Andhra Pradesh High Court - Amravati

Reliance Industries Limited vs The State Of Andhra Pradesh, on 30 March, 2022

Bench: D.V.S.S.Somayajulu

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       HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU

             WRIT PETITION No.21567 of 2021

ORDER:

With the consent of learned counsel appearing for the

petitioner and the respondents the Writ Petition itself is taken

up for final hearing.

The Writ Petition is filed for the following reliefs:

"...to issue an appropriate writ or order or direction more particularly a writ in the nature of a Writ of Mandamus declaring the actions of Respondent No.2 Corporation (APSRTC) in issuing the letter bearing No.CM(Comm)/Oil Outlets/110(15)/2018-19, dated 10.08.2021, as being illegal, arbitrary, violative of the terms and conditions of the request for proposal as well as violative of Articles 14, 19 & 21 of the Constitution of India and consequently quash the same and direct respondent No.2 Corporation (APSRTC) to transfer the (4) Letters of Intent dated 26.11.2020 (Annexure P6) in favour of petitioner No.2 (RBML) and pass such other order or orders as this Hon'ble court may deem fit and proper in the circumstances of the case and in furtherance of justice."

This Court has heard Sri L.Ravichander, learned senior

counsel appearing for Sri Sai Sanjay Suraneni and Ms. Avanija

Inuganti, learned counsels for the petitioner and Sri P. Durga

Prasad, learned standing counsel for the respondents.

PETITIONERS' SUBMISSIONS:

Sri L.Ravichander, learned senior counsel submits that

the 1st petitioner is India's largest industrial group with a

private refinery. It is the successful tenderer in a bid floated

by the respondents for development of sites for installation of

retail oil outlets. Four letters of intent were also issued on

26.11.2020 in favour of the 1st petitioner. However, by then

the petitioner had transferred all its retail marketing business

to the 2nd petitioner herein. Learned senior counsel submits

that the permission of Government of India was obtained for

this transfer of marketing authorization to the 2nd petitioner.

This is evidenced by a letter dated 31.03.2020 issued by the

Government of India (Ministry of Petroleum and Natural Gas).

Learned senior counsel submits that the 1st and the 2nd

petitioners have entered into a petroleum product supply

agreement dated 09.07.2020 by which the 2nd petitioner has

been given the exclusive rights to market the products

manufactured by the 1st petitioner. It is also stated therein that

the entire requirements of the product needed by the 2nd

petitioner shall be supplied by the 1st petitioner. Learned

senior counsel, therefore, argues that as the entire business of

retailing in the petroleum product was transferred to the 2nd

petitioner, a request was made on behalf of the 1st petitioner to

transfer the letters of intent from the 1st petitioner to the 2nd

petitioner. It is the contention of the learned senior counsel

that even the licenses issued to the petitioner for all its retail

outlets have been transferred in the name of the 2nd petitioner,

therefore, it is submitted that the letters of intent, which are

issued by the respondents in favour of the 1st petitioner should

be transferred to the 2nd petitioner. Learned senior counsel

argues that the respondents have refused to transfer these

letters of intent on the ground that the 2nd petitioner is not

owning an oil refinery and would have been ineligible to submit

a bid in this case. It is his contention that when there is a

transfer of the entire retail marketing business to the 2 nd

petitioner and the said transfer has been approved by the

Government of India itself the 2nd petitioner cannot refuse to

transfer the letters of intent. It is his contention that the

respondents have taken a hyper technical approach ignoring

the purpose for the tender was floated and awarded to the 1 st

petitioner. He submits that ultimate objective of the tender will

be fulfilled even if the letters of intent are transferred to the 2nd

petitioner as the output of petroleum oil and other products of

the 1st petitioner are transferred for the purpose of marketing

to the 2nd petitioner. The learned senior counsel therefore

argues that the actions of the respondents are contrary to law.

