Ntpc Limited Vs.
Ansaldo Caldaie Boilers India P. Ltd. & ANR.
[Civil Appeal No.2134
of 2012 arising out of SLP (C) No.7807 of 2011]
J U D G M E N T
ALTAMAS KABIR, J.
1.
Leave
granted.
2.
Following
international competitive bidding procedures, the Appellant had invited bids for
the supply and installation of Steam Generator package for captive coal-based Thermal
Power Projects in different areas. The bid of the Respondent No.1 was rejected by
the Appellant by its letter dated 5th January, 2011, as the same did not meet
the minimum qualifying requirements set out in the Bid documents. Furthermore, the
Qualified Steam Generator Manufacturer, Ansaldo Caldaie, Italy, proposed by the
said Respondent, did not have the necessary minimum qualification, as was required
in terms of the Bid documents.
3.
The
main issue which arises for consideration in this Appeal is whether Ansaldo Caldaie,
Italy, can be said to be a Qualified Steam Generator Manufacturer within the
definition set out in the detailed Invitation for Bids. The said invitation for
bid contained the qualifying requirement for Bidders in Clause 7 of the Tender
Document. Clause 7.1.0 provided that the Bidder should meet the qualifying
requirements of any one of the qualifying routes stipulated under Clause 1.1.0
or 1.2.0 or 1.3.0 or 1.4.0 or 1.5.0. In addition, the Bidder was also required to
meet the requirements stipulated under Clause 7.6.0 and 7.7.0, together with
the requirements stipulated under Section ITB.
4.
Route
1 permits a Qualified Steam Generator Manufacturer to join the bidding process
provided that it should meet the qualifying requirements of any of the qualifying
routes indicated in Clause 7 of the tender documents. In Clause 7 of the tender
documents, five different routes have been enumerated which could be taken by
the tenderers, namely :-
i.
as
a Qualified Steam Generator Manufacturer; or
ii.
as
an Indian Steam Generator Manufacturer; or
iii.
as
an Indian subsidiary company of a Qualified Steam Generator Manufacturer; or
iv.
as
an Indian Joint Venture Company for manufacturing Super Critical Steam Generators
in India between an Indian Company and a Qualified Steam Generator Manufacturer;
or
v.
as
an Indian Joint Venture Promoter holding at least 51% stake in a Joint Venture Company
for manufacturing Super Critical Steam Generators in India between an Indian Company
and a Qualified Steam Generator Manufacturer.
5.
Indisputably,
none of the parties which responded to the invitation adopted Routes 1 or 3. Bharat
Heavy Electricals Ltd. adopted Route 2, while Route 4 found favour with Larsen
& Toubro, MHI and the Appellant, while BGR took recourse to Route 5. Route 4
contained in Clause 7.4.0 relates to Indian Joint Venture Companies for manufacturing
of Super Critical Steam Generators in India between an Indian Company and a Qualified
Steam Generator Manufacturer. For the sake of reference, Clauses 7.4.1 and 7.4.2
which formed part of Route 4 are extracted hereinbelow :- "7.4.0 Route 4 :
Indian Joint Venture (JV) Company for manufacturing of Super Critical Steam Generator
in India between an Indian Company and a Qualified Steam Generator
Manufac-turer 7.4.1 The Bidder shall be a Joint Venture (JV) Company incorporated
in India under the Companies Act 1956 of India, as on the date of techno-commercial
bid opening, promoted by
(i) an Indian Company
registered in India under the Companies Act 1956 of India and
(ii) a Qualified Steam
Generator Manufacturer meeting requirements of clause 7.1.1, created for the purpose
of manufacturing in India supercritical steam generator sets covering the type,
size and rating specified. If the JV Company is incorporated as a public
limited Company then it should have obtained certificate for Commencement of Business
in India as on the date of techno-commercial bid opening.
The Qualified Steam Generator
Manufacturer shall maintain a minimum equity participation of 26% in the JV
Company for a lock-in period of 7 years from the date of incorporation of JV Company
or up to the end of defect liability period of the contract whichever is later.
One of the promoters shall be a majority stakeholder who shall maintain a minimum
equity participation of 51% in the JV Company for a lock in period of 7 years from
the date of incorporation of JV Company or up to the end of defect liability period
of the contract whichever is later.
