Larsen and Toubro
Ltd. & ANR. Vs. Union of India & Ors.
J U D G M E N T
ALTAMAS KABIR, J.
1.
This
Special Leave Petition has been filed by M/s. Larsen and Toubro Ltd. and one Lt.
Col. Ajay Bhatia (Retired), challenging the judgment and order passed by the Division
Bench of the Delhi High Court on 8th September, 2010, dismissing Writ Petition (Civil)
No.3231 of 2010, filed by the Petitioners herein. In the Writ Petition, a
prayer had, inter alia, been made for an appropriate writ, order or direction upon
the Respondent Nos.1 to 3 to consider the bid of the Petitioner No.1 in response
to Request For Proposal (RFP) No. TM (M)/0025/CG/FPV dated 17th June, 2009 and to
invite the said Petitioner for negotiation, since the said bid was the lowest bid,
and, thereafter, to accept the same in terms of the said RFP.
2.
On
17th June, 2009, the Respondent No.1 sent a RFP to the Petitioner No.1 for supply
of 20 Fast Patrol Vessels (FPV) for the Indian Coast Guard. Similar requests
were also sent to other persons as well. According to the normal procedure, the
RFP was to be submitted by the intending bidders in two parts. The first part was
to consist of the technical proposal and the second part was to be the commercial
proposal or financial bid. In response to the said RFP, the Petitioner No.1 submitted
its bid on 19th October, 2009, containing a technical proposal and a commercial
proposal in two parts. In its commercial offer, the Petitioner had indicated that
it intended to avail of the Exchange Rate Variation benefit. The Petitioner and
four others, including the Respondent No.4, proved to be successful in the technical
bid and, thereafter, the commercial bids were opened on 11th January, 2010, in the
presence of the Bidders and/or their representatives. Although, the offer of the
Petitioner No.1 was found to be the lowest (L-1), its bid was held to be non-responsive,
because, despite the tender condition that the price was to be firm and fixed for
the entire duration of the contract and would not be subject to escalation, the
Petitioner No.1 had claimed the benefit of Foreign Exchange Rate Variation. On
the other hand, Respondent No.4, M/s. Cochin Shipyard Ltd., a Public Sector Undertaking,
was found to be the second lowest bidder (L-2).
3.
Apart
from the fact that the Technical Evaluation Committee, which had been
constituted on 21st October, 2009, found that the price quoted by the Petitioner
had a variable foreign content, it was also found that in order to determine the
foreign exchange content, the Petitioner had attached a copy of the rate card
of the State Bank of India along with the commercial bid, which contained various
exchange rates of different foreign currencies. The Petitioner, however, did not
specify as to which foreign currency was the basis of the foreign exchange component
in its commercial bid. Since the Commercial offers had to be firm and fixed and
since the Petitioner had claimed the benefit of the foreign exchange variation component,
the Contract Negotiation Committee, which was constituted in accordance with the
Defence Procurement Procedure-08 (DPP), concluded that the commercial offer of the
Petitioner was non-responsive. The Petitioner thereupon withdrew its offer and
offered the quoted price without the Foreign Exchange Rate Variation content. The
Contract Negotiation Committee, however, declared the bid of the Petitioner as
non-responsive and awarded the contract to Respondent No.4, which was declared as
L-1. Challenging the said decision of the Respondents, the Petitioners filed Writ
Petition No.3231 of 2010 before the Delhi High Court.
4.
As
has been recorded in the impugned judgment of the High Court, when the writ
petition was taken up for admission on 14th May, 2010, the fact that the Petitioners
had withdrawn the condition with regard to the provision of Foreign Exchange Rate
Variation was considered and it was also observed that such subsequent withdrawal
could not affect the bid of the Petitioners. However, on the submission made on
behalf of the Petitioners that the aforesaid condition was also included in the
RFP submitted by Respondent No.4, notice was issued in the matter. Consequently,
while taking up the writ petition for final disposal, the issues framed for deciding
the writ petition were centered round the said question. In fact, the first
issue which was framed was whether a Bidder could amend its bid by withdrawing a
condition of the bid document, whereby the bid was considered to be non-responsive.