To support his argument, he also relies upon the three

judgments of the Hon'ble Supreme Court of India and the High

Court of Andhra Pradesh, which are filed along with the

rejoinder viz., the cases of -

1) New Horizon Limited & Another v Union of India & Others1

2) State of U.P. & Others v Remusagar Power Co., & Others2

3) Prasad Sushee Join Venture v The Singareni Collieries Company Ltd., & Others3

(1995) 1 SCC 478

(1988) 4 SCC 59

2015 OnLine Hyd 623

RESPONDENTS' SUBMISSIONS:

In reply to this, Sri P. Durga Prasad, learned standing

counsel for the respondents argues that the bid was submitted

by the 1st petitioner. The 1st petitioner's credentials were

examined in terms of the request for proposal (RFP) and the 1st

petitioner alone was found to be eligible and qualified to bid. It

is also argued by the learned standing counsel it is an essential

condition that the bidder should be an oil company owned by

a public sector undertaking or a private sector having a

refinery. It is submitted by the learned standing counsel that

the "eligibility criteria" cannot be relaxed and so the letters of

intent cannot be transferred in its name. He relies upon a

Division Bench judgment of the Madras High Court in M/s

Smart Chip Ltd., v The Secretary to Government,

Transport Department, Chennai and six others 4 to argue

that the essential conditions of a bid cannot be overlooked. It

is also submitted that the cases relied upon by the petitioner

are cases pertaining to qualifications / experience in tenders

before the contract is concluded. It is his contention that if a

thing is contemplated to be done in a particular manner, it

should be done in that manner alone. He argues that the facts

of the cases cannot be overlooked and that once the condition

in the bid is not fulfilled the transfer of the letters of intent from

the successful bidder to a third party, who may be given the

W.A.Nos.1976, 1618 & 1631 of 2013 (Madras High Court)

exclusive marketing right, is not permissible under law. Since

the contract is concluded between the 1st petitioner and the

respondents alone, he submits that the case law relied upon is

clearly distinguishable and it does not relate to the present set

of facts, wherein letters of intent is already issued to the 1st

petitioner. He contends that this is not a case of valuation of a

combined experience of a bidders in a consortium or a joint

venture, but this is a case of transfer of a concluded contract

in favour of the third party, who would not be eligible to bid at

all.

COURT:

After hearing both the learned counsel, in the opinion of

this Court the following clauses / terms of the bid arise for

consideration and for determination of the dispute.

"BID SUMMARY:

4. Evaluation of Tender: The Bids will be finalized based on the Quotation submitted through online i.e., through MSTC and conducting open auction among the eligible bidders, based on the highest Lease Rent offered by the Bidder for the Project.

Separate bids have to be uploaded by the Bidders for each and every site.

14. Signing of Lease Agreement: After selection, a Letter of Intent (the "LOI") shall be issued, in duplicate by APSRTC to the Selected Bidder and the Selected Bidder shall, within 7 days of the receipt of the LOI, sign and return the duplicate copy of the LOI in acknowledgement thereof. In the event the duplicate copy of the LOI duly signed by the Selected Bidder is not received by the stipulated date, APSRTC may, unless it consents to extension of time for

submission thereof, appropriate the Bid Security of such Bidder, and the next eligible Bidder may be considered. After acknowledgement of the LOI as aforesaid by the Selected Bidder, it shall execute the Lease Agreement within 30 days of obtaining NOC. The Selected Bidder shall not be entitled to seek any deviation in the Lease Agreement.

GENERAL INFROMATION / INSTRUCTIONS:

4.4.1 General Eligibility: The Bidder shall be an Oil company owned by Public Sector undertaking or Private Sector company having Oil refinery. 4.4.2 Non-Compliance with RFP: APSRTC reserves the right to terminate a Bidder's participation in the bidding process at any time should APSRTC consider that a bidder has, without the prior consent, failed to comply with the procedures and protocols prescribed in the RFP.

AWARD OF PROJECT / SIGNING OF LEASE AGREEMENT:

8.2 Issue of LoI after Evaluation of the Bids and Approval of APSRTC:

Upon completion of the Bid evaluation process, acceptance of the Bid an intention of award of the Project / Lease would be conveyed by APSRTC to the Preferred Bidder, who satisfies all other compliance requirements. The above Letter of Intent (LoI) would be communicated to the preferred Bidder by fax or e- mail confirmed by a letter.

8.4 Signing of Lease Agreement 8.4.1 Within 30 (Thirty) days of obtaining NOC, the Preferred Bidder shall sign the Lease Agreement with APSRTC. Payment of 24 times Lease Rent of the first month as interest free, refundable Security Deposit shall be the precondition for the signing of the Lease Agreement.

8.4.2 If the Preferred Bidder fails to sign the Lease Agreement with APSRTC within the stipulated time,

his Bid Security and all other payments made till that date shall be forfeited. In that event, APSRTC shall have the right to award the Project to the next Highest Bidder (H2) if H2 agrees to match the Price Bid of H1 or otherwise, as decided by APSRTC.

