Respondent No.2 has floated tender bearing IFB No.09/RBLISP/2011-12, dated 24-3-2012 for construction of a Viaduct at K.M. 8.125 and earth work excavation and forming embankment from K.M. 7.500 to K.M. 9.000 of Low Level Right Main Canal of Sangambanda Balancing Reservoir, Sangambanda village, Makthal Mandal, Mahaboobnagar District. The estimated contract value is Rs.6,36,91,039/- and the period of completion of the work is prescribed as nine months. The tender process is in two stages, viz., technical evaluation and financial evaluation. The technical evaluation undertaken in the first stage pertains to the qualification and eligibility of tenderers and the financial bids of the qualified tenderers will be opened in the second stage. The petitioner and respondent No.3, among others, applied through e-Procurement and both of them were qualified in the first stage for opening of their price bids. On coming to know about the same, the petitioner addressed letters dated 19-5-2012 and 5-6-2012 wherein it has pointed out that respondent No.3 has not satisfied the eligibility criteria and therefore his price bid cannot be opened. However, despite the said objections, the price bid of respondent No.3 was opened. On coming to know of the same, the petitioner filed this Writ Petition with the apprehension that respondent Nos.1 and 2 are likely to accept the price bid of respondent No.3.
Separate counter-affidavits have been filed on behalf of respondent Nos.1 and 2 and by respondent No.3. The petitioner has filed a reply affidavit to these counter-affidavits.
At the hearing, Sri C.V. Mohan Reddy, learned Senior Counsel appearing for the petitioner, submitted that respondent No.3 has not satisfied the two mandatory conditions, namely, filing of PAN card and proof of the latest Income Tax Returns (ITRs) in his name and also the Value Added Tax (VAT) Registration and the latest clearance thereof. While elaborating his submissions, the learned Senior Counsel argued that respondent No.3 has filed his tender in his individual capacity, but he has filed the PAN card and proof of the latest ITRs pertaining to M/s. Meher Engineerings, a partnership firm of which he is only a Managing Partner. The learned Senior Counsel further submitted that for the purpose of Income Tax Act, 1961 (for short "the Act") a partnership firm has a separate legal existence by virtue of Section 184 thereof and that therefore respondent No.3 who has filed his tender in his individual capacity, cannot file the ITRs of the said partnership firm. The learned Senior Counsel distinguished the Judgment in M.V.V. Satyanarayana Vs. Engineer-in-Chief, R&B, Hyderabad (2008(1) ALT 715)and submitted that this Court, in the said case pertaining to respondent No.3 herein, has not considered the provisions of the Act. He further submitted that as the tender process was commenced in March 2012, the latest VAT clearance, which is prescribed as a mandatory condition, means that the clearance should be in respect of the Financial Year immediately preceding the issue of the tender notice, which is 2010-11, and that respondent No.3 has only filed the VAT clearance certificate of Financial Year 2009-10. He placed reliance on the Judgments of the Supreme Court in G.J. Fernandez Vs. State of Karnataka (1990) 2 SCC 488)and RamanaDayaram Shetty Vs. International Airport Authority of India (AIR 1979 S.C. 1628)in support of his submissions.
Opposing the above submissions of the learned Senior Counsel, Sri Vemulapalli Prasada Rao, learned counsel for respondent No.3, placed heavy reliance on the Judgment of this Court in M.V.V. Satyanarayana (1-supra). He also referred to and relied upon Clause 6 of the Partnership Amendment Deed dated 1-4-1993 of M/s. Meher Engineerings and submitted that respondent No.3 shall be deemed to be representing the said partnership firm and for all purposes all the works executed by him are deemed to have been executed on behalf of the said partnership firm and that therefore, the filing of the ITRs of the said firm satisfies the requirement of the tender condition in this regard. With regard to the VAT clearance, he submitted that respondent No.3 filed VAT clearance certificate dated 21-1-2011 which will satisfy the tender condition.
The learned Government Pleader for Irrigation has supported the submissions of the learned Counsel for respondent No.3.
I have carefully considered the respective submissions of the learned counsel and perused the record.
Clause 24 of the General Terms and Conditions of the tender document prescribed the eligibility criteria. For the present purpose, the 'Document details' column, which forms part of the said Clause, is relevant. It prescribed 18 documents of different nature to be filed by the tenderers. Sl.No.10 thereof deals with 'Income Tax document. PAN CARD PROOF OF LATEST I.T. RETURNS' and Sl.No.18 deals with 'VAT REGN. AND VAT LATEST CLEARANCE'.