The second issue, which is an off-shoot of the first issue, is whether a Bidder
would be entitled to contend that a non-responsive bid be treated as responsive
since the offending condition was withdrawn after the bid documents had been opened.
The third issue raised was with regard to the bid submitted by Respondent No.4 and
whether the same could be treated as responsive, although, the price offered by
the said Respondent contained a foreign exchange rate component which was to be
considered at a particular rate as applicable on a future date at the time of
opening of the bid.
5.
In
deciding the said issues, the High Court held that since the terms and conditions
of the price to be firm and fixed was one of the more important ingredients of
the tender, the submission of a bid which violated the said condition rendered the
bid non-responsive. The High Court observed that this was not a case of
clerical mistake in the bid documents, but a conscious change in the terms and conditions
of the bid as submitted by the Petitioners, which could not cure the initial disqualification
when the bids were submitted. The High Court took note of the fact that the bid
of Respondent No.4 contained the condition that its price would be in Indian rupees
with a foreign component which would be converted in Indian rupees as on the date
of opening of the bid. The High Court observed that the same did not violate the
conditions of the RFP and that the said condition ensured that the price would be
firm and fixed during the period of performance of the contract. Accordingly, the
High Court held that the said condition satisfied the condition regarding price
being firm and fixed and could not, therefore, be treated on the same footing as
the conditions offered by the Petitioner.
6.
The
High Court also rejected the Petitioner's contention that as per the bid documents
the Discounted Cash Flow (DCF) method was required to be used to arrive at the actual
and final cost which would be payable by the Respondent Nos.1 to 3, for the contract
in question. Taking note of the different conditions relating to the evaluation
and acceptance process and the terms of payment, the High Court took the view
that once the contract had been awarded, the submission made on behalf of the Petitioner
that the DCF mechanism had to be applied had little force. Furthermore, it was
also observed that the adoption of the ECF method could not be said to be
mandatory, as the relevant clause provides that the buyer reserved its right to
apply the DCF method if it wished to do so.
7.
On
its aforesaid findings and strongly deprecating the practice of submitting a Foreign
Currency Rate Card with the rates of various currencies, without specifying the
currency in respect of which the foreign exchange rate was to be considered,
the High Court was of the view that the entire exercise was mala fide and while
dismissing the writ petition, imposed costs both in favour of the Respondent Nos.1
to 3 and the Respondent No.4.
8.
Mr.
S. Ganesh, learned Senior Advocate, who appeared for the Petitioners, submitted
that the same ground on which the Petitioners' bid documents had been rejected,
was also applicable to the bid documents submitted by the Respondent No.4, inasmuch
as, the Foreign Exchange Rate Variation factor had also been projected by the said
Respondent in the column relating to Foreign Exchange Conversion Rates contained
in the commercial bid. Mr. Ganesh submitted that different yardsticks had been used
in the case of the Petitioners and the Respondent No.4. While accepting the commercial
bid documents of the Respondent No.4 as valid, the Respondent No.1, Union of India,
ought not to have rejected the commercial bid documents submitted by the Petitioners
on the basis of the same objection.
9.
Mr.
Ganesh drew our attention to the response of the Respondent No.4 in the column relating
to Foreign Exchange Conversion Rates included in the commercial bid documents. It
has been indicated therein on behalf of the Respondent No.4 that the costing of
the vessel had been carried out by converting the foreign currencies into Indian
currency with conversion rate as on the date of costing. The said rates and the
contents of foreign currency had been disclosed in the commercial offer and the
exchange rate of those currencies as on the date of the opening of the bid
would be applicable for the respective foreign currencies to determine the price
of the vessel. There could, therefore, be price variation till the commercial bids
were opened.
10.
Mr.