SPECIAL INSTRUCTIONS:

Article 9 (xxvii): Those who have submitted quotation are only eligible for participation in the auction." (Emphasis supplied)

In addition, the terms of the lease agreement by which

the proposed business is to be carried forward are also relevant

in the opinion of this Court. This lease agreement is the

substratum or the foundation for the business which was go to

on for a period of 20 odd years. In the proposed lease

agreement, the following clauses / recitals and definitions are

important:

"APSRTC invited competitive proposals from interested parties for the Project and pursuant to evaluation of the Proposals that were received, APSRTC accepted the Proposal submitted by ____________ for the Project Site and a Letter of Intent (LoI) bearing No.___________ dated_________ was issued to the Successful Bidder.

Section 1.1 (j) Lessee' shall mean the selected Preferred Bidder who has been selected and nominated by the APSRTC to implement the Project on the terms and conditions stipulated in the Lease Agreement.

"Proposal" or "Bid" means the documents in their entirety comprised in the proposal or bid submitted by Preferred Bidder (including financial proposal / bid) in response to the Request for Proposal, and

accepted by the Lessor, signed for verification by the authorized representatives of the Parties:

A reading of these clauses / recitals / definitions in

succession makes it very clear that respondents floated a bid

for development of sites for installation of retail outlets by oil

companies. A bidder is the person with whom the contract is

to be entered into once he becomes a preferred bidder. A bidder

is very clearly defined as Oil Company owned by a public sector

undertaking or "private sector" company having oil refinery.

This is an elementary or a necessary condition which in the

opinion of this Court has to be fulfilled. The bidder, who

submits a bid, becomes the "preferred bidder" if he is

successful and fulfills all the criteria (Clause 8.2). The

preferred bidder shall sign the lease agreement. The 1st

petitioner definitely fulfills this criteria, because it has a

refinery. This is in public knowledge and it cannot be denied

by the respondent or anybody else.

The question is: in view of the transfer of the marketing

rights to the 2nd petitioner, can the relief be granted? In the

opinion of this Court the agreement can only be entered into

by the respondents with the bidder. As noticed earlier, those

who have submitted quotations are only entitled to participate

in the auction [Article 9 (xxvii)]. The preferred bidder, as per

Clause 8.2 should satisfy all the other "compliance

requirements" if his bid is found to be in order. The definition

of a lessee in the bid document makes it clear that the lessee

should be the preferred bidder / project company that is Public

Sector Unit oil company or any other company having a refinery

selected.

The essential pre-qualification or a pre-condition for a

private company to be a bidder in this case is that they should

be having an oil refinery. Clause 12 of the invitation to bid

clearly states this and so does Clause 4.4 of the instructions

which clearly states that the bidder should be a private sector

company having an oil refinery. The arguments of the learned

senior counsel that in view of the exclusive marketing

agreement the 2nd petitioner would fulfill all the terms and

conditions of the bid and ensure smooth supply of products, at

first blush appears to be correct. It is asserted emphatically by

the learned senior counsel that the 1st and 2nd respondents

would ensure the fulfilment of the conditions of the agreement.

However, what is necessary to be seen is whether the same is

permissible under the terms and conditions of this bid and as

per the general law. The terms and conditions of this bid make

it very clear that the respondents would be entering into an

agreement with the bidder, who "meets" the eligibility criteria

and then becomes the preferred bidder. It is this the preferred

bidder alone who is entitled to enter into the agreement

between the parties. As rightly pointed out by the learned

standing counsel for the respondents, if the 2nd petitioner had

independently filed its bid it would have been rejected at the

threshold itself since admittedly they do not have an oil

refinery. The law is clear that what cannot be done directly

cannot also be done indirectly. It is also clear that when power

is given to do a thing it must be done in that manner alone or

not at all. This principle is extended to contractual bids /

tenders also. In para 52 of Central Coalfileds Ltd., and

another V SLL-SML (Joint Venture Consortium) and Others5

the Hon'ble Supreme Court of India held as follows:

"52. There is a wholesome principle that the courts have been following for a very long time and which was articulated in Nazir Ahmad v Kind Emperor6 namely: (SCC OnLine PC) '.....where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden'.

There is no valid reason to give up this salutary principle or not to apply it mutatis mutandis to bid documents. This principle deserves to be applied in contractual disputes, particularly in commercial contracts or bids leading up to commercial contracts where there is stiff completion."