It is not in dispute that respondent No.3 filed the tender in question in his individual name. However, he has submitted the ITRs assessed in the name of M/s. Meher Engineerings. It is the pleaded case of respondent No.3, with respect to which there is no dispute, that he is the Managing Partner of the said partnership firm. The law is well settled that a partnership firm has no separate legal existence as the firm is nothing but a compendium of its partners. In S. Kireetendranath Reddy Vs. A.P. Transco (1999 (5) ALT 47), this Court has extensively dealt with the status of a partnership firm in law vis--vis its partners and held that a firm is neither a legal entity nor a person; that it has no legal existence apart from its partners; that a firm’s name is merely a description of the individuals who composed it; that the essential characteristic of a firm is that each partner is a representative of the other partners; and that each of the partners is an agent and a principal. On a thorough analysis of the provisions of the Indian Partnership Act, 1932 (for short 'the Partnership Act') with reference to the decided case law, this Court has nullified the action of the A.P. Transco in that case in disqualifying the petitioner therein by not taking into consideration the experience of the firm as his experience as a partner therein.
An identical case (3-supra) filed by respondent No.3 was dealt with by me. In that case, Clause 3.3(A) of the Notice Inviting Tenders (NIT) prescribed that to qualify for opening the price bid, each firm in its name should have during the last five financial years satisfactorily completed as a prime contractor similar nature of works of the prescribed value. The NIT also contained similar Clauses to that in the present case relating to filing of the PAN card with a copy of latest the ITRs and also copy of the VAT Registration and the latest valid Commercial Tax clearance certificate. As in the present case, respondent No.3 has filed the ITRs of the firm, of which he is the Managing Partner. When his technical bid was rejected, respondent No.3 approached this Court questioning the said action. While dealing with those Clauses, this Court inter alia held, at para-21, as under :
'…..Once it is legally conceded that a partnership firm has no independent legal existence, I do not see any justification whatsoever in respondent No.2 not considering the income tax return filed in the name of the firm of which admittedly the petitioner is the managing partner. Respondent No.2 seems to be obsessed with the fact that the income tax return was not 'on the same name' of the petitioner and this objection looks to me to be hyper-technical. As concluded supra, the purpose of sub-clause (f) of clause 3.3B appears to be limited only to ensure that the bidder holds a PAN card meaning thereby that he should be an assessee. The proof in respect of such fact could be shown only by producing the latest income tax return. With the filing of the income tax return and the PAN card standing in the name of the firm of which the petitioner is the managing partner, the requirement of sub-clause (f) is adequately complied with.' (Emphasis added)
At the hearing, it is not disputed that the Judgments in M.V.V. Satyanarayana (1-supra) and S. Kireetendranath Reddy (4-supra) have attained finality. Therefore, the further consideration on this aspect would have been obviated in the normal course. However, as noted above, the learned Senior Counsel placed reliance on Section 184 of the Act which was not referred to in either of the above noted two Judgments. I must therefore consider the contention advanced with reference to the said provision.
Section 184 of the Act, to the extent it is relevant for the present purpose, reads as under:
'A firm shall be assessed as a firm for the purposes of this Act, if –
(i) the partnership is evidenced by an instrument; and
(ii) the individual shares of the partners are specified in that instrument.'
As rightly submitted by the learned Senior Counsel, for the limited purpose of the Act, a firm is conferred legal recognition as an entity and the Act made its assessment compulsory. But, I do not find any conceivable reason why the ITRs of such a firm shall not be made use of by its partners for the purpose of satisfying the pre-qualification criteria of a tender document. Even if individual partners are liable for getting their individual incomes separately assessed under Section 10 of the Act, in the absence of any legal bar under the provisions of the Act, there can be no reason for preventing a partner of a partnership firm from filing the ITRs of the firm for the purpose of showing his turnover, financial capacity and other requirements as prescribed by the tender conditions. In my considered opinion, the fiction introduced in Section 184 of the Act, whereby a legal status is conferred on a partnership firm, cannot be extended to destroy the legal relationship between the partners and the firm. Such a water-tight compartment can be presumed only when the question of compliance with the requirement of Section 184 of the Act arises. For instance, where a firm was not assessed under the Act and its partners who got their individual incomes assessed separately plead that the assessments in their individual capacity shall be deemed to be the assessment of the firm, Section 184 can be pressed into service to negate such stand of the partners. But once the firm is assessed under the Act, such assessment would, in my opinion, enure to the benefit of its partners for the purposes such as the present one, where proof of assessment of the tenderer is required.
