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M/s. Tbas Construction Supreme Infrastructure India Ltd. Indian Erecters Engineering Contractors Consortium, Represented by T.U. Ajimon v/s Union of India, Represented by Secretary, Ministry of Shipping, Transport Bhavan, New Delhi & Others

    W.A. No. 1553 of 2018 In WP (C). No.18936 of 2018

    Decided On, 05 September 2018

    At, High Court of Kerala

    By, THE HONOURABLE CHIEF JUSTICE MR. HRISHIKESH ROY & THE HONOURABLE MR. JUSTICE A.K. JAYASANKARAN NAMBIAR

    For the Petitioner: P.B. Krishnan, M.S. Kiran, Advocates. For the Respondents: R1, N. Nagaresh, R2 & R3, K.M. Nataraj, Asst. Solicitor General of India, K. Anand, Addl. R4, George Thomas Mevada Sr. Advocates, Latha Anand, Standing Counsel, M.N. Radhakrishna Menon, N. Raynold Fernandez, Manu George Kuruvila, Amal George Mevada, Advocates.



Judgment Text

Hrishikesh Roy, C.J.

1. Heard the learned counsel Sri.P.B.Krishnan, appearing for the appellant (writ petitioner). The Union of India is represented by Sri.N.Nagaresh, the learned Assistant Solicitor General of India. Sri.K.M.Nataraj, Additional Solicitor General of India, Southern Zone, appears for the Cochin Port Trust together with Sri. K.Anand, Senior Advocate and Smt. Latha Anand, Advocate. The learned Senior Counsel Sri.Thomas George Mevada represents the additional 4th respondent.

2. The appellant is the writ petitioner and they challenge the judgment dated 28.6.2018 whereby the W.P.(C) No.18936 of 2018 was dismissed by the learned Single Judge. The writ petitioner was a participating tenderer and challenged Ext.P6 communication of the Cochin Port Trust whereby, their tender was declared to be non-responsive, as they had failed to meet the requirement of the Earnest Money Deposit ('EMD').

THE TENDER PROCESS

3. The Chief Engineer, Cochin Port Trust (hereinafter referred to as 'Port Trust') issued the Ext.P1 Notice Inviting Tender ('NIT') dated 15.2.2018, for the 'Construction of International Cruise Terminal at Ernakulam Wharf'. In the Two Cover bidding process, only those technical bids which satisfied the Tender Conditions, would proceed to the stage of opening of the price bids. The NIT required the bidders to submit the EMD of Rs.22.34 lakhs, in the form of Demand Draft or through an irrevocable Bank Guarantee valid for 148 days from the date of opening of the Tender. The Clause 16.1 of the Instructions to the Tenderers (hereinafter referred to as 'ITT') stipulated that the Bank Guarantee must be in the prescribed proforma and the Port Trust would independently verify the Bank Guarantee. In the event of lack of confirmation of the Bank Guarantee by the concerned Bank, the bid shall stand disqualified and any bid not accompanied by an acceptable Bid Security shall be treated as non-responsive and shall be rejected by the Port Trust. The last date and time for submission of the bids was specified as 12.3.2018 upto 15.00 hours, and the bids were to be opened at 15.30 hours, in the presence of all bidders. The Clause 25 stipulated that those tenderers whose technical bid are found to be responsive, will be informed about the date and time of opening of the price bids. The Port Trust could seek clarification of the bids under Clause 26 of the ITT.

4. The petitioner represented itself to be a Consortium/Joint Venture comprising of three constituents, 'M/s. TBAS Construction, M/s. Supreme Infrastructure India Ltd, M/s.Indian Erecters Engineering Contractors' and they submitted their bid, under the Ext.P2 covering letter dated 9.3.2018, together with the bid security/EMD, in the form of the Bank Guarantee, bearing No.IBG 84746 dated 09.3.2018 for Rs.22,34,000/- issued by the Federal Bank Limited. The Clause 38 of the ITT lays down that when bids are submitted by Joint Venture/Consortium, the most experienced partner shall be nominated as the Lead Partner, by all the constituent firms. Most importantly, the Clause 38.2(g) provided that 'Bid Security as required can be furnished by any partner but it shall be in the name of Joint venture'. In case, the Joint Venture/Consortium agreement is not acceptable to the employer, under Clause 38.2(s), the Joint Venture/Consortium would modify the agreement so as to make it acceptable to the Employer. Under sub-clause(w) of Clause 38.2, a specific stipulation was made that the contractor shall not alter its composition or legal status, without the prior written permission of the employer.

