State of Kerala Vs.
M/S Zoom Developers P. Ltd.& Ors. [2009] INSC 267 (10 February 2009)
Judgment
CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NOS. 841-842 /2009 (arising out of SLP(C) Nos.
30204-30205/2008) State of Kerala ... Appellant(s) versus M/s Zoom Developers
Pvt. Ltd. & Ors. ... Respondent(s) with Civil Appeal No.843 /2009 (arising
out of S.L.P.(C) No. 30305/2008) and Civil Appeal No.844/2009 (arising out of
S.L.P.(C) No. 30355/2008)
S.H. KAPADIA, J.
1.
Leave
granted.
2.
A
short question which arises for determination in these civil appeals is -
whether the decision of the Bid Evaluation Committee ("EC" for short)
dated 6.5.2008 rejecting the Bid Proposal made by the Consortium led by M/s
Zoom Developers Pvt. Ltd. as non- admissible in terms of RFP and thus excluding
the said Consortium from the zone of consideration was unjustified, arbitrary
and bad in law, as held by the impugned judgment of the Kerala High Court dated
4.12.2008 in Writ Appeal No. 1460/2008.
Facts:
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:
(i) Apollo Enterprises
led consortium (ii) Nagarjuna Construction Co. led consortium (iii) Videocon
Industries Ltd. led consortium (iv) Lanco Kondapalli Power Pvt. Ltd.,
Hyderabad, led consortium (v) Zoom Developers Pvt. Ltd., Mumbai led consortium.
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.
6.
Aggrieved
by the said decision, M/s ZDL preferred Writ Petition (C) No. 15570/2008 in the
Kerala High Court which came to be dismissed by the learned single Judge on
3.7.2008. It was held by the learned Single Judge that the concept of
"liability" was different from "responsibility". It was
further held that since the consortium members led by M/s ZDL had not
undertaken "joint and several liability", the EC was right in
treating the bid proposal as non- responsive. It was further held by the
learned single Judge that the original consortium agreement dated 4.10.2007 was
signed by M/s PMS on behalf of M/s PPL though no such authorization was found
in that regard. According to the learned single Judge, in the modified
consortium agreement dated 11.3.2008, M/s PPL, which was the party to the
original consortium agreement, stood deleted and M/s PMS had emerged as a
member of consortium for the first time only under the modified consortium
agreement dated 11.3.2008 without explaining under whose authority such change
was made and consequently, the EC was right in treating the Bid Proposal made
by M/s ZDL as non- responsive. Accordingly, the writ petition stood dismissed.
Aggrieved by the said decision, M/s ZDL preferred Writ Appeal No. 1460/2008,
which stood allowed by the Division Bench of the Kerala High Court, hence,
these civil appeals are filed by the State of Kerala (licensor), M/s Lanco
Kondapalli Power Pvt. Ltd. and M/s Vizhinjam International Sea Port Ltd.
(Sponsors).
Contention:
7.
On
behalf of State of Kerala, Shri K. Parasaran, learned senior counsel submitted
that after 31.1.2008 (the cut-off date) there was a change in M/s ZDL led
Consortium which was impermissible in terms of the RFP and, therefore, the Bid
Evaluation Committee was right in treating the Bid submitted by M/s ZDL led
Consortium as non-responsive/non-admissible in terms of the RFP. In support of
his contention, learned senior counsel submitted that as per clause 3.4 of RFP,
only the Lead Member could be changed and that too with the written consent of
M/s VSL (Sponsor). According to the learned counsel, RFP did not permit change
of consortium member after the cut-off date. It may be noted that the Proposals
of the Bidders were to be submitted on or before 31.1.2008. Learned counsel
pointed out that along with the Proposal, M/s ZDL submitted the Consortium
Agreement dated 4.10.2007 in which M/s PMS signed the consortium agreement on
behalf of M/s PPL, UK. Therefore, according to the learned counsel, M/s PMS
singed the Consortium Agreement dated 4.10.2007 as an agent of M/s PPL, UK.
