Bombay High Court
Gti Infotel Private Limited vs Hindustan Petroleum Corporation ... on 25 October, 2024
Author: Amit Borkar
Bench: Amit Borkar
2024:BHC-OS:17933-DB
908-oswp1508-2024-J -Final.doc
AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1508 OF 2024
SHABNOOR
AYUB
GTI Infotel Private Limited
PATHAN
Digitally signed by
SHABNOOR AYUB
PATHAN
601 Tower A, 6th Floor,
Date: 2024.10.25
17:13:13 +0530
Smart Homes, Hajipur Sector 104,
NOIDA - 201 304, Uttar Pradesh ... Petitioner
V/s.
1. Hindustan Petroleum Corporation
Ltd., through Chairman and
Managing Director,
Petroleum House, 17,
Jamshedji Tata Road, Mumbai
Maharashtra 400 020
2. Union of India,
through the Secretary,
Ministry of Petroleum & Natural Gas,
Room No.206-A, Shastri Bhavan,
New Delhi - 110 001
3. Value Chain Solutions (India)
Private Limited,
209-212, 2nd Floor, Ornet Arcade,
Opposite AUDA Garda, Vastrapur,
Ahmedabad, Gujarat 380 015 ... Respondents
Mr. Zal Andhyarujina, Senior Advocate with Ms. Ishani
Khanvilkar, Mr. Abhinandan Waghmare, & Mr. Yogendra
Singh for the petitioner.
Mr. Zubin Behramkamdin, Senior Advocate with Mr. Vijay
Purohit, Mr. Pratik Jhaveri and Mr. Samkit Jain i/by P & A
Law Officers for respondent No.1-HPCL.
Mr. J.S. Saluja for respondent No.2.
1
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908-oswp1508-2024-J -Final.doc
Mr. Ashish Kamat, Senior Advocate with Mr. Pradeep
Mane and Mr. Huzan Bhumgara i/by Desai & Diwanji for
respondent No.3.
CORAM : DEVENDRA KUMAR UPADHYAYA, CJ &
AMIT BORKAR, J.
RESERVED ON : OCTOBER 16, 2024
PRONOUNCED ON : OCTOBER 25, 2024
JUDGMENT:
(Per Amit Borkar, J.)
1. Challenge in this writ petition under Article 226 of the
Constitution of India is to the entire tender process bearing
Tender No. GeM/2023/B/3507416, which includes not only the
issuance of the tender but also the consequent stages leading
up to the allotment of work by P.O. No. 5200037423 dated
5th January 2024. The petitioner contends that the process
has been vitiated by violations of tender conditions, and public
procurement policies, specifically the Micro and Small
Enterprises (MSE) policy aimed at providing preferential
treatment to MSEs, which, according to the petitioner, has not
been followed in its spirit or in letter.
2. Facts, as disclosed in the petition, relevant for
adjudication of the present writ petition are as follows: on
30th May 2023, respondent No.1, a government entity
responsible for public procurement, published a detailed bid
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document for tender designated as the E-Tender for Track and
Trace along with a comprehensive scope of work on the official
website of the Government E-Marketplace (GeM). The scope
of work involved implementation of a sophisticated track and
trace system, which required compliance with specific
technical standards, including those outlined under relevant
Indian Standards (IS) codes. The last date for tender
submission was fixed as 20th July 2023, providing potential
bidders with approximately 50 days to prepare their bids. All
prospective participants were required to submit their
proposals electronically, ensuring adherence to the timelines
and conditions specified. The petitioner, an MSE entity,
submitted its proposal on 20th July 2023, which included all
necessary documents, including the MSE Registration
Certificate, in compliance with the eligibility requirements
stipulated in the bid document.
3. On 14th August 2023, respondent No.1 initiated further
interaction by email, inviting the petitioner to discuss the
technical aspects of its bid submission. This invitation was
aimed at seeking clarifications on specific technical points
related to the petitioner's compliance with IS standards, which
was an important criterion for evaluating the technical bid.
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The physical meeting was scheduled for 16th August 2023 at
the office of respondent No.1. On the designated date, the
petitioner attended the meeting and gave a detailed
presentation concerning its technical bid, focusing on the
system's architecture, functional capabilities, and compliance
with the prescribed standards. Thereafter, respondent No.1
raised queries concerning IS compliance, which were duly
addressed by the petitioner with supporting documentation.