In the event that the
majority stake holder in the JV Company is an entity other than the Qualified Steam
Generator Manufacturer, it should be an Indian Company and should have
executed, in the last 10 years, large industrial projects on EPC basis (with or
without civil works) in the area of power, steel, oil & gas, petrochemical,
fertilizer and/or any other process industry with the total value of such projects
being Rs.10,000/- million or more. At least one of such projects should have a
contract value of Rs.4,000/- million or more. These projects shall be in
successful operation for a period of not less than one year as on the date of
techno-commercial bid opening. 7.4.2
The Bidder shall furnish
a DJU executed by him, the Qualified Steam Generator Manufacturer and other JV
promoter having 25% or higher equity participation in the JV Company, in which all
the executants of DJU shall be jointly and severally liable to the Employer for
successful performance of contract as per the format enclosed in the bidding documents.
The joint deed of undertaking shall be submitted along with techno-commercial bid,
failing which the Bidder shall be disqualified and his bid shall be rejected. In
case of award, each promoter having 25% or higher equity participation in the
JV Company will be required to furnish an on demand bank guarantee for an amount
of 0.5% of the total contract price of the Steam Generator Package in addition to
the contract performance security to be furnished by the Bidder."
6.
As
mentioned hereinbefore, the bid filed by the Respondent No.1 was rejected by the
Appellant by its letter dated 5th January, 2011, as the same did not fulfill the
qualifying requirements of Route 4, extracted hereinabove.
7.
Appearing
for the Appellant, the learned Attorney General, Mr. Goolam E. Vahanvati, submitted
that Clause 7.1.1 prescribes the basic qualifying requirements for a Qualified Steam
Generator Manufacturer and the same is applicable to all the routes permitted under
the bidding documents, irrespective of the route which the Bidder would opt for,
for seeking qualification. For the sake of convenience, Clause 7.1.1 is
reproduced here in below :-
"7.1.1 The Bidder
should have designed, engineered , manufactured/got manufactured, erected /supervised
erection, commissioned/ supervised commissioning of at least one (1) number of coal
fired supercritical Steam Generator having rated capacity of 1500 tonnes of steam
per hour or above.
Further, such Steam generator
should be of the type specified, i.e. single pass (tower type) or two pass type
using either spiral wound (inclined) or vertical plain or vertical rifled type
water wall tubing, and should be in successful operation for a period of not
less than one (1) year as on the date of Techno-commercial bid opening. In addition,
the above Steam Generator should have been provided with evaporator suitable for
variable pressure operation (sub-critical and supercritical pressure ranges). The
Bidder shall offer only the type of Steam Generator and type of water wall
tubing for which he is qualified."
8.
The
learned Attorney General submitted that Clause 7.1.1 is identical to Clause
1.1.2 of Item No.4 of Section III of the Tender Documents and under Clause 1.4.1
it has been clearly mentioned that the requirements of Clause 1.1.1 had to be
met. The learned Attorney General urged that in view of Clause 7.1.1, the Bidder
must have "designed" and "engineered" the entire Steam
Generator himself and the same could not be outsourced.
Accordingly, once it is
submitted that a Steam Generator is to be designed by the Qualified Steam Generator
Manufacturer itself, all the integral parts of the Steam Generator like the furnace
(evaporator), Superheaters 1, 2 and 3, Reheaters 1 and 2, connecting piping etc.,
have to be designed and engineered by the said manufacturer himself. The learned
Attorney General also urged that Clause 7.1.1, however, permitted the
manufacture, erection or commissioning to be outsourced by the Qualified Steam Generator
Manufacturer, in view of the expressions used, such as, "got
manufactured", "supervised erection" and "supervised
commissioning".
9.
The
learned Attorney General also contended that Clause 7.1.1 also categorically states
that the Steam Generator would have to be provided with an evaporator suitable for
variable pressure operation (emphasis added). It was submitted that an evaporator
is an integral and one of the most critical parts of any Supercritical Steam
Generator. It was further urged that if the evaporator was not designed for
variable pressure operation, conditions in Note 5 of the Notes in Clause 1.0.0
of the Bid documents would have to be complied with.