According to the learned counsel, in the Consortium Agreement dated 4.10.2007,
M/s ZDL did not stipulate that as a Lead Member it would hold a minimum equity
of 26% in the SPC. The Consortium Agreement dated 4.10.2007 was not notarized
and stamped. That apart, the said consortium did not submit documents from M/s
PPL, UK authorizing M/s PMS to sign the Consortium Agreement on behalf of M/s
PPL, UK. According to the learned counsel, all the above circumstances came to
be considered by the EC in its meeting held on 25.2.2008. The EC, according to
the learned counsel, recorded in its Minutes that since M/s PPL was the member
of the Consortium in terms of Consortium Agreement dated 4.10.2007, but, since
M/s PPL was not shown in the Outer Cover, therefore, a query was raised by the
EC in its letter dated 3.3.2008 to the effect that although M/s PMS has signed
the Consortium Agreement on behalf of M/s PPL, the latter was not a member of
the Consortium. According to the learned counsel, in the said letter dated 3.3.2008,
there was no direction from the EC to M/s ZDL to delete the words "on
behalf of M/s PPL" and consequently, after the cut-off date, it was not
open to M/s ZDL led Consortium to submit a fresh Consortium Agreement dated
11.3.2008 deleting the words "on behalf of M/s PPL". According to the
learned counsel, therefore, there was a change in the membership of the
Consortium led by M/s ZDL and that too after 31.1.2008. Therefore, according to
the learned counsel, it was not a case of curing of defect. According to the
learned counsel, change of consortium membership after the cut-off date made
the Proposal of M/s ZDL led Consortium non- admissible in terms of the RFP.
8.
Shri
K. Parasaran, learned senior counsel, next contended that vide clause 3.5 of
the RFP, all members of the Consortium were "jointly and severally
liable" for execution of the Project in terms of the Licence Agreement and
a statement to that effect was required to be stated in the consortium
agreement, which statement was not incorporated in consortium agreement dated
4.10.2007 nor in the consortium agreement dated 11.3.2008. According to the
learned senior counsel, the two words, namely, "liabilities" and
"responsibilities" are not interchangeable. They are distinct and
different concepts. According to the learned counsel, RFP required a statement
regarding "joint and several liability" to be incorporated in the
consortium agreement because the word "liability" represented an
objective criteria, which criteria has not been satisfied despite opportunity
being given to M/s ZDL led Consortium to incorporate such a statement in the
consortium agreement. Learned counsel submitted that despite opportunity being
given to M/s ZDL led Consortium, even in the fresh Agreement dated 11.3.2008,
M/s ZDL led Consortium had insisted on using the words "joint and several
liabilities" in support of the words "joint and several
responsibilities".
Therefore, for
non-compliance of the said criteria, the EC was right in treating the Bid
Proposal of M/s ZDL led Consortium as non- admissible/non-responsive in terms
of RFP.
9.
In
short, on two of the aforestated grounds, namely, change of consortium
membership and non incorporation of joint and several liability Clause in the
consortium agreement, learned counsel for the State of Kerala submitted that
the EC was right in treating the Bid Proposal of M/s ZDL as non-responsive.
9A. Shri A. Sharan,
learned Additional Solicitor General appearing on behalf of M/s VSL
substantially adopts the contentions advanced by Shri K. Parasaran, learned
senior counsel for the State of Kerala.
10.
Shri
K.K. Venugopal, learned senior counsel appearing on behalf of M/s Lanco led
Consortium submitted in addition to the above contentions that, in any event,
the figures submitted by M/s ZDL led Consortium indicated that, on its own M/s
PMS did not fulfill the financial parameters of net worth, total turnover and
cash accruals and that M/s PMS was solely dependent upon the financials of M/s
PPL, UK, consequently, the Bid Proposal of M/s ZDL led Consortium was not
admissible in terms of RFP. Learned senior counsel further submitted that in
the Consortium Agreement dated 4.10.2007, there was a clause under the caption
"Relationship of Parties". Reading of that clause, according to the
learned counsel, indicated that the consortium members were to act on
principal-to- principal basis and despite opportunity, even in the fresh
Consortium Agreement dated 11.3.2008, the said clause stood retained.
Therefore, according to the learned counsel, the criteria of joint and several
liability was not satisfied by M/s ZDL led Consortium.
11.
On
the other hand, it was submitted on behalf of M/s ZDL led Consortium that the
interpretation given by the Sponsor/Advisor on various terms and conditions of
the RFP should be read as a standard to evaluate the admissibility of the bids.
According to Shri Harish N. Salve, learned senior counsel appearing on behalf
of M/s ZDL, the Minutes of the EC held on 25.2.2008 indicated that the words
"responsibility" and "liability" were used interchangeably.