Ganesh contended that Part IV of the Request for Proposal dealt with evaluation
and acceptance criteria which included evaluation of commercial proposals. Under
the instructions with regard to evaluation of commercial proposals, it has been
categorically stated that the shipyard/shipbuilder quoting the lowest price
(L-1) as determined by the Contracts Negotiation Committee would be invited for
negotiations and that the Discounted Cash Flow method would be used for
evaluation of the bids.
11.
Mr.
Ganesh submitted that while awarding the contracts, the Government has to be
completely fair and above all arbitrariness, as was laid down by this Court in Ramana
Dayaram Shetty vs. International Airport Authority of India [(1979) 3 SCC 489].
Mr. Ganesh also submitted that, in any event, the Petitioners had withdrawn the
condition regarding Foreign Exchange Rate Variation and had substituted the same
with a Fixed Rate offer. Accordingly, Petitioners' tender documents ought not
to have been rejected and the High Court erred in holding otherwise.
12.
The
stand taken on behalf of the Petitioners was strongly opposed on behalf of the Respondent
No.4, to whom the contract had been awarded. Mr. Ashok H. Desai, learned Senior
Advocate, pointed out that the condition relating to the Foreign Exchange Rate Variation
and the proposal of the Respondent No.4 in relation thereto indicated a firm
rate of exchange as on the date of the opening of the commercial bids and there
would be no escalation of such offer during the subsistence of the contract, as
envisaged in the tender documents. It was urged that the rate quoted by the
Respondent No.4 was firm and fixed as on the date of opening of the commercial bids
and was not subject to any variation during the period of the contract. Mr. Desai
submitted that the averments made on behalf of the Petitioners to the contrary,
as far as the commercial bid of the Respondent No.4 was concerned, were
erroneous and misconceived and were in no way similar to the offer made by the Petitioners.
13.
Learned
Additional Solicitor General, Ms. Indira Jaising, took much the same stand as Mr.
Desai and contended that since the commercial offers had already been opened, the
changed offer made on behalf of the Petitioners regarding the Foreign Exchange Rate
Variation condition was concerned, could not be taken into consideration and had
to be rejected on that ground. Furthermore, as submitted by Mr. Desai, the offer
made by the Petitioners and that made by the Respondent No.4 on the question of
firm and fixed pricing, were different and could not be said to be on the same
footing.
14.
Having
heard learned counsel for the respective parties, we are satisfied that the High
Court did not commit any error in dismissing the Writ Petition filed by the Petitioners,
since in the absence of compliance with the terms and conditions relating to firm
and fixed price offer, the Petitioners stood excluded from consideration. The offer
in this regard made by the Respondent No.4 satisfies the requirements of a firm
and fixed offer, since once the commercial bids were opened, there was no further
scope of the rates being altered, which was not so in the case of the Petitioners,
which tried to make its bid responsive by withdrawing the initial offer and substituting
the same with another.
15.
As
far as the decision in Ramana Dayaram Shetty's case is concerned, the same does
not in any way help the Petitioners' case and, on the other hand, has very clearly
laid down that where tenders are invited for grant of Government Contract, the standard
of eligibility laid down in the notice for tenders could not be changed arbitrarily
as that would be hit by the provisions of Article 14 of the Constitution. It was
also observed by this Court that an executive authority has to be rigorously
held to the standards by which it professes its actions to be judged and it must
scrupulously observe those standards on pain of invalidation. It has been repeatedly
stated by this Court that every action of the Executive Government must be informed
with reason and should be free from arbitrariness, the same being the very essence
of the rule of law. The said decision, in fact, supports the case of the
Respondent No.4.
16.
We,
therefore, find no reason to interfere with the judgment and order of the High Court
impugned in this Special Leave Petition and the same is, accordingly,
dismissed.
17.
There
will be no order as to costs.
................................................J.
(ALTAMAS KABIR)
................................................J.
(CYRIAC JOSEPH)
NEW
DELHI
DATED:
05.05.2011
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