1
* HON'BLE SRI JUSTICE D.V.S.S. SOMAYAJULU
+ WRIT PETITION No.455 of 2022
% 3rd March, 2022
# M/s Adani Ports and Special Economic Zone Ltd., and
another
... Petitioners..
AND
$ The Vishakhapatnam Port Trust
... Respondent.
! Counsel for the Petitioners : Sri A. Satya Prasad
Senior Counsel
Sri V. Harish
^ Counsel for the respondent : Sri P. Raghuram
Senior Counsel
Sri Raviteja Padiri
Standing counsel
< Gist:
> Head Note:
? Cases referred:
1) 2018 SCC Online 8269
2) Civil Appeal Nos.4862-4863 of 2021
3) Civil Appeal No.1949 of 2019
4) (2008) 16 SCC 215
2
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
WRIT PETITION No.455 of 2022
ORDER:
With the consent of all the learned senior counsels and
the learned standing counsel for the respondent-
Visakhapatnam Port Trust the Writ Petition itself is heard.
The Writ Petition is filed by the petitioners seeking a Writ
of Mandamus declaring the action of the respondent in
disqualifying the petitioner from participating further in tender
No.IM&EE/MOF/Mech-WQ-7&8/2021, dated 04.10.2021 as
illegal, violative of principles of natural justice etc.
This Court has heard Sri A. Satya Prasad, learned senior
counsel appearing for the petitioners and Sri P. Raghuram,
learned senior counsel appearing for the respondent-
Visakhapatnam Port Trust.
PETITIONER'S CASE:
Learned counsel for the petitioner Sri Satya Prasad
points out that the petitioner is a company which wanted to
participate in a tender bearing No.IM&EE/MOF/Mech-WQ-
7&8/2021, for mechanization of WQ 7 & WQ 8 Berths. The
said tender involved a multi stage process. The first stage was
the qualification stage (RFQ stage). The bidders who qualified
at this stage were entitled to participate in the second stage,
which is the bidding stage (RFP). The petitioner was
disqualified at the first stage itself on the ground that they did
not disclose certain important material facts. Learned senior 3
counsel points out that this decision of disqualifying the
petitioner is not communicated to the petitioner, and that after
a caveat was filed and a notice of caveat was served on the
petitioner, they realized the fact that they were disqualified.
Learned senior counsel submits that the procedure adopted by
respondent Visakhapatnam Port Trust is totally wrong. It is
submitted that the ground on which the petitioner was
disqualified is also not legally and factually tenable. Hence, he
prayed for an appropriate order.
Learned senior counsel drew the attention of this Court
to clause 2.2.2 of the tender conditions which describe the
technical, financial and the O&M experience of the bidder.
Learned senior counsel submits that the petitioner has fulfilled
and met all the stipulations of Clause 2.2.2. Learned counsel
submits that an entity called AVCTPL is a 100% subsidiary of
the petitioner. The rejection of the petitioner's present bid by
VPT was on the ground that the earlier contract between the
said AVCTPL and VPT was terminated and this fact was not
disclosed. Learned counsel submits that the caveat petition
filed revealed (in paragraph 4 and 6) that Clause 2.2.8 of the
bid condition was not fulfilled in the present case. Learned
senior counsel argues that clause 2.2.8 is not applicable to the
facts and circumstances of the case as AVCTPL has terminated
the contract and not vice versa. Relying upon paragraphs 9 to
11 of the writ affidavit, senior counsel argues that it is the
AVCTPL which terminated the agreement and not VPT. 4
Learned senior counsel also argues that the petitioner has
faithfully and diligently disclosed all the particulars. He also
argues that Annexure-I / Appendix-I, contains the following
Clause 7 -
"7. A statement by the Applicant and each of the Members of its Consortium (where applicable) or any of their Associates disclosing material non-performance or contractual non-compliance in past projects, contractual disputes and litigation/arbitration in the recent past is given below (Attach extra sheets, if necessary)."
Learned senior counsel, therefore, argues in line with
paragraph 11 of his writ affidavit that they have disclosed all
the facts, arbitrations and there is no concealment of facts. He
submits that the action of the respondent-VPT should be set
aside for the following reasons -
(A) That these clauses of bid are not contravened / there
is no concealment and
(B) That the respondent port trust did not intimate the
rejection by a letter or document as required.