Alternatively, in view of Clause 6 of the Partnership Amendment Deed referred to above, respondent No.3 shall be treated as a representative of M/s. Meher Engineerings itself. For better understanding of this aspect, it is necessary to consider this Clause, which reads as under:
'Partner No.1 viz., Sri M.V.V. Satyanarayana shall be the Managing Partner of the Firm who shall have the power of control and management of the affairs of the business. He shall have the power individually to apply for tenders and negotiate the terms thereof, to enter into agreements, to accept measurements, to sign the bills and to receive payments etc. He shall also have the power to appoint necessary staff, to maintain the books of accounts and to incur necessary expenses and to do all acts and things necessary and incidental to carry on the business of the firm. Any of the works tendered and obtained in the name of Sri M.V.V. Satyanarayana shall be deemed to have been taken on behalf of this firm. (Emphasis added)
Under the above quoted clause, it was agreed among the partners that the works tendered and obtained in the name of respondent No.3 shall be treated to have been taken on behalf of the firm. This Clause fell for consideration of this Court in M.V.V. Satyanarayana (1-supra) and it was held, at para-28, as under:
'I find another crucial angle to this case on which also the result of this case can turn. The learned counsel for the petitioner relied upon clause 6 of the partnership agreement as amended, for the purpose of convincing this court that the petitioner is permitted to execute works in his own name, but he is obliged under the said clause to assess the works in the name of the firm. He has taken pains to explain and correlate with reference to the income tax returns filed in the name of the firm, the works executed by him in his name with the turnover mentioned in the name of the firm in the income tax returns. In my opinion, this exercise on the part of the learned counsel is wholly unnecessary, because, clause 6, which is unequivocal in its terms, obviates the necessity for such an exercise. The said clause empowers the petitioner not only to individually apply for tenders, negotiate the terms thereof and enter into agreements etc., but it also contains a deeming provision, namely, that the works tendered and obtained in the name of the petitioner shall be deemed to have been taken on behalf of the firm. Thus on the true construction of this clause, it is quite apparent that though the petitioner executed the works in the past in his own name, they are deemed to have been executed on behalf of the firm. Clause 6, in my view, is in accordance with the provisions of Section 16 of the Act which was referred to supra and a fortiorari, the tender which is filed by the petitioner in his name is deemed to be filed in the firm’s name. Viewed from this perspective, even if sub-clause (f) of clause 3.3B of NITs is treated as substantive in nature and construed literally, the petitioner complied with the said condition by filing the income tax return of the firm. The rejection of technical bid cannot therefore be sustained even from this perspective.'
The above finding is a complete answer to the submission of the learned Senior Counsel. Even though Section 184 of the Act was not considered in the said Judgment, by virtue of Clause 6 of the amended Partnership Deed, the effect of Section 184 of the Act, if any, gets nullified. Significantly, the words 'in its name' in Clause 3.3(A) of the tender conditions in M.V.V. Satyanarayana (1-supra), do not exist in the tender conditions in the present case. Even in the face o
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f those words, this Court has opined in the said case that the ITRs filed in the name of the firm would enure to the benefit of respondent No.3 even though he has filed the ITRs standing in his name. Therefore, I have no hesitation to hold that the first submission of the learned Senior Counsel has no merit. With regard to the second submission, Sl.No.18 of Clause 24 of the tender conditions uses the words '…VAT LATEST CLEARANCE'. No doubt, respondent No.3 filed the VAT clearance for the immediately preceding year in which the tender was called. However, along with the VAT clearance certificate dated 21-1-2011, respondent No.3 has filed the VAT Returns Report dated 27-1-2012 of the Commercial Tax Department for the period from December 2010 to December 2011. In my opinion, this Report needs to be read along with the VAT clearance certificate dated 21-1-2011. None of the respondents have disputed the authenticity of the VAT Returns Report, which were upto December 2011, i.e., a couple of months prior to the issuance of the tender notification. In this view of the matter, I am of the view that Clause 24 of the tender conditions is duly satisfied and hence the technical bid of respondent No.3 is not liable for rejection on a hyper-technical ground that the formal latest VAT clearance certificate was not filed by him. For the above mentioned reasons, I do not find any merit in the Writ Petition and the same is accordingly dismissed. As a sequel, interim order dated 29-6-2012 is vacated and WPMP Nos.25014 and 33179 of 2012 are disposed of as infructuous.