Despite the petitioner's assertion that all technical criteria
were satisfied, the subsequent list of technically qualified
bidders, published on 18th October 2023, did not include any
detailed reasoning regarding the qualification or
disqualification of the bidders, raising concerns about
transparency in the evaluation process.
4. On 20th October 2023, respondent No.1 opened the
financial bids of the technically qualified bidders, which
included the petitioner. The opening of financial bids marked
the next important step in the tender process. On the same
day, respondent No.1 invited the petitioner to participate in
the reverse auction process, which was scheduled to
commence on 21st October 2023 at 15:00 p.m. and conclude
by 12:00 p.m. on 25th October 2023. The reverse auction
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process is a critical component of competitive bidding,
allowing bidders to modify their financial proposals in real-
time, with the ultimate aim of achieving the lowest price for
the procuring entity. The petitioner actively participated in the
reverse auction, wherein it revised its bid in response to the
competing offers.
5. On 26th October 2023, at 11:51 a.m., the reverse
auction process was concluded. The official GeM website
displayed that the petitioner's bid of Rs. 27,29,52,112/- had
matched the 'Current L-1 Price,' and the system reflected the
petitioner's status as the lowest bidder (L-1). The results of
the reverse auction were subsequently published on 21st
November 2023 on the GeM platform. The petitioner's bid of
Rs. 27,29,52,112/- was ranked L-1, with respondent No.3
ranked L-3, having submitted a bid amounting to Rs.
27,32,87,109/-. The petitioner claims that despite being the
lowest bidder and having satisfied all technical criteria, there
was undue delay in finalizing the award of the contract, which
led to additional correspondence between the petitioner and
respondent No.1.
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6. On 21st November 2023, respondent No.1 emailed the
petitioner requesting an extension of the bid validity period
from 15th December 2023 to 25th February 2024. The
petitioner, while granting the extension, contends that this
request was unusual given the prior completion of the tender
process, including the reverse auction. The extension was
accepted by the petitioner under the presumption that it was
necessary to facilitate subsequent stages of the procurement
process, such as obtaining requisite internal approvals and the
timely issuance of the work order. However, the petitioner
asserts that despite this extension, respondent No.1 failed to
act with the required urgency, raising concerns of procedural
lapses.
7. On 12th December 2023, respondent No.1, by email,
requested the petitioner to consider a reduction in the
contract price, citing the closure of their Rampur plant, which
resulted in a significant decrease in the quantities outlined in
the initial agreement. This reduction, according to respondent
No.1, was necessary to align the contractual obligations with
the new operational realities. After considering the request,
the petitioner, in an email dated 15th December 2023,
approved the modification of the contract price,
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acknowledging that the closure of the Rampur plant and the
corresponding reduction in deliverable quantities justified such
a change. This modification signified an amicable adjustment
to the original contract, indicating the willingness of the
petitioner to cooperate in light of unforeseen changes on the
part of respondent No.1. However, despite the petitioner's
cooperation, this incident marks the beginning of subsequent
disputes between the parties.
8. According to the petitioner, in the first week of January
2024, the petitioner was verbally informed by the Deputy
General Manager of respondent No.1 that there had been an
inordinate delay in issuing the work order, attributing the
delay to internal processes within respondent No.1. The
Deputy General Manager assured the petitioner that the work
order would be issued very soon. On 16th January 2024, the
petitioner, through a formal email, requested respondent No.1
to expedite the release of the work order, emphasizing the
urgency of the situation given the prior delays. However, on
the same day, while checking the status of the tender on the
official GeM website, the petitioner made a startling discovery.
It was found that the total price bid of respondent No.1 had
been modified to match the petitioner's bid price. This
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modification appeared unilateral, raising concerns of undue
interference in the tender process. Consequently, on 17th
January 2024, the petitioner sent a detailed letter and email
to respondent No.1, requesting an immediate inquiry into how
respondent No.3's bid price had been altered without prior
consultation or notification to the petitioner. The petitioner
highlighted the potential impropriety and favoritism that may
have led to respondent No.3's bid price being unfairly
adjusted to match that of the petitioner. In response, on 19th
January 2024, the GeM portal, by email, provided a
clarification to the petitioner's communication dated 17th
January 2024, stating that the petitioner was classified as a
seller under the Make in India (MII) category and not as a
Micro and Small Enterprise (MSE), which the petitioner
contested.