That, it is only after the Law Secretary gave his opinion that the question of
the connotation of the two words "liability" and
"responsibility" were made an issue, which was clearly an afterthought.
According to the learned counsel, the said hair-splitting exercise was
undertaken as an afterthought only after the Law Secretary gave his opinion,
which opinion was "off the record" advice (which expression is used
by the Law Secretary in his affidavit). According to the learned counsel, there
was no change in the membership of the Consortium led by M/s ZDL because right
from the inception, at the time of submitting the Proposals, it was made clear
that M/s PMS would be the member of M/s ZDL led Consortium. It was submitted that
M/s PMS was the subsidiary of M/s PPL, UK, and the words "on behalf
of" were used in the Consortium Agreement dated 4.10.2007 only to indicate
the relationship between M/s PMS and M/s PPL, UK. This position, according to
the learned counsel, is indicated by the Bid documents submitted on 31.1.2008,
Power of Attorney dated 18.10.2007, Notary Certificate, Covering letter dated
31.1.2008 and annexures to the Bid documents submitted by M/s ZDL.
12.
On
the question of financials, Shri Arun Jaitley, learned senior counsel for M/s
ZDL, submitted that the Chart submitted before this Court by the learned
counsel for M/s Lanco led Consortium was defective because the Financials for
FY 2006-2007 has not been projected. In this connection, it was pointed out that
M/s ZDL had submitted the details for FY October, 2003 to September, 2004,
October, 2004 to September, 2005 and October, 2005 to September, 2006 as on
31.1.2008. It was pointed out that, M/s ZDL was following the Accounting Year
from October to September. It was submitted that the last date for submission
of Bids was 31.10.2007 initially, which stood extended later on till 31.1.2008.
According to the learned counsel, the Balance Sheet for FY 2006-2007 was in the
process of being prepared when the Bid documents were submitted on 31.1.2008
and consequently, the Balance Sheet for FY 2006-2007 could not be submitted.
According to the learned counsel, if the Financials for the year including FY
2006-2007 are taken into account, then M/s ZDL lead Consortium satisfies all
the financial parameters of net worth, turnover and cash accruals.
13.
Points
for Consideration:
(A) Whether the
modified Consortium Agreement dated 11.3.2008 resulted in a change in the
constituents membership of the Consortium led by M/s ZDL.
(B) Whether use of
the expression "joint and several responsibility" in place of
"joint and several liability" would justify rejection of the Bid
Proposal made by the Consortium led by M/s ZDL as non-responsive/non-admissible
in terms of the RFP.
Findings on Point No.
(A):
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:
"M/s PMS has
signed consortium agreement dated 4.10.2007 on behalf of M/s PPL but M/s PPL is
not a member of the consortium."
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.
15.
One
more aspect needs to be pointed out. The RFP prescribes the form in which a
bidder has to make his proposal. However, bidder was free to submit the
consortium agreement in its own format. M/s Universal Legal (legal advisor to
the Sponsor) cleared the proposal on 4.4.2008 stating that all requisite
defects stood cured. It is only after 4.4.2008 that the Law Secretary came into
picture and gave an opinion to the contrary. Moreover, as found by the High
Court in the impugned judgment, when the Law Secretary was asked to file his affidavit
he came out with the statement that his advice was "off the record"
advice. It was not given through Official Channel. At this stage, we may also
point out that no material has been placed before the High Court as to the
reference made by the Chief Secretary to the Law Secretary. Whenever opinion is
sought, the persons seeking opinion has to formulate the query for which
opinion is sought. We do not know the query raised by the Chief Secretary
before the Law Secretary. No material has been placed before us in this regard.
In fact, the very purpose of routing the query through Official Channel is that
the querist formulates the query on which opinion is given. In this case, there
is no formulation of such a query. In the circumstances, we find that the High
Court was right in not giving weightage to the "off the record"
advice of the Law Secretary. This is one of the circumstances which vitiates
the process of decision making by the EC. The bid was declared as
non-admissible in the IVth meeting of the EC held on 6.5.2008. The Minutes
indicate that, before the EC, there were two Opinions. First opinion was that
of M/s Universal Legal and the second opinion was that of the Law Secretary.
There is nothing to indicate in the Minutes as to why the opinion of the legal
advisor, M/s Universal Legal, stood rejected.