The learned senior counsel relying upon Atlanta
Limited v Union of India1 argues that Clause 2.2.8 confers
unbridled power on the respondent and therefore it is arbitrary
and unreasonable.
RESPONDENTS SUBMISSIONS:
In reply to this, learned senior Counsel for VPT Sri
P.Raghuram argues that there is clear concealment of facts, as
1 2018 SCC Online 8269 5
the contract with the coal terminal (AVCTPL) was also
terminated by the VPT. He also submits that an arbitration
was invoked basing on the non-performance of the contract,
/failure to perform the contract and there are serious
allegations leading to claims and counter claims. Learned
senior counsel also argues that the clause 2.2.8 clearly deals
with the disqualification as mentioned in the clause itself. He
points out that no injustice is caused to the petitioner by the
communication through the caveat. Admittedly, he points out
that on 05.01.2022 a letter was also addressed to the petitioner
informing them that their bid cannot be accepted due to
termination of the earlier contract of the AVCTPL termination.
He also argues that basing on Clause 2.7 and 2.7.3 of the bid
document that the right to reject the bid is available with the
respondent. They can reject the bid or annul the process
without assigning any reason whatsoever. This power is not
available both before the bid is accepted and after the bid is
accepted as per Clause 2.7.3, if there is a material
misrepresentation, material concealment facts or false
information. Learned senior counsel also argues that the right
of an employer to choose whom he wishes to enter into a
contract cannot be taken away and that the past experience
with the contractor / associates is a relevant factor to be taken
into account by the State or the respondent. He points out that
when the subsidiary's contract was terminated and this fact is
not disclosed, VPT was within its right in refusing to enter into 6
further dealings with the petitioner. He points out that this is
an essential condition of the contract. Relying upon the
judgment of the Hon'ble Supreme Court of India in Uflex Ltd.,
v Government of Tamilnadu & Ors.,2 learned senior counsel
argues that judicial review in such matters is permissible if
there is arbitrariness, irrationality, unreasonableness, bias,
mala fides in the decision making process. He points out that
in these limited circumstances the Court can interfere. It is his
contention that none of these factors are actually evident or
present. He also argues that the words of a tender document
must be given their own meaning and necessary importance.
He contends that the same cannot be overlooked or ignored by
the Court. The principles of judicial review as per the learned
senior counsel are limited to reviewing the decision making
process alone. Terms of the tender are fixed by domain experts
and therefore he submits that the issue should be left to the
experts. In conclusion, learned senior counsel submits that
there is no mistake committed by the respondent-VPT.
COURT:
The long term alliance failed at the very beginning itself
due to the alleged non-disclosure of clear details by the bidder.
In the opinion of this Court what needs to be
considered for a decision in this case are Clauses 2.2.8, 2.7.1.,
2.7.3 and Clause 7 in Annex-I, which are extracted hereunder
:
2 Civil Appeal Nos.4862-4863 of 2021 7
"2.2.8: An Applicant including any Consortium Member or Associate should, in the last 3 (three) years, have neither failed to perform on any contract, as evidenced by imposition of a penalty by an arbitral or judicial authority or a judicial pronouncement or arbitration award against the Applicant, Consortium Member or Associate, as the case may be, nor has been expelled from any project or contract by any public entity nor have had any contract terminated by any public entity for breach by such Applicant, Consortium Member or Associate. Provided, however, that where an Applicant claims that its disqualification arising on account of any cause or event specified in this Clause 2.2.8 is such that it does not reflect (a) any malfeasance on its part in relation such cause or event; (b) any willful default or patent breach of the material terms of the relevant contract; (c) any fraud, deceit or misrepresentation in relation to such contract; or (d) any rescinding or abandoning of such contract, it may make a representation to this effect to the Authority for seeking a waiver from the disqualification hereunder and the Authority may, in its sole discretion and for reasons to be recorded in writing, grant such waiver if it is satisfied with the grounds of such representation and is further satisfied that such waiver is not in any manner likely to cause a material adverse impact on the Bidding Process or on the implementation of the Project.
- 2.7.1: Notwithstanding anything contained in this RFQ, the Authority reserves the right to accept or reject any Application and to annul the Bidding Process and reject all Applications/ Bids, at any time without any liability or any obligation for such acceptance, rejection or annulment, and without assigning any reasons therefor. In the event that the Authority rejects or annuls all the Bids, it may, in its discretion. invite all eligible Bidders to submit fresh Bids hereunder.