9. On 20th January 2024, dissatisfied with the
developments in the tender process and the unexplained
revision of respondent No.3's bid price, the petitioner made a
formal representation to the Minister of Petroleum and Natural
Gas. The petitioner requested a thorough inquiry into the
conduct of the reverse auction process, alleging that the
integrity of the bidding system had been compromised to
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favor respondent No.3. In a parallel development on the same
day, respondent No.1, while invoking clause 8 of the terms
and conditions of the tender, responded by asserting that
respondent No.1 had actively opted for the MSE purchase
preference under the policy, whereas the petitioner had not
availed of such an option. Respondent No.1 claimed that the
petitioner's failure to exercise this option rendered them
ineligible for the MSE preference and that the system had duly
recognized this distinction, which resulted in the evaluation of
the petitioner's bid as a non-MSE bidder. This communication
by respondent No.1 suggested that the petitioner's omission
to select the MSE preference during the bidding process was
important to the petitioner's grievances regarding the tender
evaluation.
10. On 21st January 2024, the GeM official website
published a notification that the bid price of respondent No.3
had been revised once again, this time to an amount of
Rs.26,18,01,112/-. This second revision in a short span of
time only heightened the petitioner's suspicions regarding the
transparency of the bidding process. The petitioner viewed
these multiple alterations in respondent No.3's bid price as
indicative of possible manipulation within the system,
908-oswp1508-2024-J -Final.doc
designed to favor respondent No.3 at the cost of the
petitioner's rightful position in the tender. According to the
petitioner the repeated revisions, without any legitimate
explanation, severely weakened the confidence in the fairness
and impartiality of the tender process.
11. On 24th January 2024, the petitioner formally
communicated with respondent No.1, reiterating that the
petitioner had submitted all requisite documents during the
bid submission and evaluation stages to substantiate its
status as an MSE. The petitioner emphasized that it was
eligible for the benefits accorded under the MSE policy and
urged respondent No.1 to reconsider its stance in light of the
petitioner's documented compliance. Despite this clarification,
respondent No.1, in a letter dated 24th January 2024,
reaffirmed its earlier position. Respondent No.1 maintained
that the petitioner had not opted to avail the benefits of
purchase preference under the tender document, and as such,
the system had evaluated the petitioner as a non-MSE bidder.
This response further frustrated the petitioner's attempts to
resolve the issue, as it appeared that the petitioner's MSE
status had been disregarded due to a technical or procedural
oversight, leading to an erroneous evaluation. Respondent
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No.1's refusal to reconsider its stance compounded the
petitioner's grievances, reinforcing the need for a thorough
investigation into the bidding and evaluation process. The
petitioner therefore filed present petition on 12th March 2024.
12. Upon petitioner's request, this Court, vide its order
dated 21st March 2024, granted leave to amend the writ
petition to include the successful bidder, i.e., respondent No.3,
as a necessary party to the proceedings. This amendment also
encompassed the petitioner's challenge to the work order
dated 5th January 2024 issued to respondent No.3 under the
tender process. The Court observed that since the work order
had already been issued, it was necessary to hear the
successful bidder to avoid any prejudice. The amended writ
petition included detailed prayers seeking quashing of the
work order and directions to respondent No.1 to reconsider
the tender in light of the petitioner's MSE status.
13. In its affidavit-in-reply filed on 12th April 2024,
respondent No.1 raised a preliminary objection to the
maintainability of the writ petition, contending that the entire
tender process was conducted in strict compliance with the
terms and conditions set forth in the bid documents.
908-oswp1508-2024-J -Final.doc
Respondent No.1 contended that the petitioner had ample
opportunity to exercise its option for purchase preference
during the bidding process but failed to do so. It further
argued that the petitioner did not exhaust the available
grievance redressal mechanisms as outlined in the tender
document and the GeM portal, making the writ petition
premature and non-maintainable. By its communication dated
13th February 2024, respondent No.1 sought clarification
from GeM regarding the petitioner's eligibility for purchase
preference. GeM, by email dated 15th February 2024,
confirmed that the petitioner had not opted for purchase
preference as an MSE during the reverse auction and, as
such, respondent No.1 was bound by the outcome of the
bidding process, which treated the petitioner as a regular
bidder. Respondent No.1 emphasized that it could not alter
the bid parameters post-auction to favor the petitioner.