Therefore, issuing a letter of intent in favour of the 2 nd

petitioner at the request of the 1st petitioner would be contrary

to the terms and conditions of the bid. These are also essential

conditions in the bid which cannot be relaxed under any

circumstances. The law that the essential conditions of bid

cannot be relaxed is too well settled to be repeated here. Time

and again the highest courts of the land have clearly held that

(2016) 8 SCC 622

AIR 1936 PC 253(2) : 1936 SCC OnLine PC 41

the essential conditions of a bid cannot be relaxed. For the

sake of good order a decision of the Hon'ble Supreme Court in

Vidharbha Irrigation Development Corporation and

Others v Anoj Kumar Agarwal and Others7 is referred to. If

the essential term of a "bid" cannot be relaxed prior to the

conclusion of the bid acceptance, the same principle would

continue to operate even after the "bid" becomes an accepted

offer / contract. By permitting the request made by the

petitioner this Court would be granting approval of relaxation

of an essential condition. In addition, the Hon'ble Supreme

Court of India in Central Coal Fields case (5 supra) also held

as follows on the issue of the decision making by an employer

with regard to essential conditions:

"47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. As held in Ramana Dayaram Shetty [Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489] the terms of NIT cannot be ignored as being redundant or superfluous.

They must be given a meaning and the necessary significance. As pointed out in Tata Cellular [Tata Cellular v. Union of India, (1994) 6 SCC 651] there must be judicial restraint in interfering with administrative action. Ordinarily, the soundness of the decision taken by the employer ought not to be questioned but the decision-making process can certainly be subject to judicial review. The soundness

(2020) 17 SCC 577

of the decision may be questioned if it is irrational or mala fide or intended to favour someone or a decision "that no responsible authority acting reasonably and in accordance with relevant law could have reached" as held in Jagdish Mandal [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517] followed in Michigan Rubber [Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216] .

48. Therefore, whether a term of NIT is essential or not is a decision taken by the employer which 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 bidders and potential bidders as held in Ramana Dayaram Shetty [Ramana Dayaram Shetty v.

International Airport Authority of India, (1979) 3 SCC 489] . However, if the term is held by the employer to be ancillary or subsidiary, even that decision should be respected. The lawfulness of that decision can be questioned on very limited grounds, as mentioned in the various decisions discussed above, but the soundness of the decision cannot be questioned, otherwise this Court would be taking over the function of the tender issuing authority, which it cannot.

49. Again, looked at from the point of view of the employer if the courts take over the decision-making function of the employer and make a distinction between essential and non-essential terms contrary to the intention of the employer and thereby rewrite the arrangement, it could lead to all sorts of problems including the one that we are grappling with. For example, the GTC that we are concerned with specifically states in Clause 15.2 that "Any bid not accompanied by an acceptable Bid Security/EMD

shall be rejected by the employer as non-responsive". Surely, CCL ex facie intended this term to be mandatory, yet the High Court held that the bank guarantee in a format not prescribed by it ought to be accepted since that requirement was a non-essential term of the GTC. From the point of view of CCL, the GTC has been impermissibly rewritten by the High Court."

Lastly, the following dates, which are visible from the

documents filed are also important.

 e-tender was invited on 13.11.2018 by the

respondents.

 Petitioner offers were dated 27.12.2018 and

29.01.2019 for developing four retail outlets at

Anaparthy, Kavali, Piler and Kurnool respectively.

 Four letters of intent were issued on 26.11.2020 by

the respondents to the 1st petitioner.

In the interregnum period, on 24.04.2020 the petitioner

made a request to Government of India to transfer its

marketing wing / organisation to the 2nd petitioner. The

Ministry of Petroleum by its letter dated 31.03.2020 permitted

the same and the application dated 24.02.2020 was approved.

On 09.07.2020 an agreement was entered into between

petitioner Nos.1 and 2 for the marketing of the various

products manufactured by the 1st petitioner. Thus, it is clear

that even before the date of issuance of the letters of intent,

permissions were sought by the 1st petitioner to transfer its

marketing division to the 2nd petitioner. It is not clear why this

fact was not disclosed to the respondents. Almost eight months

before the letters of intent were issued the Government of India

had permitted the transfer of marketing arrangements between

petitioners 1 and 2. Only after the letters of intent were issued

on 26.11.2020, the 1st petitioner addressed a letter seeking the

issuance of LOI in favour of the 2nd petitioner. In the opinion

of this Court this conduct of the 1st petitioner disentitles from

seeking an equitable relief of a Mandamus. No explanation is

also forthcoming in the Writ Affidavit about this.