.....
- 2.7.3: In case it is found during the evaluation or at any time before signing of the Concession Agreement or after its execution and during the period of subsistence thereof, 8
including the concession thereby granted by the Authority, that one or more of the pre-qualification conditions have not been met by the Applicant, or the Applicant has made material misrepresentation or has given any materially incorrect or false information, the Applicant shall be disqualified forthwith if not yet appointed as the Concessionaire either by issue of the LOA or entering into of the Concession Agreement, and if the Applicant/SPV has already been issued the LOA or has entered into the Concession Agreement, as the case may be, the same shall, notwithstanding anything to the contrary contained therein or in this RFQ, be liable to be terminated, by a communication in writing by the Authority to the Applicant, without the Authority being liable in any manner whatsoever to the Applicant and without prejudice to any other right or remedy which the Authority may have under this RFQ, the Bidding Documents, the Concession Agreement under applicable law.
Annexure-1 Clause-7: A statement by the Applicant and each of the Members of its Consortium (where applicable) or any of their Associates disclosing material non-performance or contractual non-compliance in past projects, contractual disputes and litigation / arbitration in the recent past is given below (Attach extra sheets, if necessary)."
It is clear after considering the detailed submissions
made that there was an earlier contract between the
respondent VPT and AVCTPL and there are disputes with
regard to the same. The said AVCTPL is a 100% subsidiary of
the petitioner. This is admitted in the pleadings. A small
written note, which is filed by the petitioners, also clearly
shows that on 08.10.2020 the said AVCTPL alleging that force
majeure continued for more than 120 days sought mutual
termination of the agreement. Thereafter, on 21.10.2021
AVCTPL sent its own termination notice. Visakhapatnam Port 9
Trust in turn issued consultation notice under that contract on
03.10.2020 alleging failure to achieve minimum guaranteed
contract. AVCTPL disputed this stating that there is force
majeure intimation. VPT sent a consultation notice on
23.11.2020 and thereafter gave a notice of termination on
26.12.2020. The matter is now under arbitration before the
three Hon'ble former judges of the Supreme Court of India.
These are the facts that are disclosed from the written note
itself.
Clause 7 of the Annexure thus assumes importance
now. It clearly states that there should be a disclosure about
any non-performance or contractual non-compliance in past
projects along with contractual disputes and litigation /
arbitration. In fact, the said clause itself states that the extra
sheets are to be attached to the bid document to disclose these
facts. As can be seen from the pleading in the affidavit itself
(para 11 of the writ affidavit) the petitioner in this case merely
disclosed that there is an arbitration pending between the said
AVCTPL and VPT but did not disclose anything about the
termination; the non-performance or contractual non-
compliance etc., in the earlier contract (Clause 2.2.8 read with
Clause 7 of Annexure-I).
Apart from that it is argued that Clause 2.2.8 is not
dealing with "disqualification". Clause 2.2.8 has already been
reproduced earlier. It is in two parts. Part (a) deals with failure
to perform and as evidenced by an order passed by a judicial 10
authority, arbitrator, tribunal award etc. It also talks of the
expulsion of the applicant and consortium member or associate
from any contract or project or the termination of a contract by
a public entity for any breach by the applicant consortium or
association. Clause, 2.2.8 also has a proviso which states that
if the applicant feels that this "disqualification on account of
an event" specified under 2.2.8 is such that it does not reflect
the malfeasance, willful default or the rescinding or remanding
etc., of any such contract, it may make representation to the
authority which can consider the same. Therefore, the
submission on behalf of the petitioner that 2.2.8 and the failure
to disclose these material facts is not a disqualification cannot
be accepted by this Court. The clause is clear and if the
applicant has been expelled from any project or if its contract
has been terminated by any public entity for breach, then the
applicant can make a representation, if it is of the opinion that
such termination etc., is not valid or correct and the
respondent has discretion to decide whether the same is a
ground for disqualification or not. Clause 2.28 therefore is held
to apply to disqualification also.