14. Respondent No.1 clarified that the exemption from the
payment of Earnest Money Deposit (EMD) is an independent
benefit extended to various categories of bidders, including
but not limited to MSEs. It was stated that exemption from
EMD did not automatically translate to the petitioner being
entitled to purchase preference under the MSE policy. As per
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the tender conditions, exercise of purchase preference was a
separate and specific option that needed to be affirmatively
selected by the bidder during the bidding process. Respondent
No.1 further contended that the reverse auction concluded on
18th October 2023, and the petitioner's writ petition, filed
nearly five months later on 8th March 2024, suffered from
inordinate delay and laches. Moreover, respondent No.1
asserted that it had no control over the bidding process
conducted on the GeM portal, which automatically classified
the petitioner as a regular bidder due to its failure to select
the purchase preference option. Respondent No.3, being
within the 15% price band of the petitioner's bid, was lawfully
awarded the benefit of purchase preference in accordance
with the GeM guidelines and the terms of the tender.
15. Respondent No.3, in its affidavit-in-reply filed on 24th
April 2024, echoed the contentions raised by respondent No.1.
Respondent No.3 confirmed that it was issued the Letter of
Intent (LoI) by respondent No.1 on 8th January 2024, in
furtherance of the purchase order dated 5th January 2024. In
accordance with the terms of the purchase order, respondent
No.3 was required to complete the project within six months
of the issuance of the LoI. Respondent No.3 highlighted that it
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promptly commenced the work and held an initial meeting
with respondent No.1 on 10th January 2024 to discuss the
project's implementation. Respondent No.3 has also provided
a detailed account of the project's progress, asserting that it
has invested significant resources and effort into its execution.
16. Respondent No.3 further stated that it successfully
completed Phase-I of the project by 7th March 2024, having
implemented the pilot project in presence of respondent
No.1's representatives. The minutes of the meeting held on
7th March 2024 documented successful implementation of the
pilot project, marking a critical milestone in the project's
execution. As of 31st March 2024, respondent No.3 claims to
have completed approximately 35% of the total project, with
Phase-II expected to be completed by the second week of
June 2024. Respondent No.3 further elaborated that it has
engaged a team of 13 skilled personnel specifically for this
project and has incurred substantial financial outlays,
including approximately Rs. 15 lakh towards equipment and
licenses. Cumulatively, respondent No.3 has spent around Rs.
3 crore towards the project's completion. Given the advanced
stage of the project and the significant costs incurred,
respondent No.3 submitted that any interference by this Court
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at this juncture would cause grave prejudice to its interests
and prayed for the dismissal of the writ petition on grounds of
delay and substantial compliance with the tender terms.
17. Mr. Andhyarujina, learned Senior Advocate appearing for
the petitioner, argued that the petitioner's status as an MSE
was never in dispute, as the petitioner was granted exemption
from the payment of EMD based on its MSE registration. He
submitted that the petitioner had exercised its rights under
the MSE policy by submitting the requisite MSE certificate
during the tender process. According to Mr. Andhyarujina, the
tender conditions did not specify a distinct or separate
mechanism for exercising purchase preference, nor did the
GeM portal provide any clear option for the same. He
submitted that once the petitioner's MSE certificate was
uploaded, it should have been automatically considered for all
benefits, including purchase preference. Referring to Clause 8
of the tender document, Mr. Andhyarujina emphasized that
the eligibility criteria only required the tenderer to be an MSE
and to upload the MSE certificate. Therefore, the petitioner
was entitled to the full benefits of the MSE policy, including
purchase preference, and the denial of such benefit by
respondent No.1 was arbitrary and contrary to the principles
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of equity and justice.
18. Conversely, Mr. Behramkamdin, learned Senior Advocate
appearing on behalf of respondent No.1, has argued that the
tender conditions expressly require that the bidder must
exercise the option for purchase preference by following the
specific methodology provided on the Government e-
Marketplace (GeM) Portal available to MSE bidders. He
elaborated that the process mandates not only uploading of
the MSE certificate at the designated place but also selection
of the option for purchase preference. If the bid submitted by
an MSE bidder falls within 15% of the L-1 price, the GeM
Portal would automatically extend an option to the MSE bidder
to match the price of the L-1 bidder. According to him, despite
being well aware of this process, the petitioner did not
exercise the purchase preference option in its bid submission,
whereas respondent No.3 duly opted for it as an MSE. After
the reverse auction process, the petitioner emerged as the L-1
bidder, and respondent No.3 as the L-2 bidder. He contended
that the petitioner was fully aware of the fact that it was not
being recognized as an MSE due to its failure to opt for the
purchase preference option when the list of qualified bidders
was published on the GeM Portal on 18 October 2023.