There is no reason
given as to why the opinion of the Law Secretary came to be accepted. Be that
as it may, we are of the view that the modified consortium agreement was
between members of the consortium led by M/s ZDL in which the member was M/s
PMS and not M/s PPL, UK, right from the inception. Therefore, the entire
exercise was to cure the defect. Time was given to M/s ZDL to cure the defect
which in fact was cured before 4.4.2008. For the aforestated reasons, we hold
that there was no change in the membership of the consortium led by M/s ZDL
after 31.1.2008. In fact, even prior to the IVth meeting the EC did not call
upon M/s ZDL/PMS to obtain Letter of Authority from M/s PPL, UK.
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):
17.
As
stated above, the second ground for treating the Bid Proposal of the consortium
led by M/z ZDL as non-responsive was that, in the consortium agreement, M/s ZDL
has failed to incorporate the expression "joint and several
liability". That, M/s ZDL has incorporated the clause under the expression
"joint and several responsibility" in place of "joint and
several liability" and consequently, the Bid Proposal became non-admissible/non-
responsive in terms of the RFP. This was the basic argument advanced on behalf
of GoK.
18.
At
the outset, it may be stated that in letter dated 3.3.2008 no such point was
ever raised by the Project Advisor. As stated above, by the said letter dated
3.3.2008 curable defects were pointed out regarding M/s PMS having signed the
consortium agreement dated 4.10.2007 on behalf of M/s PPL, UK, but no query was
ever raised on the above point. On the contrary, as can be seen from the
Minutes of the meetings held prior to 8.4.2008, the Project Advisor/Sponsor has
used the word "responsibility" interchangeably with the word
"liability". It is only in the opinion of the Law Secretary that, for
the first time, the above objection is taken.
19.
Be
that as it may, the question is whether in the modified consortium agreement
dated 11.3.2008 responsibilities and allocation of works stood clearly
demarcated between the members of the consortium? We have examined the
consortium agreement dated 11.3.2008. It clearly indicates that M/s ZDL is an
Indian company. It is a lead member of the consortium. The agreement further
indicates that there were two members in the consortium apart from M/s ZDL,
namely, M/s PMS and M/s Peter Fraenkel & Partners. The agreement indicates
that M/s ZDL shall be responsible for implementation of the Project along with
M/s PMS and M/s Peter Fraenkel & Partners. M/s ZDL had to submit technical
and financial bids. M/s ZDL had to act as project developers and principal
coordinators. M/s ZDL had to arrange finances. On the other hand, M/s Peter
Fraenkel & Partners had to do the work of designing and budget preparations
whereas M/s PMS had to provide operational support during the implementation of
the Project. Therefore, under the said Agreement, duties and responsibilities
of each of the members stood carved out. Vide clause 7, members of the
consortium were made "jointly and severally responsible" for every
stage of implementation of the Project. The only objection raised by the GoK is
that the word "liable" ought to have been used instead of the word
"responsible" in clause 7 and since that word has not been used, the
Bid Proposal of M/s ZDL needs to be dismissed. As stated above, in the meetings
held prior to 8.4.2008, no such objection was ever raised. In fact, no
opportunity was given to M/s ZDL to cure this defect though it was given to the
consortium led by M/s Apollo (see page 81 of the SLP paper book in SLP (C) Nos.
30204-30205/2008 entitled State of Kerala v. M/s Zoom Developers Pvt. Ltd.
& Ors.). The important point is that the EC treated the above objection as
a curable defect. It is only after the Law Secretary came on the scene that the
above objection was raised even after the clearance by M/s Universal Legal.