In addition, this Court also notices that Clause 2.7 gives
the right to the respondent to accept or reject any bid without
assigning any reasons. This power may appear on a first blush
to be an unbridled power. As per the law State action must be
based on reasons only otherwise it would be arbitrary. In the
case on hand, it is a fact that the reasons for disqualification 11
"do exist" but the same was not actually communicated to the
petitioner through a formal notice. It is only through the caveat
that the petitioner is made aware of the reasons for the
disqualification. The fact also remains that the Writ Petition
has been filed on 05.01.2022 and the disqualification was also
communicated to the petitioner by the letter of the CME on
05.01.2022. In the opinion of this Court, the respondent Port
Trust should have communicated the reasons by a formal
letter/notice. The reasons for the failure to formally
communicate are given in paragraph 15 of the counter
affidavit. In the opinion of this Court, this could have been
handled better and a formal communication would have been
communicated, but the mere failure to communicate this
through a formal letter will not enure the benefit of the
petitioner. In the opinion of this Court the petitioner is getting
a "post decisional" hearing and no prejudice per se is caused to
the lack of formal communication. In fact, the Writ itself does
not strictly allege any prejudice due to this non-
communication.
As per the settled law on the subject, this court, in
contractual and tender matters, should look into the decision
making process only. The law is well settled and need not be
reproduced again. Even the case law relied upon by the learned
counsel by the respondent is clear. In paragraph 2 of the Uflex
ltd., (1 supra) following is laid down:
12
"2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance.
This court also considers that paragraph 15 of
Vidarbha Irrigation Development Corporation v M/s Anoj
Kumar Garwala3 which is to the following effect is also very
important -
"15) It is clear even on a reading of this judgment that the words used in the tender document cannot be ignored or treated as redundant or superfluous - they must be given meaning and their necessary significance. Given the fact that in the present case, an essential tender condition which had to be strictly complied with was not so complied with, the appellant would have no power to condone lack of such strict compliance. Any such condonation, as has been done in the present case, would amount to perversity in the understanding or appreciation of the terms of the tender conditions, which must be interfered with by a constitutional court."
If the current case is viewed against the backdrop of
these two cases and other leading judgments on the subject,
the right of the respondent to choose its own contractual
partners cannot be ignored and for this purpose the past
experience that the respondent had with its intending bidders
3 Civil Appeal No.1949 of 2019 13
and their consortiums, associates etc., cannot be totally
overlooked. If it is for this reason alone that the bid document
contains detailed clauses asking the intending bidders to
disclose clearly the imposition of penalty, existing disputes etc.,
between the bidder and its consortium members, associates
etc. The track record of the bidder, its associate members, its
associates, consortium members etc., are matters of great
importance particularly for such long term contracts with huge
investments and consequently huge consequences for delay
etc. This Court cannot lose sight of the fact that the port has to
function 24x7 and 365 days in a year. It is for this reason the
Clause 7, (which is reproduced earlier) requires the bidder to
disclose the earlier disputes, litigations, material non-
performance etc., by the bidder, its associates, consortium
members etc. Clauses 2.2.7 and 2.2.8 which are also
reproduced earlier deal with these similar issues. Clause 2.2.7
is of particular significance, because it clearly states that if any
contract has been terminated the same should be mentioned
clearly and brought to the notice of the respondent. This is not
merely limited to the applicant but also includes within its
ambit the applicant, associates, its consortium members etc.
The proviso is in 2.2.8 which clearly states that if in the opinion
of the applicant such a disqualification is not a material fact, it
can also make an application to the respondent Port Trust
stating that the same is not a very material fact and that it
should be ignored. This was not done by the petitioner. 14
Apart from that Clause 2.7.3 to which this court's
attention has also been drawn is also applicable. This clause
gives special powers to the respondent Port to disqualify an
applicant during the process of evaluation / before signing the
concession agreement, if any materially incorrect or false
information has been given by a prospective bidder /
prospective concessionaire. This clause also empowers VPT to
terminate the agreement after the agreement was signed / work
is awarded notwithstanding anything contained in the terms if
the concessionaire / applicant has made a material
misrepresentation or has given material incorrect or false
information. A reading of this clause which confers power of a
wide amplitude makes it clear that if material
misrepresentation is there, incorrect information, false
information etc., are there the bid can be rejected before it is
signed and the contract can also be terminated after it is signed
on this sole ground alone. This is the importance attached to
correct and clear disclosure under this bid /tender document
and it clearly underscores the need for a full and complete
disclosure.