908-oswp1508-2024-J -Final.doc
19. He submitted that since respondent No.3's bid was
within 15% of the L-1 price and the petitioner did not opt for
purchase preference, the GeM Portal only recognized
respondent No.3 as an MSE and extended the option to
respondent No.3 to match the price quoted by the petitioner.
He emphasized that the GeM Portal operates in a pre-
programmed, automated, and transparent manner, which
eliminates any possibility of bias or arbitrariness in the
procurement process. Had the petitioner opted for the
purchase preference as an MSE, the GeM Portal would have
reflected it accordingly, and the petitioner would have been
given the benefit under the MSE policy.
20. Mr. Behramkamdin further submitted that GeM has
categorically submitted that the petitioner did not opt for the
purchase preference as an MSE. While the petitioner may
have availed the benefit of an EMD exemption by uploading
supporting documents, it failed to exercise the purchase
preference option in the same manner on the respective page
of the GeM Portal. He pointed out that the training modules
and guideline videos provided by the GeM platform clearly
indicate that availing the EMD exemption and availing the
purchase preference option as an MSE are separate and
908-oswp1508-2024-J -Final.doc
distinct actions. Despite sufficient opportunity, the petitioner
has failed to produce any screenshots or corroborating
documents to substantiate its claim that it had opted for
purchase preference. Furthermore, the contract was awarded
to respondent No.3 on 8 January 2024, and in accordance
with Clause 5.2 of the special terms and conditions of the
tender, respondent No.3 has significantly completed the work
under the contract. He added that only the warranty period of
two years and the comprehensive annual maintenance
contract (CAMC) for five years remain, which the petitioner is
unlikely to provide considering the technical complexity
involved in the execution and maintenance of the Track and
Trace system.
21. Mr. Kamat, learned Senior Advocate on behalf of
respondent No.3, in addition to the contentions raised on
behalf of respondent No.1, submitted that on 20 July 2023,
the petitioner had submitted its techno-commercial bid in
response to the tender but crucially failed to specify and
select the purchase preference option under the MSE policy.
He pointed out that the tender documents, including the
undertaking form, required bidders to make a clear and
definitive choice between availing the benefits under the MSE
908-oswp1508-2024-J -Final.doc
policy or the Make in India (MII) preference. The petitioner,
however, failed to make such a selection.He further submitted
that on 18 October 2023, respondent No.1 published the list
of qualified bidders on the GeM Portal, which included both
the petitioner and respondent No.3. However, the status of
the petitioner was not reflected as an MSE in the list. This was
clear evidence that the petitioner had not exercised the MSE
purchase preference option at the relevant stage of the
bidding process.
22. Mr. Kamat emphasized that, as on 31 March 2024,
respondent No.3 had completed approximately 35% of the
project work, and Phase II of the project had been completed
in its entirety. He argued that considering the nature of the
Track and Trace project, which involves highly technical work
requiring specific equipment, expertise, and compliance with
stringent regulatory standards, it would not be feasible for the
petitioner to continue or take over the remaining portion of
the project. He submitted that respondent No.3 has already
made substantial investments in the project, including
expanding its operations, acquiring additional equipment, and
securing necessary licenses. He noted that respondent No.3
has spent an approximate amount of Rs.3 crores in expanding
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its outlets and approximately Rs.15 lakhs in acquiring new
equipments and licenses, further solidifying its ability to
complete the project. He contended that the petitioner, having
failed to avail the purchase preference option and lacking the
requisite specialized knowledge and resources to complete the
Track and Trace project, is not in a position to step in at this
advanced stage of project completion. Any interference at this
point, he argued, would not only disrupt the ongoing work but
would also result in delays and financial losses that could have
been avoided had the petitioner properly exercised its rights
under the MSE policy from the outset. Accordingly, he
submitted that the writ petition deserves to be dismissed.
