w w w . L a w y e r S e r v i c e s . i n

Rappid Geo Services Pvt. Ltd., rep. by its Managing Director S.V. Suresh Babu v/s The Union of India, rep. by its Secretary, Department of Petroleum, New Delhi & Others

Company & Directors' Information:- M SURESH COMPANY PRIVATE LIMITED [Active] CIN = U36910MH2004PTC149806

Company & Directors' Information:- A R C INDIA PETROLEUM PRIVATE LIMITED [Active] CIN = U11202TG2009PTC063249

Company & Directors' Information:- AMP E - SERVICES PRIVATE LIMITED [Active] CIN = U51909MN2013PTC008361

Company & Directors' Information:- S R PETROLEUM PRIVATE LIMITED [Strike Off] CIN = U23200MH1999PTC122909

Company & Directors' Information:- N. P. PETROLEUM LIMITED [Strike Off] CIN = U23201UP1995PLC018153

Company & Directors' Information:- R H PETROLEUM PRIVATE LIMITED [Active] CIN = U23209MH1996PTC101701

Company & Directors' Information:- K S M PETROLEUM PRIVATE LIMITED [Active] CIN = U01120TZ1978PTC000800

Company & Directors' Information:- A. M. PETROLEUM PRIVATE LIMITED [Strike Off] CIN = U51524MH2014PTC255581

Company & Directors' Information:- NEW DELHI E SERVICES PRIVATE LIMITED [Active] CIN = U72900DL2007PTC165097

Company & Directors' Information:- S V S PETROLEUM PRIVATE LIMITED [Active] CIN = U51909DL2002PTC116940

Company & Directors' Information:- DELHI SERVICES PRIVATE LIMITED [Strike Off] CIN = U74999DL1950PTC001721

Company & Directors' Information:- NEW INDIA PETROLEUM COMPANY LIMITED [Dissolved] CIN = U99999MH1919PTC000534

Company & Directors' Information:- INDIA PETROLEUM COMPANY LIMITED [Dissolved] CIN = U99999MH1936PTC002453

    Writ Petition No. 19737 of 2019

    Decided On, 26 February 2020

    At, High Court of Andhra Pradesh


    For the Petitioner: Ugra Narasimha, Advocate. For the Respondents: R1, B. Krishna Mohan, Asst. Solicitor General of India, R2 to R6, Avinash Desai, Advocate.

