaking
commonly found in oil, chemicals, electronic, atomic fields. (Black's Law
Dictionary, 6th Edn., p. 342) Joint venture companies are now being
increasingly formed in relation to projects requiring inflow of foreign capital
or technical expertise in the fast developing countries in East Asia, viz.,
Japan, South Korea, Taiwan, China, etc. [See Jacques Buhart : Joint Ventures in
East Asia -- Legal Issues (1991).] There has been similar growth of joint
ventures in our country wherein foreign companies join with Indian counterparts
and contribute towards capital and technical know-how for the success of the
venture.
The High Court has
taken note of this connotation of the expression "joint venture". But
the High Court has held that NHL is not a joint venture and that there is only
a certain amount of equity participation by a foreign company in it. We are unable
to agree with the said view of the High Court.
25. As noticed
earlier, in its tender NHL had stated that it is a joint venture company
established by TPI, LMI and WML and IIPL wherein TPI, LMI and WML and other
companies in the same group as well as Mr Aroon Purie own 60% shares and IIPL
owns 40% shares. It was also stated that the joint venture has received
approval of the Government of India and is currently in operation and that the
promoter will increase their capital/contribution to commensurate with the
project need and that the company has been established as an information and
database management company with expertise in database processing, publishing,
sales/marketing and the dissemination of related information. In the tender it
is also stated that as a joint venture in the true sense of the phrase, the
company will have access to expertise in database management, sales and
publishing of its parent group companies. It would thus appear that the Indian
group of companies (TPI, LMI and WML) and the Singapore-based company (IIPL)
have pooled together their resources in the sense that TPI, LMI and WML have
made available their equipment and organisation at various places in the
country while IIPL has made available its wide experience in the field as well
as the expertise of its managerial staff. All the constituents of NHL have thus
contributed to the resources of the Company (NHL). This shows that NHL is an
association of companies jointly undertaking a commercial enterprise wherein
they will all contribute assets and will share risks and have a community of
interest. We are, therefore, of the view that NHL has been constituted as a
joint venture by the group of Indian companies and IIPL, the Singapore-based
company and it would not be correct to say that IIPL which has a substantial
stake in the success of the venture, having 40% of shareholding, is a mere
shareholder in NHL.
xx xx xx
41. We have been
informed that while the matter was pending in the High Court and in this Court
the telephone directory for the year 1993 has been printed and supplied to the
Department by Respondent 4 as per terms of the contract. Insofar as the
directory for the year 1994 is concerned we find that, as per the terms of the
contract, the process for preparation of the telephone directory has already
commenced. We cannot lose sight of the fact that as a result of quashing of the
contract in respect of the directory for 1994 fresh steps will have to be taken
to award a fresh contract and the said process would take some time and
thereafter the contractor will require time to print and publish the telephone
directory. It would, therefore, not be feasible to bring out the directory for
1994 before the close of the year. As a result, the Department would suffer
loss of revenue which it would otherwise earn by way of royalty from Respondent
4 for the directory for the year 1994. Insofar as the contract in respect of
the year 1995 is concerned there is sufficient time for the Department to award
a fresh contract if the contract awarded to Respondent 4 is cancelled and the
new contractor will have sufficient time at his disposal to print and deliver
the directory as per the time schedule. Moreover, in respect of the directory
for the year 1995 the amount of royalty that is payable by Respondent 4 is Rs
45 lakhs and the amount of royalty offered by NHL for the directory for the
said 13 year was Rs .291.6 lakhs. Keeping in view the circumstances referred
to above, the course that commends us is that, while maintaining the contract
awarded to Respondent 4 in respect of the directories for the years 1993 and
1994, the said contract may be set aside insofar as it relates to the directory
for the year 1995 and fresh tenders may be invited for award of the contract
for the directory for the year 1995. The appeal filed against the judgment and
order of the Delhi High Court dismissing the writ petition of the appellants
must therefore, be allowed in the above terms. The other appeal has been filed
by the appellants against the order of the Delhi High Court dismissing CM No.
6120 of 1993 which was an application for an interim relief during the pendency
of the writ petition in the High Court. In view of the final order that is
being passed in the writ petition the application for interim relief has become
infructuous and the appeal against the order dismissing CM No. 6120 of 1993
must, therefore, be dismissed as infructuous."
7. Though the
aforesaid case related to experience, the other essential characteristic of a
joint venture has also been highlighted.
8. In that view of
the matter the inevitable conclusion is that the view taken by the High Court
that the appellant did not fulfil the eligibility criteria was not correct. The
High Court was not justified in dismissing the writ petition. We direct the
Evaluation Committee to consider the bid of the appellant alongwith two persons
who had been selected and take a final decision.
9. The appeal is
allowed to the aforesaid extent.
.........................................J.
(Dr. ARIJIT PASAYAT)
.........................................J
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