5. The Employer (Port Trust) sought confirmation of the bank guarantee furnished by the writ petitioner and the Federal Bank on 17.3.2018 provided the [Ext.R3(c)] confirmation that they have issued the Bank Guarantee to the Port Trust on behalf of their customer, i.e. M/s.TBAS Construction (Proprietor Mr. Abdul Salam T.B).

6. While verifying the technical bid documents, several deficiencies were noticed in the bid submitted by the petitioner's Consortium and accordingly the Port Trust issued the letter dated 21.3.2018, (Ext.P3) whereby, clarification was sought on the twelve discrepancies in the Bid of the petitioner. In the letter, the Employer required that details of all partners of the Consortium be furnished and the Bid documents to be signed by the authorised signatory. Several other defects, relating to the Consortium agreement pertaining to Clause 38 of the ITT, were also highlighted. Besides, it was mentioned that the most experienced member of the Consortium i.e., M/s.Supreme Infrastructure India Ltd., was not made the lead member of the Consortium. The Bidder was accordingly allowed time until 26.3.2018, 5.00 PM, to cure the 12 defects in their documentation or else, their bid will be declared as non-responsive.

7. Responding to the above communication of the Port Trust, the Consortium in their clarification (Ext.P4) proposed M/s.Supreme Infrastructure India Ltd., as the lead partner. But simultaneously, they dropped M/s. M/s.Indian Erectors Engineering Contractors, one of the constituents of the joint venture. In other words, although the Bid was originally submitted by a three member entity, the revised Consortium/Joint Venture would comprise of only two partners.

8. The price bids were scheduled to be opened on 4.6.2018, but on that day, under Ext.P5, the bidder was informed that their bid was rejected as 'they had not met the requirement of submission of EMD'. The price bids of the responsive tenderers were however opened at 15:24:53 hours on the same day.

COURT PROCEEDING

9. Aggrieved by the rejection of their technical bid, the Consortium filed the WP (C) No.18936 of 2018 with the projection that the respondent Port Trust having found their technical bid to be responsive in all other particulars save those twelve discrepancies pointed out in the 21.3.2018 (Ext.P3) communication, could not have rejected the bid on a ground, that was not specifically shown as violative of the tender conditions. Questioning the stated ground (the EMD failing to satisfy the requirement of the tender), reliance is placed on the Federal Bank's confirmation letter of 5.6.2018 (Ext.P7), to contend that the Port Trust having obtained the necessary clarification/confirmation from the Bank which issued the Bank Guarantee towards the EMD/bid security document, and having found the bid security document to be in order, could not have turned round and rejected the technical bid on the stated ground. In any case, it is argued that the irregularity in the Bank Guarantee should be considered as a minor deviation, which will not render the bid to be non-responsive.

10.1. On the other hand, the Port Trust contends that the most experienced partner in the Consortium, was not nominated as the lead partner. Moreover the EMD was in the name of M/s.TBAS Construction whereas Clause 38.2(g) of the ITT specified that 'bid security for a Joint Venture/Consortium can be furnished by any partner, but it shall be in the name of the Joint Venture/Consortium.' The petitioner's bid was projected to be non-responsive for other reasons as well, since the composition of the Consortium was altered by constituting a new entity, comprising of only two constituents and excluding the third partner from the entity which submitted the Bid as a Joint Venture.

10.2 According to the Port Trust, even if the petitioner qualify on the submission of the EMD, on account of the change of constituents of the Consortium without prior written permission of the Employer, no relief can be granted to the bidder since the original Consortium/Joint Venture, is no more in existence.

11. The learned Judge noted the material facts and also the specific stipulations in the ITT for bids submitted by Consortium/Joint Venture. The court found that the bidder unilaterally changed the constituents of the Consortium and their supporting documentations were not furnished as per the ITT. Moreover, they failed to cure the discrepancies as pointed out in the Ext.P3. Most importantly, despite the specific stipulation in Clause 38.2(g) of the ITT, the Bank Guarantee was in the name of M/s.TBAS Construction only but not in the name of the Joint Venture/Consortium, who were the bidders. Thus the rejection of the technical bid was found to be in order and accordingly the writ petition was dismissed.