Judgment Text

This Writ Petition is filed to declare the action of respondent Nos.4 to 6 in deleting Clause 1.5 in part-2 of the Bid Evaluation Criteria (BEC) by amendment No.1, dated 25.10.2019, in the tender notice No.CEG2303P20, thereby denying the preference to MSMES as illegal and arbitrary and contrary to the provisions of Micro, Small and Medium Enterprises Development Act, 2006 (for short ‘MSMED Act’).The case of the petitioner Company is that it is engaged in the business of Geologic and Seismic Surveying and Geodetic Surveying Activities etc.; the respondent Corporation conducts exploration of Oil and Natural Gas based on the Data that is obtained by conducting a Seismic Survey; in this connection, the respondent Corporation had issued a tender notification, which is open for both National and International bidding; it is also specified in the tender notification that a pre-bid conference will be held on 19.09.2019; Clauses 5.5 and 5.6 of the tender notification deal with purchase preference to Micro and Small Enterprises as defined under the Act; the Department of Public Enterprises had formulated a public procurement policy through Micro and Small Enterprises Order, 2012, dated 08.12.2012, stipulating that at least 25% of their total procurement of goods and services by the Government Departments/Central Public Sector Enterprises shall be through MSME; pursuant to the said policy, the respondent Corporation incorporated purchase preference in Clause 1.5 in part-2 Bid Evaluation Criteria; petitioner is a duly registered Micro and Small Enterprise as defined under the Act and the petitioner Company is in collaboration with a foreign origin company which fits into the technical, financial and experience criteria specified in Clause 1.0; in the pre-bid conference seven (7) parties have participated and party No.1 has taken an objection and requested to remove the MSME clause from the tender document claiming it to be contradictory to QCBS criteria, pursuant to which respondent Corporation has amended the tender notification by completely removing Clause 1.5 purchase preference clause in Part-2, Bid Evaluation Criteria and the said deletion will take away the preference given to MSE companies; challenging the said deletion, the present Writ Petition is filed.This Court, on 06.12.2019, while directing to list the matter on 11.12.2019, granted an interim order directing that the bids shall not be finalized till then. The said interim order is being extended from time to time.Counter affidavit along with vacate stay petition has been filed by the second respondent stating, inter alia, that the second respondent has issued the Global Notice inviting tenders for hiring of services for 2D and 3D Seismic Data acquisition and processing of 500 LKM and 610 sq. km. respectively under QCBS (quality and cost based selection); the Writ Petitioner does not have locus standi to file the present Writ Petition as the petitioner did not even participate in the tender process; the tender was for a basin in the State of Odisha and no cause of action has arisen within the jurisdiction of this Court, hence the Writ Petition is not maintainable; the pre-bid meeting was held on 19.09.2019 and the petitioner did not participate in the pre-bid conference and did not submit any queries prior to pre-bid conference; the prospective bidders drew the attention of the second respondent to certain clauses of the tender document and sought certain modifications/deletions thereon citing practices that have previously been followed by the second respondent’s earlier tenders, the latest tenders of ONGC and a similar tender of the respondent for the project based out of Rajasthan; the objection of the prospective bidders with respect to purchase preference clause to Micro and Small Enterprises is that Clause 1.5 of the tender is not only contradictory to QCBS criteria under the Tender, but also in deviation of the earlier tenders; after a detailed internal review, the second respondent learnt that it had in similar tender documents removed the purchase preference clause, as public sector undertakings like ONGC, IOCL do not have scope to give purchase preference in QCBS tenders; the ONGC circular dated 28.05.2018 reads as follows:“In the QCBS system, as the evaluation of bids shall be based on combined score (technical parameters and prices), purchase preference policies (like policy for MSEs and PPLC etc) shall not be applicable.”The Engineers India Limited, another PSU of the Government of India compiled a report on the recommendations of Oil PSU’s in India titled: “Enhancing Efficiency and Transparency in Procurement of OIL Public Sector Undertakings”; after deliberations amongst the oil PSU’s certain modifications and additions were proposed to the report dated July, 2016 and it was decided that “purchase preference policy for MSEs on allowing the MSE bidder within the price range of within 15% be allowed to match the prices of L1 non-MSE bidder, should not be followed in QCBS tenders as otherwise it shall defeat the purpose of QCBS”; the tender in question is with respect to a project that requires an advanced level of technical expertise and financial ability and hence it is imperative that the QCBS criteria must be adopted; the respondent Corporation has acted in public interest and to keep the bid competitive and not for any ulterior purpose; the interim orders are causing irreparable operational and financial losses to the second respondent and prayed to dismiss the Writ Petition.Reply affidavit has been filed to the counter of the second respondent stating that the removal of purchase preference clause is to facilitate other than the MSME bidders to participate without competition from MSME and if the purchase preference clause is restored, the petitioner will be eligible to participate; as the tender is a global tender, this Court has got jurisdiction to deal with the issue and that deletion of the clause on the basis of the query cannot be called as exchange of view/clarification.Heard Sri Ugra Narasimha, learned counsel for the petitioner and Sri Avinash Desai, learned counsel for the respondents.As seen from the global notice inviting tenders, the pre-bid conference is not only for exchange of views/clarifications, but also to explain the requirements of the Company in detail to the interested prospective bidders and to understand bidders perspective including exchange of views/clarifications, if any, on the scope of work, bid rejection/bid evaluation criteria and other terms and conditions of the tender and as a query has been raised in the pre-bid conference by way of Amendment No.1 dated 25.10.2019 to the tender, only the purchase preference to MSEs is deleted and MSEs were not debarred from participation, but in spite of the same, admittedly the petitioner did not participate in the tender. Previously also ONGC followed the same policy, which is not denied by the petitioner. As