23. For the purpose of adjudicating contentions raised by the
parties, it is necessary to extract relevant tender conditions,
which are as under:
"Instructions to Bidders
1. Vendors are advised to submit their bids taking
full notice of all the pre-qualification criteria(BOC),
technical specifications, terms and conditions. Bidders
are to note that this tender is on GeM platform and hence the
interested bidders can participate in the tender (Techno-
Commercial and Price Bids) only through the internet.
Response in any other form shall not be accepted.
2. Eligible Bidders are required to submit their offer in two
parts - Techno Commercial bid (Unpriced bid) and Price Bid.
The Techno Commercial as well as Price Bid shall both be
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submitted online along with the documents as required in this
tender.
4. Submission of Bids:
...
vi. All details, revisions, clarifications, corrigenda,
addenda, time extensions, etc., to the tender will be hosted
only on this website. Bidders should regularly visit this
website to keep themselves updated.
vii. Bidders are advised to study all the Tender the
Documents carefully and understand Tender/Contract
Conditions, Specifications etc., before quoting. If there
are any doubts, they should get clarification in writing but
this shall not be a justification for late submission of tender
or extension of opening date. Tender should be strictly in
accordance with Terms & Conditions, Specifications.
viii. The offer from the tenderer should he strictly in
accordance with Terms & Conditions of the tender,
Specifications.
ix. All the enclosed Tender documents along with the
covering letter will form part of the tender
...
15. The Corporation reserves the right to reject any
and or every tender without assigning any reason
whatsoever and/or place order on any tenderer and
their decision in this regard will be final. No disputes
could be raised by any tenderer (s) whose tender has
been rejected.
...
38. Miscellaneous:
...
h. In case of any dispute in the interpretation of the
terms and conditions of the tender, the decision of the
Corporation shall be final and binding.
...
"8. Purchase preference to Micro and Small Enterprises
(MSEs): Purchase preference will be given to MSEs and
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defined in Public Procurement Policy for Micro and Small
Enterprises (MSEs) Order, 2012 dated 23.03.2012 issued by
Ministry of Micro, Small and Medium Enterprises and its
subsequent Orders/Notifications issued by concerned
Ministry. If the bidder wants to avail the Purchase
preference, the bidder must be the manufacturer of the
offered product in case of bid for supply of goods.
Traders are excluded from the purview of Public Procurement
Policy for Micro and Small Enterprises. In respect of bid for
Services, the bidder must be the Service provider of the
offered Service. Relevant documentary evidence in this
regard shall be uploaded along with the bid in respect of the
offered product or service. If L-1 is not an MSE and MSE
Seller (s) has/have quoted price within L-1+ 15% of
margin of purchase preference / price band defined in
relevant policy, such Seller shall be given opportunity
to match L-1 price and contract will be awarded for
percentage of 100% of total value.
(Emphasis Supplied)"
"Undertaking Attachment -1
Tender no.__________dated_____
We, M/s_____________________(Name of Bidder) hereby
confirm that purchase preference may be extended as per
the provisions of Purchase Preference under Public
Procurement Policy for MSE / Purchase Preference
(linked with Local Content), (retain whichever is
applicable and remove the other option) for our bid submitted
against the above mentioned tender.
||Note (Only for the information of bidders and not be
included in the final declaration) :
(i) In case a bidder is eligible to seek benefit under MII
policy as well as PPP for MSE 2012, then the bidder
should categorically seek benefits against any one of
the two policies i.e., either MII or MSE policy.
(ii) In case a MSE bidder opts for purchase preference
based on MII, he shall not be entitled to claim purchase
preference benefit available to MSE Bidders under PPP
for MSE 2012. However, the exemptions from
furnishing Bidding Document fee and Bid security/EMD
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shall continue to be available to MSE Bidders.
(iii) The option once exercised, cannot be modified
subsequently.
(iv) In case PPP - MSE option is selected, then the bidder
can delete the balance portion of this declaration. In
case, MII option is selected, then the bidder has to
submit the balance portion of this declaration, without
which, the purchase preference under applicable MII
Policy is not liable to be extended.||"
"Purchase Preference - MSE
In case the bidder is a Micro or Small Enterprises registered
with District Industries Centers (DICs) or Khadi and Village
Industries Commission (KVIC) or Khadi and Village Industries
Board (KVIB) or Coir Board or National Small Industries
Corporation or Directorate of Handicrafts and Handloom or
any other body specified by Ministry of Micro and Small
Enterprises (MoMSME), the bidder shall be entitled for
benefits under the Public Procurement Policy as per the
details mentioned below:
i. Issue of Tender Documents free of cost.
ii. Exemption from payment of EMD.
iii. Micro and Small Enterprises quoting price within price
band of L1 + 15% shall be allowed to supply a portion
of requirement by matching the price of L1, if L1 is
other than MSE, upto 25% of the total tendered value.
iv. Only Manufacturing Enterprises qualify as MSEs.