For the sake of reference,
Note 5 is reproduced hereinbelow :- "Steam Generator Manufacturer with
Technology Tie-up for Variable Pressure Design In case a supercritical Steam
Generator manufacturer meets all the requirements as specified in clause no. 1.1.1
above except that the evaporator in the reference steam generator is not designed
for variable pressure operation and is designed for constant pressure (Universal
Pressure) operation only, in such case, the Supercritical Steam Generator Manufacturer
has an ongoing license agreement (which covers technology transfer), as on the date
of Techno-commercial bid opening, with the original Technology Owner (Licensor)
for design, manufacture, sell, use, service of once through variable pressure supercritical
steam generator technology (with evaporator suitable for variable pressure
operation in sub-critical pressure ranges).
i.
The
licensor should have experience of providing such variable pressure design steam
generator technology for at lease one (1) no. of coal fired supercritical steam
generator for a 1500 T/hr or higher capacity using either spiral wound (inclined)
or vertical plain or vertical rifled type water wall tubing with the evaporator
suitable for variable pressure operation in sub-critical and super-critical pressure
ranges and which should be in successful operation for a period of not less than
one (1) year as on the date of bid opening.
ii.
The
Bidder shall offer only the type of steam generator i.e. single pass (tower type)
or two pass type for which the Bidder is qualified and shall offer only the type
of water wall tubing (either spiral wound (inclined) or vertical plain or vertical
rifled type) for which his licensor is qualified.
iii.
In
such an event, the Bidder shall furnish a Deed of Joint Undertaking executed between
the Bidder and the supercritical steam generator manufacturer (as the case may be)
and its Technology Owner (Licensor), as per the format enclosed in the Bidding Documents
towards the Bidder and the licensor being jointly and severally liable to the
Employer for successful performance of the Steam Generator along with an extended
warranty of at least one (1) year over and above what is required as per tender
documents.
iv.
In
case of award, Technology Owner (Licensor) will be required to furnish an on demand
bank guarantee for an amount of 0.1% of the total contract price of the Steam Generator
Package in addition to the contract performance security to be furnished by the
Bidder."
10.
In
addition to the above, the learned Attorney General submitted that in the event
the provisions of Note 5 were to be followed, it would be necessary for the
Bidder to provide a Deed of Joint Undertaking to be executed between the
Bidder, the proposed Qualified Steam Generator Manufacturer, who possessed the experience
of designing and engineering a Steam Generator with evaporator suitable for constant
pressure operation. The very reason for the furnishing of a Deed of Joint Undertaking
was to make the technology owner responsible for the successful operation of the
plant along with the Bidder.
It was submitted that
only when such an undertaking was given by the licensor and the Qualified Steam
Generator Manufacturer that the Bidder would be eligible for being considered as
being qualified to participate in the bidding process. The learned Attorney
General submitted that despite the fact that the Respondent No.1 had taken recourse
to Note No.5 and the bid of the Respondent was non-responsive, no Deed of Joint
Undertaking had been furnished by the Respondent. On the other hand, in the bid
submitted by the Respondent No.1, it had been mentioned in Clause 1.2.0 that the
evaporator in the reference Steam Generator, which was supplied to Enel, was
for variable pressure operation.
The Respondent claimed
to have designed and engineered the reference Steam Generator, but when it came
to the actual confirmation in reference to the experience, it was indicated as
follows :- 1.5.0 We, confirm that M/s ANSALDO CALDAIE S.p.A. (Qualified Steam Generator
Manufacturer) meets all the requirement as per 1.1.1 of BDS except that the evaporator
indicated in the reference steam generator is not designed for variable pressure
operation and is designed for constant pressure (Universal Pressure) operation only
and seeking qualification along with the original technology owner (Licensor) from
which he has an ongoing license agreement (which covers technology transfer), as
on the date of Techno-commercial bid opening, for design, manufacture, sell,
use, service of once through variable pressure supercritical steam generator technology
(with evaporator suitable for variable pressure operation in sub-critical and supercritical
pressure ranges).