12. Before proceeding any further, we may note here that in pursuant to the direction issued by us, the price bid offered by the petitioner was disclosed as Rs.21,75,44,475.81 which would qualify as the lowest amongst the responsive tenders provided, the petitioner's bid is also considered to be a valid one. But, since the petitioner's bid was considered to be non-responsive and his price bid was never opened at the relevant stage, the contract was awarded to M/s.K.V.Joseph and Sons Private Ltd., the 4th respondent, to whom a letter of acceptance was issued on 19.7.2018. Subsequent to the said letter of the employer, the 4th respondent has furnished the performance guarantee of Rs.1,16,14,000/- and the work site was handed over to them on 27.7.2018 and since timely completion of the work of the International Cruise Terminal was essential, the respondent No.4 as the successful bidder, commenced work on 03.08.2018. As the contract was awarded to the 4th respondent at Rs.23,22,66,370.40, the same is around Rupees 1.5 Crores (Rs.1,47,21,894.59) more than the price bid quoted by the petitioner Consortium.

13. The learned counsel for the appellant, Sri.P.B.Krishnan, besides reiterating the contentions in the writ proceedings argues that furnishing of bid security in the name of the Joint Venture/Consortium, cannot be read as an essential condition as the objective of furnishing Bank Guarantee is intended to protect the rights of the employer and such objective have been achieved by furnishing of the Bank Guarantee, by one of the partners of the Consortium, on behalf of the Joint Venture/Consortium. In order to distinguish the essential and non-essential conditions in the tender process, Sri.Krishnan placed reliance on various judgments, which will be considered subsequently.

14. Per contra, Sri.K.M.Nataraj, the learned Additional Solicitor General of India and the learned Senior Counsel Sri.Thomas George Mevada for the successful bidder argue that the bid of the Consortium was deficient and their documentations were not in order. According to them, the petitioners had failed to provide security in the name of the Joint Venture. Besides they failed to address the discrepancies pointed out in the Ext.P3 letter of the Port Trust. The fabrication and interpolation in the documentations, is also alleged by the respondents counsel.

REFERENCE TO THE CITED JUDGMENTS

15. In order to appreciate the rival submission, it is necessary to bear in mind the scope of judicial intervention with the decision of the employer in contractual matters. The following judgments relied by the parties will require our consideration.

16. In Ramana Dayaram Shetty v. International Airport Authority of India, reported in (1979) 3 SCC 489, the Supreme Court has held that the words used in a document are not superfluous or redundant but it must be given some meaning and weightage. (para 7 at page 500 SCC)

'7. ….... ….... …..... It is a well settled rule of interpretation applicable alike to documents as to statutes that, save for compelling necessity, the Court should not be prompt to ascribe superfluity to the language of a document 'and should be rather at the outset inclined to suppose every word intended to have some effect or be of some use'. To reject words as insensible should be the last resort of judicial interpretation, for it is an elementary rule based on common sense that no author of a formal document intended to be acted upon by the others should be presumed to use words without a meaning. The court must, as far as possible, avoid a construction which would make the words used by the author of the document meaningless and futile or reduce to silence any part of the document and make it altogether inapplicable. ….. …... ….'

17. While reaffirming the ratio laid down in Ramana Dayaram Shetty (supra), the Supreme Court in G.J.Fernandez v. State of Karnataka, (1990) 2 SCC 488, declared that the party issuing the tender 'has the right to punctiliously and rigidly' enforce the terms of the tender. If a bidder approaches a court for an order restraining the employer from strict enforcement of the terms of the tender, the court would decline to do so.

18. However, in Poddar Steel Corporation. v. Ganesh Engg. Works, (1991) 3 SCC 273, the Supreme Court postulated the theory of essential and non-essential, or ancillary or subsidiary terms of an NIT. It was held in this case that, the cheque of the Union Bank of India issued by the Poddar Steel Corporation 'though a deviation from the terms of the NIT' was sufficient, for meeting the conditions of the NIT, the condition being ancillary or subsidiary to the main object to be achieved by the stipulation. In other words, the Supreme Court declared that while there can be no deviation from the essential tender terms, deviation from the ancillary or non-essential terms, is permissible. But, while granting relief to the tenderer in Poddar Steel (supra), the Supreme Court did not advert to the privilege-of-participation principle, laid down in Ramana Dayaram Shetty (supra) as affirmed in G.J.Fernandez (supra). Discussion was also not made, on the consequence of permitted deviation since others also, could have become eligible, to participate in the tender process.