Traders and Agents shall not be allowed to avail the
benefits extended under PP Policy.
v. In case of availability of more than one Micro and Small
Enterprises within the price band of L1 + 15%, 25% of
the tender value shall be shared equally amongst the
eligible MSEs, subject to matching the L1 price.
vi. Further, out of above 25%, 4% shall be from MSEs
owned by SC/ST entrepreneurs and 3% from MSEs
owned by Women Entrepreneurs. This quota is to
be transferred to other MSEs in case of non-
availability of MSEs owned by SC/ST entrepreneurs
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or Women Entrepreneurs."
24. In light of the facts and circumstances mentioned above,
and upon considering the decisions in Jagdish Mandal v.
State of Orissa [(2007) 14 SCC 517] and Tata Motors
Ltd. v. Brihanmumbai Electric Supply & Transport
(BEST) [(2023) 3 SCC 646], it is imperative to evaluate
whether judicial interference in the tender process would be
justified.
25. The judgment in Jagdish Mandal(Supra) laid down
clear parameters for judicial interference in tender matters,
limiting it to cases where the process is arbitrary, irrational, or
discriminatory; the decision is mala fide or in violation of
statutory provisions; public interest is adversely affected by
the tender decision.
26. The Court in Jagdish Mandal(Supra) emphasized that
interference by courts is not warranted unless these factors
are met. Courts should not act as an appellate authority over
administrative decisions unless there is a clear breach of
constitutional or statutory provisions.
908-oswp1508-2024-J -Final.doc
27. The decision in Tata Motors(Supra) further refined the
scope of judicial review in tender matters. It highlighted that
while courts can review tenders for fairness, transparency,
and reasonableness, they must do so sparingly and with great
caution, particularly in matters involving technical expertise.
It reaffirmed the principle that unless there is manifest
arbitrariness or a violation of statutory norms, courts should
refrain from interfering in contractual and commercial
decisions taken by government authorities.
28. If the facts and arguments pleaded by the respective
parties in these writ petition are analysed on the anvil of the
law laid down by Hon'ble Supreme Court, what we need to
determine firstly is as to whether the tender document had a
specific requirement for bidders to select the purchase
preference option during the bidding process. Respondent
No.1 contended that the petitioner failed to opt for this
preference on the Government E-Marketplace (GeM) portal,
leading the system to treat the petitioner as a non-MSE bidder
for the purpose of awarding the tender. The petitioner,
however, claims that there was no separate option for
exercising purchase preference during the bid submission
stage and that the submission of the MSE registration
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certificate should have sufficed.
29. For the purpose of determining whether there existed a
separate option for exercising purchase preference during the
bid submission stage, it is necessary to consider the relevant
tender conditions which have been extracted above. Sub-
clause (vii) of Clause (4) of the Instructions to Bidders
required bidders to carefully study all the tender documents
and fully understand the tender/contract conditions before
quoting their bid. This places an obligation on the bidder to be
fully aware of all requirements, including the exercise of
purchase preference. Additionally, Sub-clause (iii) of Clause
(4) clarified that all the enclosed tender documents, along
with the covering letter, would form part of the tender and
were binding on the bidders. Furthermore, Sub-clause (h) of
Clause (38) of the tender conditions granted finality to the
decision of the Corporation in case of any dispute regarding
the interpretation of the terms and conditions of the tender.
This reinforces the need for bidders to strictly comply with the
tender conditions to avoid any ambiguity.