Further we confirm that
original technology owner (Licensor) had experience of providing variable pressure
design steam generator technology for at least one (1) no. of coal fired supercritical
steam generator technology for at least one (1) no. of coal fired supercritical
steam generator for a 1500 T/hr or higher capacity using either spiral wound (inclined)
or vertical plain or vertical rifled typed water wall tubing with the evaporator
suitable for variable pressure operation in sub-critical and super-critical pressure
ranges and which should be in successful operation for a period of not less than
one (1) year as on the date of techno commercial bid opening. The detail of Licensor
and his experience detail are as follows:"
11.
The
learned Attorney General submitted that it was, therefore, clear that the evaporator
for the Steam Generator, which the Respondent No.1 had agreed to provide, had not
been designed for variable pressure operation and, accordingly, the experience
of the licensor was relied upon. Furthermore, the Deed of Joint Undertaking referred
to in Clause 1.01.00 was left blank, and Clause 1.6.0 which included the reference
to the Deed of Joint Undertaking was expressly and consciously scored off. It
was submitted that the failure to furnish the said undertaking made the bid of
the Respondent No.1 completely non-responsive.
12.
In
support of his aforesaid submissions, the learned Attorney General submitted that
the crucial aspects of the case are :- (i) Did the tender contemplate that the Evaporator
is something separate from the Steam Generator? (ii) Is the Evaporator not an
integral part of the Steam Generator? (iii) Could the Evaporator, if the tender
contemplated that the Evaporator could be manufactured by a third party, be
manufactured by a third party? (iv) Did Ansaldo Caldaie indicate that the Evaporator
would be supplied by it after having it manufactured by a third party?
13.
The
learned Attorney General submitted that as far as the first two questions are concerned,
the Evaporator was very much an integral part of the Steam Generator and as far
as the third and fourth questions are concerned, the Attorney General submitted
that the answer was in the negative.
14.
Learned
Attorney General contended that the Respondent No.1 was ineligible to compete
in the bid, since it did not satisfy one of the critical conditions of the tender
document. It was submitted that in order to be eligible, a Bidder had to satisfy
the conditions contained in Clause 7.1.1 of the Memorandum of Understanding, hereinafter
referred to as `MOU'. Although, manufacturing, erection or commissioning of the
Steam Generator could be outsourced, the "designing" and
"engineering" of the Steam Generator had to be done by the Bidder himself.
The learned Attorney
General submitted that if the party proposed as Qualified Steam Generator Manufacturer
by the Bidder had not designed or engineered the Steam Generator himself, he could
not be said to have met the qualifying requirements stipulated for a Qualified Steam
Generator Manufacturer and consequently, the Bidder could not also be said to have
fulfilled the requirements relating to meeting the minimum qualification
requirements for his bid to be accepted.
The learned Attorney General
submitted that the evidence on record clearly indicated that the Respondent No.1
had not designed or engineered the entire Steam Generator and that it
transpired that in response to queries raised by the Appellant to Enel, the
reference station owner had indicated that the work had been split up between the
Respondent No.1 and BHK, but executed the contract for the reference station as
part of a consortium. The detailed break-up which was provided, indicated that the
Respondent No.1 had not done the designing and engineering of the boiler walls furnace.
It was submitted that
the failure to design and/or engineer the critical parts of the Steam Generator
was fatal for qualification as a Qualified Steam Generator Manufacturer and
hence the bid submitted by the Respondent No.1 had to be rejected.
15.
The
learned Attorney General submitted that there were various contradictions and inconsistencies
in the bid submitted by the Respondent No.1 and while, on the one hand, it was mentioned
that the reference Steam Generator was provided with evaporator suitable for variable
pressure operation within sub-critical and super critical pressure ranges, it was
also indicated in another part of the Tender Documents that the evaporator indicated
in the reference Steam Generator was not designed for variable pressure
operation, but for constant pressure operation. It was submitted that the said condition
being one of the fundamental conditions of the bid, it could not be held to be
substantially responsive.
16.
The
learned Attorney General submitted that the High Court had not applied itself
to these aspects of the matter, which were essential in nature and had proceeded
on the assumption that the bid of the Respondent No.1 was in order and that the
rejection of the bid of the Respondent No.1 was liable to be quashed.
17.