19. In another often cited judgment in the field of contract, i.e., Tata Cellular v. Union of India, (1994) 6 SCC 651, it was declared that, the Court will not interfere with the decision taken by the awarder of the contract, at the behest of an unsuccessful bidder in respect of a technical or procedural violation. Proceeding on this basis, in the subsequent judgment in Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, the Supreme Court succinctly stated the law on the issue, in the following words:(Para 22, at Page 531 SCC)

'22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. ….. ….... ….'

20. The petitioner's counsel has also referred to Rashmi Metaliks Ltd. v. K.M.D.A. (2013) 10 SCC 95 and also the ratio in B.S.N.Joshi & Sons Ltd. v. Nair Coal Services Ltd, (2006) 11 SCC 548. Here a distinction has been drawn by the Supreme Court between essential and ancillary conditions in the bid documents. In these two judgments the Court substituted its own view, for that of the employer, who interpreted that particular term of NIT, to be mandatory for compliance. But, in the process, the dictum laid down in Ramana Dayaram Shetty (supra), G.J.Fernandez (supra), Tata Cellular (supra) and Jagdish Mandal (supra) were ignored.

21. We will benefit in this discussion by referring to the recent decision in Central Coalfields Ltd. v. SLL-SML Joint Venture Consortium, reported in (2016) 8 SCC 622. Here considerable light was shown by the Court, on the issue of the power of the employer in their interpretation of essential and non-essential clauses, in the NIT. The earlier judgments were discussed and on thorough analysis, the Supreme Court declared that whether a term of the NIT is essential or non-essential, when decided by the employer, that decision should be respected. Even if the term is essential, the employer has the inherent authority to deviate from it, provided the deviation is made applicable to all participating and potential bidders. However, the employer's decision on a particular term to be ancillary or subsidiary, should usually be respected by the court. The lawfulness of the employer's decision can be questioned only on very limited grounds, but soundness of the decision cannot be questioned or else the court will take over the functions of the tender issuing authority.

DISCUSSION AND DECISION

22. From the above judgments cited before us, it is clearly discernible that the court while exercising the powers of judicial review in contractual matters, should consider whether the decision made by the authority is mala fide or is intended to favour someone or whether the process adopted or the decision made is so arbitrary and irrational, that the same could not have been sustained through judicial scrutiny. When the Employer chooses to enforce the terms of the contract specified in the Instructions To Tenderers, relaxation from the contractual terms to a participating bidder may not be justified. If we take into account the specific situation in this matter, the bidders knew that when the bid is of a Joint Venture/Consortium, the bid security must be in the name of the Joint Venture. The change in the composition of the Joint Venture/ Consortium, without the permission of the Employer is not allowed. Most surprisingly even when the bidder was put on notice, the bidder had failed to take necessary steps to rectify the deficiencies communicated to them in the Ext.P3 letter. It is on these grounds, the petitioner's bid was not accepted and declared to be non-responsive. In such circumstances, if relaxation of the bid requirement is permitted for a particular bidder, such relaxation of condition should necessarily be provided to the other participating or intending bidders, as otherwise, privilege of participation would be denied to those bidders. Moreover, it will not be a level playing field, if relaxation, notwithstanding the contractual terms, is granted in favour of a non-responsive bidder. That apart, what is essential or non-essential component of the contractual terms, is best decided by the employer and their decision should normally be respected. Only when the Employer's decision is arbitrary or irrational or the decision making process is intended to favour someone, intervention of the court may be justified.

23. Bearing in mind the above principles in tender matters, let us apply them to the facts in the present case. While the Bank Guarantee furnished by one of the constituents of the Consortium may perhaps protect the interest of the Employer, the Tender Committee (Ext.R3a) rightly noticed that the Consortium which submitted the bid on 09.03.2018, was a Joint Venture of three partners, viz. M/s.TBAS Construction, M/s.Supreme Infrastructure India Ltd., and M/s. Indian Erecters Engineering Contractors Consortium. But the Bank Guarantee issued from the Federal Bank, was in the name of M/s.TBAS Construction only and not in the name of Joint Venture/Consortium. As per Clause 38.2(g) of the ITT (Ext.P1), when the tenderer is a Joint Venture/Consortium, the bid security can be furnished by any partner, but it shall be in the name of Joint Venture. Therefore, it is apparent that the Bank Guarantee did not conform to the requirement of the ITT which will make the Bid of the Joint Venture non-responsive.