seen from the recommendations of the Oil PSUs on the report “Enhancing Efficiency and Transparency in Procurement of Oil Public Sector Undertakings”, it was discussed that purchase preference policy for MSEs on allowing the MSE bidder within the price range of 15% be allowed to match the prices of L1 non-MSE bidder, should not be followed in QCBS tenders as otherwise it shall defeat the purpose of QCBS. The purchase preference clause is contradictory to QCBS criteria and is admittedly in deviation of the earlier tenders. Even as per circular of ONGC dated 28.05.2018 in the QCBS system, purchase preference policies to MSEs are not applicable. Engineers India Limited also in its report dated July 2016 observed that purchase preference policy for MSEs should not be followed in QCBS tenders as otherwise it will defeat the purpose of QCBS. Admittedly, the tender in question requires technical expertise. As seen from the Udyog Aadhaar registration certificate filed by the petitioner, the date of commencement of manufacturing activity is 26.03.2019 and the tenders were called for in September 2019.In Tata Cellular v. Union of India (1994) 6 SCC 651), the Hon’ble Supreme Court emphasised the need to find a right balance between administrative discretion to decide the matters on the one hand, and the need to remedy any unfairness on the other, and observed as follows:“94. (1) The modern trend points to judicial restraint in administrative action.(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible.(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. …(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.”In Raunaq International Limited v. IVR Construction Limited (1999) 1 SCC 492), the Hon’ble Supreme Court reiterated the principle governing the process of judicial review and held that the writ court would not be justified in interfering with commercial transactions in which the State is one of the parties except where there is substantial public interest involved and in cases where the transaction is mala fide.The Hon’ble Supreme Court in Reliance Airport Developers (P) Ltd., v. Airports Authority of India (2006) 10 SCC 1), held that while judicial review cannot be denied in contractual matters or matters in which the Government exercises its contractual powers, such review is intended to prevent arbitrariness and must be exercised in larger public interest.In Jagdish Mandal v. State of Orissa (2007) 14 SCC 517), the Hon’ble Supreme Court held that the Court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:“(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;ORWhether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”;(ii) Whether public interest is affected.If the answers are in the negative, there should be no interference under Article 226.”The Hon’ble Supreme Court, while relying on the above decisions, held in Michigan Rubber (India) Limited v. The State of Karnataka (2012) 8 SCC 216), as follows.“19) From the above decisions, the following principles emerge:(a) ……………….(b)………………(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very restrictive since no person can claim fundamental right to carry on business with the Government.”The Division Bench of this Court in B. Sailesh Saxena v. The Union of India (2018 (4) ALT 36), (to which I am a party), observed in paras 19, 28 and 124 as follows.“19. In examining the contention, urged on behalf of the appellants, regarding the validity of the qualification requirements stipulated in the tender notification, Courts must remain conscious that the scope of judicial review in such matters is extremely limited. In economic and commercial matters, decisions are taken by the government or its instrumentalities keeping in view several factors, and it is not possible for the Courts to consider competing claims and conflicting interests, and conclude which way the balance tilts. There are no objective, justiciable or manageable standards to judge these issues nor can such questions be decided on a priori considerations. (Dhampur Sugar (Kashipur) Ltd. v. State of Uttaranchal) (2007) 8 SCC 418)”28.Before interfering in tenders or contractual matters, in the exercise of its power of judicial review, the Court should pose to itself the following questions : (i) Whether the process adopted or decision made by the authority is mala fide or is intended to favour someone or the process adopted or the decision made is so arbitrary and irrational that the Court can say : 'the decision is such that no responsible authority acting reasonably and in accordance with the relevant law could have reached'; and (ii) Whether public interest is affected. If the answers are in the negative, there should be no interference in proceedings under Article 226 of the Constitution of India.”“124. Should the tendered work be interdicted at the behest of a person or a company which, admittedly, does not have the prescribed experience (as stipulated as the qualification requirement in the tender notification) to execute a work of this complexity and magnitude? It must be borne in mind that the jurisdiction which this Court exercises is in larger public interest and, even if a technical flaw is detected, interference would be justified only if this Court is satisfied that larger public interest would be served thereby. On a challenge to the award of a contract, or invitation to tender, by a public authority or the S

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tate, this Court must be satisfied that there is some element of public interest involved in entertaining such a petition. The elements of public interest are (1) public money would be expended for the purposes of the contract; (2) the goods or services which are being commissioned are for a public purpose; (3) the public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously; and (4) the public would also be interested in the quality of the work undertaken or goods supplied by the tenderer.”The purpose of judicial review is to check whether the choice or decision is made ‘lawfully’, and not to check whether the choice or decision is ‘sound’ and in the present case, in the light of the discussion in the previous paras, the decision of the respondent ONGC is found to be made lawfully. In the facts and circumstances of the case and in the light of the case law discussed above, it would be wholly inappropriate, therefore, for this Court to interfere with the action of the respondents in deleting Clause 1.5 in Para-2 Bid Evaluation Criteria. I see no reason, therefore, to interdict the tender notification at the behest of the petitioner who, admittedly, did not even participate in the tender, even though it is qualified to participate in the tender.In view of the aforesaid reasons, the Writ Petition fails and is, accordingly, dismissed. There shall be no order as to costs.As a sequel thereto, the miscellaneous petitions, if any, pending in this Writ Petition shall stand closed.