Lastly, the case law cited by the learned senior counsel

for the petitioners, in the opinion of this court, are not directly

applicable to the facts and circumstances of the case on hand.

Both the Supreme Court judgments are leading judgments on

the subject. In the case of New Horizon Ltd., (1 supra) the

core issue was about the experience of the constituent of a joint

venture. The question, therefore, was whether the rejection of

a bid by the Tender Evaluation Committee of a bidder called

NHL was correct or not. This was the case whether the contract

was not yet concluded and a bid was rejected on the ground

that the condition regarding experience as laid down in the

tender notices was not fulfilled. The Hon'ble Supreme Court of

India held that the experience of the joint venture member or

the constituent of the joint venture can be construed to the

experience of the bidder and for this purpose corporate deal

was pierced.

In Renusagar Power Co., Case (2 supra) the question

was about the levy of electrical charges. It is also noted that

piercing of the corporate veil was necessary to decide the

relationship between the Renusagar Power co., and

Hindalco. Renusagar was said to be wholly owned subsidiary

of Hindalco and it is completely controlled by Hindalco. Even

the day to day affairs of Renusagar are controlled by Hindalco

and it is also noticed by the Hon'ble Supreme Court of India

that the State or the respondent's board have also lifted the

corporate veil and treated the Renusagar and Hindalco as one

and the generation of power / electricity in Renusagar was also

treated as own sources of generation of Hindalco. Therefore, it

is held that Renusagar power plant must be treated as power

plant of Hindalco. These facts are not similar to the present

case which deals with a marketing agreement given to the 2nd

petitioner by the 1st petitioner.

Similarly, in the judgment of learned single Judge of this

Court in Prasad Sushee Joint Venture case (3 supra) also

the questions that were decided can be seen from para 12 of

the judgment which is as follows:

"12. From the above rival contentions, the questions that fall for consideration are:-

(1) Whether respondent Nos. 1 and 2 are justified in treating the Holding Company as the bidder, while considering the bid submitted by the 3rd respondent: and (2) Whether respondent Nos.1 and 2 are justified in taking into consideration the experience and financial

capacity of the Holding Company, while assessing the bid of the 3rd respondent?"

Thus, it is clear that the facts in the present case are far

different from the facts before the Hon'ble the Supreme Court

of India or the learned single Judge of this Court. This is not a

case of piercing the corporate veil to ascertain if the Joint

venture partner has necessary expertise or the experience. The

question involved here is whether the request of Petition No.1

to transfer the letter of intent to petitioner No.2 can be accepted

or not? This Court holds that it is not permissible. This Court

is also of the opinion that on the question of law once a contract

is concluded, it cannot be transferred or assigned to the 3rd

party without the consent of the respondent. It is also a matter

of discretion. In the opinion of this Court the respondents

rightly refused to transfer the letter of intent, since they felt

that the letter of intent can only be issued to a preferred bidder,

who fulfills all the eligibility criteria. Admittedly the 2 nd

petitioner, who is called as exclusive marketing licenses does

not fulfill the eligibility criteria.

In the passing this Court also notices that the Petroleum

supply agreement dated 09.07.2020 is filed as part of bid

papers. Some pages and terms of this agreement are not

reproduced and are redacted. The available clauses do not

indicate that the entire production of petitioner No.1 will be

given exclusively to petitioner No.2 for distribution. The Clause

9.1 relied upon by the learned senior counsel is to the following

effect:

"9.1 Exclusivity: during the Term and except as otherwise expressly provided for in this Agreement, the company shall have the obligation to purchase and take delivery of the Company's entire requirements for Products for sales in the Republic of India and RIL shall have the obligation to sell and deliver up to a maximum of the Base Quantify subject to the terms of this Agreement."

What is the base quantity is not clear from the document

filed before this Court. This particular definition has been

redacted. Apart from this, this court also notices that the

application as made on 24.02.2020 by the 1st petitioner to

transfer its marketing authorization to the 2nd petitioner for

retail marketing along with the 1st petitioner's retail business

of 1400 retail outlets. The application specified that the

existing 1400 retail outlets would be transferred from the 1st

petitioner to the 2nd petitioner. About 474 retail outlets were

proposed to be commenced in 2021 along with other units. The

Government of India accorded permission to transfer these

1400 units and also clarified that prior permission from the