24. But assuming that the issue of non-furnishing of Bank Guarantee in the name of Joint Venture, will have no fatal implication, even then, the bid of the appellant/writ petitioner will have to fail on other counts. The Clause 38.2(s) of the ITT contemplates a situation where, modification can be made to the Joint Venture agreement so as to make it acceptable to the Employer. The petitioner, in response to the discrepancies pointed out by the Port Trust in their Ext.P3 communication dated 21.3.2018, proceeded to change the very constitution of the Joint Venture, by excluding one of the constituents, from the Consortium. This resulted in a new Consortium/Joint Venture entering the fray at mid stage of the tender process. The original entity, which submitted the bid on 9.3.2018 (Ext.P2) as a Consortium, made itself scarce by removing one of the partner of the Joint Venture, which have its own implication on the bid. A reading of sub-clauses (v) and (w) of Clause 38.2 of the ITT indicate that, alteration of the legal status or of composition of the Consortium can be done, only with prior permission of the Employer. In the absence of any such prior permission from the Port Trust, the new Consortium with just two members, cannot automatically step into the shoes of that entity which submitted their bid on 9.3.2018. The participation or recognition of the newly composed Consortium/Joint Venture would hardly be justified, as the entity currently in the fray, is not the one which had submitted the Bid with the Bank Guarantee issued by the Federal Bank. In fact, the original Joint Venture/Consortium which submitted their bid on 9.3.2018 is unilaterally substituted without the required approval of the employer and the Bidder is not existing anymore.

25. That apart, the bidder failed to cure the discrepancies pointed out in Ext.P3 communication of the Port Trust within the time granted to them. Therefore, even on this score, their bid would be liable for rejection.

26. In addition to above, we must also bear in mind certain deficiencies/ fabrication/interpolations, in the documents furnished by the writ petitioner. The bid submitted on behalf of the Consortium on 9.3.2018(Ext.P2), was not signed by the authorised person, T.U.Ajimon. Moreover, the power of attorney in favour of T.U.Ajimon executed on 12.3.2018, was not signed by the two constituents of the Joint Venture, i.e. M/s.Supreme Infrastructure India Ltd or by M/s.Indian Erecters Engineering Contractors. Interpolation of dates are discernible in the Joint Venture agreement produced as Ext.R3(d). Although Ext.R3(d) appears to have been executed on 12.03.2018, the stamp paper itself is purchased on 24.03.2018. This reflects that dates were illegally inserted in the tender documents to suit the process and this suggest manipulation, which will

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disentitle the bidder from equitable relief. 27. The learned counsel for the petitioner has referred to the difference in the bid quoted by the petitioner and the 4th respondent, who were awarded the contract. But, in our considered view, this cannot be the sole basis to choose a non-responsive tenderer as in that event, the work itself may be put to jeopardy. The Employer too will be put to unnecessary risk, since the defects are fundamental in nature and cannot be ignored. The Employer having prepared the tender documents is the best authority to understand and appreciate their requirements and interpret them to meet their objectives. The court exercising the power of judicial review should normally respect the Employer's understanding and appreciation, unless the decision taken by the authority is mala fide or perverse. In the instant case, there was no ambiguity in the interpretation of the Tender Conditions made by the Port Trust nor any special consideration was shown by them for any of the participating bidders. In such circumstances, it would hardly warrant the Court to intervene in the decision of the Employer in the contractual domain. 28. The tender committee during their assessment of the bids, have specifically referred to the reconstitution of the Joint Venture/Consortium and the fact that the most experienced constituent was not shown as the lead partner, as per Clause 38.2(b) of the ITT. The defects in the Joint Venture/Consortium and the related documents including the discrepancies in the additional document, furnished by the tenderer were also noticed. On the basis of these omissions and discrepancies, the tender committee declared that the bid of the petitioner is non-responsive and therefore, their price bid cannot be considered. These omissions relate to essential conditions of the tender and the Employer would be within their right to require a bidder to satisfy these essential terms of the contract which were made known to all the tenderers. 29. When we examine the legality of the non-responsive declaration and apply our mind to the material basis for the negative decision against the petitioner, we are quite convinced that the Port Trust made a fair evaluation of the bid filed on behalf of the Joint Venture/Consortium and their conclusion on the defective bid, is found to be in order. According to our understanding, none of the judgments cited by the appellants' counsel, can help them to overcome the deviation from the essential conditions of the contract. Therefore, the impugned judgment is affirmed and the Appeal is dismissed.
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