Therefore, it is clearly an afterthought. Further under the consortium
agreement dated 11.3.2008, it was stated that M/s ZDL, PMS and Peter Fraenkel
& Partners shall be fully responsible for their individual portions of
work. Under the said Agreement, it was further stated that, in case the Project
stood awarded to the Consortium, the Consortium commits to hold a minimum stake
of 51% in the SPC. This shows that in the matter of liability, the Consortium
Agreement was only a step-in-aide to the formation of SPC. Further, as rightly
held by the High Court in the impugned judgment, the apprehension of GoK that
in the event of disputes between members of the consortium or in the event of
non- implementation of the Project, GoK would not be in a position to enforce
its claim was ill-founded because the licence agreement between the successful
bidder and the licensor (GoK) was yet to be entered into in which a provision
as to "joint and several liability" had to be made, as mentioned in
the RFP. The consortium agreement was only an assurance or a commitment to
abide by the licence agreement. Lastly, it may be stated that the word
"responsibility" is no doubt different from the word
"liability". What is submitted before us is that the expression
"joint and several liability" was required to be incorporated in the
consortium agreement in terms of RFP. What was submitted before us was that the
said expression constituted an objective criteria. What was submitted before us
was that since the above expression in the RFP was treated as an objective
criteria, the manner in which the said expression stood understood by the EC
was irrelevant. We do not find merit in this argument. As stated above, though
the Form of Proposal was prescribed, the bidder was free to submit the
consortium agreement in its own Form. In our view, in the absence of a
prescribed format and in the absence of the definition of the word
"responsibility" vis-`-vis the word "liability" in the RFP,
it cannot be said that the said expression "joint and several
liability" was an objective criteria. It is true that in terms of RFP, the
bidder was required to stipulate the words "joint and several
liability" in the consortium agreement. But it is equally true that in
certain cases objective words can be interpreted subjectively. For example, the
word "regulate". It has several times been decided that the power to
regulate does not extend to a power to prohibit. But this very word has been
held in some other cases to include the power to prohibit. In U.K., the Railway
Board was entitled to impose a ban on smoking in trains under this very power
to regulate. Therefore, one has to construe each of these words in that
context. (see Administrative Law by H.W. Wade and Forsyth- 9th ed. at pp.
432-435). In this very case, various bids were considered by the Project
Advisor/Sponsor. They have themselves used the words "liability" and
"responsibility"
interchangeably. They
have treated this defect as a curable defect.
They have not
rejected the Bid Proposal on 25.2.2008 in the first meeting on the above ground
because the EC thought that the said defect was a curable defect.
20.
It
was vehemently urged on behalf of M/s Lanco led Consortium that in the
consortium agreement dated 4.10.2007 as well as in the consortium agreement
dated 11.3.2008, there was a clause under the heading "Relationship of
Parties" which indicated that each member of the consortium shall deal
with the other on principal-to-principal basis till the formation of SPC. In
the said clause, it was further stated that, nothing contained in the agreement
shall be deemed to constitute any of the parties as agent of the other.
Therefore, the members of the consortium led by M/s ZDL cannot be said to be
jointly and severally liable at every stage of implementation of the Project.
We do not find merit in this argument. As stated above, the consortium
agreement dated 11.3.2008 spelt out the work allocation and the responsibility
of each member of the consortium. It made the consortium responsible jointly
and severally for implementation of the Project. The clause dealing with
"relationship of the parties" merely stated that till the formation
of the SPC, each member shall be related to each other on
principal-to-principal basis. This is because the consortium is formed to make
a bid for this Project only. Till the formation of SPC and till the consortium
becomes a successful bidder, the parties relate to each other on
principal-to-principal basis. But once that consortium becomes a successful
bidder and commits to hold the minimum equity stake of 51% in the SPC, then the
question of joint and several liability would certainly arise. Therefore, the
High Court rightly held that the licence agreement between GoK and the
successful bidder (consortium) has still to be executed and it is at that stage
that, in any event, the clause of joint and several liability shall stand
incorporated in the licence agreement.
21.
Before
concluding, an attempt was made on behalf of M/s Lanco Kondapalli Power Pvt.
Ltd. (appellant in the civil appeal arising out of SLP (C) No. 30305/2008) to
demonstrate before us that but for the financials of M/s PPL, the consortium
led by M/s ZDL would not have met the financial qualification criteria as on
the date of the submission of the Bid Proposal (31.1.2008). Learned counsel
appearing on behalf of M/s Lanco Kondapalli Power Pvt. Ltd. submitted a Chart
in support of his above contention. We find no merit in this argument. The said
Chart refers to the Financial Years October, 2003 to September, 2004, October
2004 to September, 2005, October, 2005 to September, 2006 as far as M/s ZDL is
concerned.
However, it may be
noted that initially the last date for submitting the bid was 31.10.2007, which
was extended to 31.1.2008. The Balance Sheet and P&L account of M/s ZDL for
the year ending 30.9.2007 stood adopted after audit only on 20.3.2008. If the
figures for that year are taken into account then the financial qualification
criteria stands satisfied.
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.
.........................J.
(Dr. Arijit Pasayat)
.........................J.
(S. H. Kapadia)
New
Delhi;
the
February 10, 2009.
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