The freedom in the joints or fair play in the joints means
that a statutory authority like the respondent should have the
right to choose with whom it would enter into contracts subject
to a proper decision making process etc. It is for this reason
these clauses are mentioned with clarity in the bid document. 15
Only if the respondent acts in an arbitrary manner and if its
decision is vitiated by mala fide arbitrariness, irrationality, bias
etc., a constitutional court can interfere. But if the action is
not vitiated by arbitrariness, irrationality, unreasonableness,
bias or mala fides, this Court cannot exercise the power under
Article 226 to interfere. The principles of equity and natural
justice have to stay at a distance and commercial prudence or
the commercial market intelligence of the respondent should
be allowed to have its own free play. Even if there is a
procedural aberration the Courts should lightly interfere.
In Siemens Public Communication Networks (P) Ltd.
v Union of India4 it was held as follows:
"40. On examining the facts and circumstances of the present case, we are of the view that none of the criteria has been satisfied justifying Court's interference in the grant of contract in favour of the appellants. When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna."
In the opinion of this Court arbitrariness, irrationality,
unreasonableness, bias and mala fides are matters which have
to be clearly pleaded and proved and demonstrated before this
4 (2008) 16 SCC 215 16
Court can interfere. If the present case is examined against the
backdrop of the settled law on the subject, this Court is of the
opinion that the action of the respondent cannot be faulted. In
the counter affidavit filed the respondent has justified its
action. In paragraphs 9 to 13 the respondent has clearly stated
that with consortium member VCTPL (an associate of the
petitioner) an agreement was entered into. There are
allegations of breaches against the said consortium Member in
not achieving the minimum guarantee that was promised in
the previous contract. After issuing consultation notices the
said contract was terminated. It is also clearly mentioned that
as a counter blast to the said consultation notice AVCTPL
issued notice of termination. If the note filed by the petitioners
themselves is examined, it is clear that on 03.10.2020
respondent-VPT issued a consultation notice to AVCTPL on
03.10.2020. On 08.10.2020 AVCTPL rejected the same stating
that the force measure conditions were continuing since long
and, therefore, they sought for mutual termination of the
agreement. On 21.10.2021 AVCTPL sent a termination notice
for the contract with VPT (respondent). VPT in turn had sent a
termination notice on 26.12.2020. VPT informed the AVCTPL
that the contract was terminated with effect from 23.04.2021.
The counter, the caveat and the note filed by the petitioner
make these facts clear. Clause 7 of the appendix of Annexure-
I clearly states that bidders should disclose if there is material
non-performance or contractual non-compliance in the past 17
projects, apart from contractual disputes and representations.
Each member of the consortium should disclose this fact. In
the opinion of this Court clause 2.2.8 also enjoins upon the
petitioner to disclose the termination of the contract of an
associate by the VPT. In fact, in the counter affidavit these
facts have been clearly pleaded but the petitioners have not
chosen to file any rejoinder against the same or by
controverting the same. In the opinion of this Court, mere
disclosure of the pendency of an arbitration does not meet the
mandatory requirements or the essential condition of this term.
Any contractual non-performance or contractual non-
compliance in past projects should have been disclosed with
clarity. Clauses 2.2.8/2.7.3 of the bid document are clear.
They are clearly applicable to the facts and circumstances of
this case. The failure of the petitioner to disclose the same is
rightly noticed by the VPT.
In the light of the above discussion, this Court is of the
opinion that the decision making process leading to a
disqualification of the petitioner cannot be found fault with.
This Court does not find any arbitrariness; irrationality; bias;
mala fides either. Their failure to disclose the termination of
the contract of their 100% owned subsidiary in October, 2021
and the VPTs termination in December, 2020 / March, 2021 is
a clear case of furnishing materially incorrect, false
information. Allegation of material non-performance; 18
contractual non-compliance etc., are present from both sides
in the earlier contract.
The petitioner who has chosen to participate in this bid
cannot question the terms of the tender and say that arbitrary
power is conferred on the respondents to disqualify the bidders.
Therefore, for all of the above reasons this Court holds
that the petitioner has not made out any ground for
interference.
The Writ Petition is dismissed. No costs.
Consequently, the Miscellaneous Applications
pending, if any, shall stand closed.
__________________________ D.V.S.S.SOMAYAJULU, J Date:03.03.2022
Note: LR copy be marked.
B/o Ssv 19
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
WRIT PETITION No.455 of 2022 Date:03.03.2022 ssv