On
behalf of the Respondent No.1 it was submitted by Mr. Mukul Rohatgi, learned Senior
Advocate, that the Respondent No.1 Company is an Indian Company jointly
promoted by Gammon India Limited and Ansaldo Caldaie S.P.A., Italy, who has
been in the business of manufacturing, designing, erecting and commissioning of
boilers since 1853 and is a world leader in the manufacture of Supercritical Steam
Generators and had engineered, designed and manufactured 24 Supercritical boilers
with capacity of 1500 Tonnes of Steam per hour and above. Mr. Rohatgi submitted
that the Respondent No.1 Company had installed boilers of various types all over
the world and it also has a significant presence in India since 1960. Included amongst
its major projects within India, are :-
i.
3
x 200 MW for NTPC at Ramagundam, Andhra Pradesh, which was installed in 1980 and
has been operating successfully since its installation;
ii.
2
x 500 MW for NTPC, Farakkha in West Bengal, which has been in operation since
1992;
iii.
230
MW at Smalkot for BSES, which was commissioned in 1999; and
iv.
2
x 210 MW at Neyvelli Lignite Corporation at Tamil Nadu, which was the first of
its kind in the State. It was submitted that the consortium, of which the
Respondent No.1 was a part, has the distinction of being the second largest company
involved in the installation of boilers in India after Bharat Heavy Electricals
Ltd. (BHEL).
18.
Mr.
Rohatgi submitted that the Respondent No.1 has vast experience in working with Steam
Generators and was fully eligible to compete in the bids relating to Clause 7.4
of the detailed information for bids, which stipulated that the qualification of
the Qualified Steam Generator Manufacturer would be considered if it owned at least
26% of the equity of the Bidder as per Clause 7.1.1. Accordingly, Respondent
No.1 submitted its performance certificate. Mr. Rohatgi submitted that the
Respondent No.1 submitted the Performance Certificate issued to Ansaldo Caldaie
by Anel Tower for Torranvaldaliga Nord Power Plant, to the Appellant to support
its eligibility for participating in the Bid.
19.
Mr.
Rohatgi submitted that there were four Bidders, including the Respondent No.1,
but ultimately on 5th January, 2011, the Respondent No.1 was informed that his technical
bid had been rejected on the ground that it did not meet the qualification criteria.
The Bank Guarantee furnished by the Respondent No.1 was returned to him. In the
meantime, the Writ Petition filed by the Respondent, (WP (C) No.296 of 2011),
came up for hearing on 17th January, 2011, when it was withdrawn with liberty
to file a fresh petition based on the fact that the Respondent No.1 had in the interregnum
period received the rejection letter dated 5th January, 2011, issued by the
Appellant.
20.
Mr.
Rohatgi submitted that Clause 7.1.1 and Clause 7.4 clearly reflected the mind of
the Bidder. Learned counsel urged that the use of the expression "provided"
in dealing with the capability of the Bidder to deal with variable pressures merely
indicated that the Steam Generator Manufacturer would have to provide technical
tie-up for variable pressure design and in the absence of the same, the bid submitted
would still qualify for being considered. It was urged that the use of the expression
"provided" would have to be read along with the phrase
"designed, engineered, manufactured/got manufactured" etc. The
further usage of the words "in addition" indicated that the
stipulation regarding the provision of an evaporator suitable for variable
pressure operation was an additional, ancillary and peripheral requirement and
not integral to the type of Steam Generator contemplated. Mr. Rohatgi urged that
the submission made on behalf of the Appellant to the contrary was incorrect since
it had been in no uncertain terms submitted that in the bid document and in the
pleadings before the High Court and this Court noted that the evaporator provided
with the Steam Generator at the reference plant at TNP was suitable for variable
pressure operation.
21.
It
was submitted that the entire basis of the case made out by the Appellant was, therefore,
non-est and the High Court did not commit any error in allowing the Writ
Petition filed by the Respondents.
22.
There
is no dispute that the Respondent No.1 chose Route 4 while submitting its Tender
Bid, in its capacity as an Indian Joint Venture Company for manufacturing Super-Critical
Steam Generator in India between an Indian Company and a Qualified Steam Generator
Manufacturer. The crucial condition for a Bidder of the said category to be
considered is contained in Clause 7.1.1 of the Tender Documents, which has been
extracted hereinbefore and provides that the Bidder should have designed, engineered,
manufactured/got manufactured, erected/ supervised direction,
commissioned/supervised commissioning of at least one Steam Generator having rated
capacity of 1500 Tonnes of Steam per hour or above and that it should be provided
with an Evaporator suitable for variable pressure operations for special
category and supercritical pressure ranges.
23.
The
controversy which led to the rejection of the Technical Bid of the Respondent No.1
was with regard to the question as to whether in the case of a Joint Venture
Undertaking it was essential that the Qualified Steam Generator Manufacturer also
had to be the manufacturer of the evaporator or whether it could function as a
facilitator. Furthermore, what appears to have weighed with the Appellant in rejecting
the Technical Bid of the Respondent No.1 was that the Steam Generator had been
designed for constant pressure and not variable pressure, as required by the
Appellant.
24.
Admittedly,
the evaporator is an integral part of the Steam Generator. The question is
whether the same could not be manufactured by a third party and supplied to the
Qualified Steam Generator Manufacturer for use in the boiler. Although, the said
proposition has been hotly contested on behalf of the Respondent, an attempt was
also made to show that the evaporator was in fact designed for variable
pressure, but such a submission was contrary to the confirmation given by the Respondent
No.1 which indicated that the evaporator had been designed for Constant Pressure
(Universal Pressure) operation only. The MOU, while permitting manufacturing, erection
or commissioning of the Steam Generator, provided that the same could be
outsourced, but the "designing" and "engineering" of the
Steam Generator had to be done by the Bidder himself and if the party proposed as
Qualified Steam Generator Manufacturer and the Bidder had not designed and engineered
the Steam Generator itself, it could not be said that the qualifying
requirements for such manufacturer had been satisfied.
25.
From
the terms and conditions contained in the MOU, it appears to us that it was the
intention of the Appellant that the Qualified Steam Generator Manufacturer would
have to be the manufacturer of the evaporator itself and could not have outsourced
the manufacture thereof to a third party, since the evaporator controlling the pressure
of the Steam generated is a vital and crucial component of the Steam Generator itself.
The Appellant, which will be the ultimate user of the Generator, must be presumed
to be conscious of the competence of the tenderer to "provide" the evaporator
in keeping with the required specifications.
26.
In
the aforesaid context, we are unable to uphold the decision of the Division Bench
of the Delhi High Court quashing the letter dated 5th January, 2011, issued by the
Appellant herein, informing the Respondent No.1 that its Techno-commercial Bid had
been rejected on the ground that it did not meet the minimum requirement set forth
in item No.4 of Section III of the Tender Documents. The High Court while interpreting
the provisions of Clause 7.1.1 of the Tender Documents was influenced by the use
of the phrase "manufactured/got manufactured" while considering the fact
that although, Ansaldo Caldaie, Italy, was being projected as the Qualified Steam
Generator Manufacturer, Siemens A.G. was shown as the technology owner/licensor
of the evaporator which was offered by the Respondent No.1. In other words, the
evaporator being offered by the Respondent No.1 was one which had been manufactured
not by the Qualified Steam Generator Manufacturer, but by a third party, which was
not contemplated in the aforesaid condition of the Tender Documents.
27.
The
importance of the above condition is manifested in the functioning of the Steam
Generator which handles High Pressure Steam for the purpose of turning the turbines
for generating electricity. The design and engineering of the evaporator and the
boiler itself has to be such as to withstand the very high temperatures and pressures
generated. The importance of the variable pressure operations is of great importance
as far as generation and wastage of energy is concerned. The importance of the
evaporator in controlling pressure during operations is to automatically regulate
the flow of water, generation of pressure and temperature of the steam to the
desired level.
28.
In
that view of the matter, we allow the Appeal and set aside the impugned judgment
of the Division Bench of the High Court allowing the Writ Petition filed by the
Respondent No.1. The Writ Petition filed by the Respondent No.1, therefore,
stands dismissed.
29.
There
shall, however, be no order as to costs.
......................................................J.
(ALTAMAS KABIR)
......................................................J.
(J. CHELAMESWAR)
New
Delhi
February
16. 2012
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