30. The form of undertaking annexed to the tender
document, attached with Form-I, specifically required bidders
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to confirm their selection of the purchase preference option as
per the Public Procurement Policy for MSE or the Purchase
Preference (linked with Local Content) policy. The bracketed
portion in the undertaking made it obligatory for the bidder to
retain the applicable option and remove the other, ensuring
clarity in the selection. The note appended to the undertaking
further emphasized that if the bidder sought to claim benefits
under both the Make in India (MII) policy and the Public
Procurement Policy for MSE (PPE for MSE 2012), the bidder
must categorically choose to claim benefits under only one of
these policies. Note (ii) in particular clarified that if an MSE
bidder opted for purchase preference under the MII policy,
such a bidder would not be entitled to the purchase
preference benefits available to MSE bidders under the PPE for
MSE 2012. However, the exemption from Earnest Money
Deposit (EMD) would continue to be available to all MSE
bidders, even if they selected the MII policy.
31. Moreover, the screenshot referred to by the GeM official
in the communication dated 15 February 2024 further
indicates the existence of a specific option on the GeM Portal,
which requires the bidder to answer whether it is availing the
benefits under the MSE policy. This option expressly allows
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bidders to upload their MSE certificate under the category for
MSE bidders. This feature emphasises the clear and distinct
requirement for MSE bidders to separately indicate their
preference for purchase preference during the bid submission
process.
32. We are, therefore, of the considered opinion that a
separate option for exercising purchase preference during the
bid submission stage was clearly available to all bidders,
including the petitioner, on the GeM Portal. The structure of
the tender conditions, as well as the provisions of the GeM
Portal, provided an explicit and transparent mechanism for
bidders to exercise their purchase preference rights as MSEs,
should they wish to avail them.
33. Secondly, the dispute involved is whether the petitioner
exercised purchase preference on the Government e-
Marketplace (GeM) portal claiming benefit of its status as
MSE. To prove said fact the petitioner could have produced
material such as the order summary, bid submission details,
or any confirmation screenshots from the GeM portal
reflecting whether the purchase preference option for Micro
and Small Enterprises (MSEs) was selected during the bid
908-oswp1508-2024-J -Final.doc
submission process or GeM transaction logs or system-
generated records indicating the actions taken by the
petitioner when submitting the bid, including timestamps and
specific selections (such as opting for MSE preference).
Petitioner could have produced correspondence between the
petitioner and GeM portal authorities or the procuring entity
about the application of purchase preference to clarify the
petitioner's intent of opting purchase preference as MSE. Any
official notifications, emails, or alerts from the GeM portal
indicating the status of the petitioner's preference selection
could have served as evidence. The petitioner could have
presented screenshots of the bid submission interface on the
GeM portal, specifically showing that the purchase preference
option for MSEs was selected.
34. The petitioner, however, has failed to produce crucial
evidence, such as screenshot from the GeM Portal, to indicate
that it had selected the purchase preference option for MSE
during the bid submission stage. Furthermore, no system-
generated records have been produced by the petitioner to
substantiate its claim of having exercised the purchase
preference as an MSE. On the other hand, the documents
submitted by the petitioner, including the MSE registration
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certificate, only serve to establish the petitioner's entitlement
to an EMD exemption, but not the exercise of purchase
preference under the MSE policy.
35. In contrast, respondent No.3 had clearly submitted an
MSE category certificate, and has demonstrated both, the
exercise of purchase preference under the MSE policy and the
entitlement to EMD exemption.
36. Additionally, the list of documents uploaded by the
petitioner reveals that the petitioner had uploaded documents
under the Make in India (MII) policy, specifically under Class-
I/Class-II categories, and had not uploaded any document to
claim purchase preference under the MSE policy. The
distinction between the documents submitted by the
petitioner and those submitted by respondent No.3 is
significant which indicates that the petitioner did not properly
exercise its option for MSE purchase preference.
37. It is important to note that the tender process on the
GeM Portal is system-driven and automated. Unless the bidder
explicitly selects the MSE purchase preference option, the
system will automatically treat the bidder as a non-MSE
bidder for the purpose of awarding purchase preference.
908-oswp1508-2024-J -Final.doc
38. Moreover the correspondence between the petitioner
and respondent No.1 shows that the issue of the petitioner's
MSE status arose after the reverse auction process had
concluded. The petitioner had repeatedly communicated its
MSE status and sought clarification on how respondent No.3
was able to match the petitioner's bid price. In response,
respondent No.1 and GeM clarified that the petitioner did not
select the purchase preference option during the bidding
process, and this clarification was further corroborated by the
email from GeM on 15th February 2024. Despite this, the
petitioner continued to assert that it should have been treated
as an MSE for purchase preference based on the submission
of the MSE registration certificate alone. However, the
documents provided by respondent No.1 indicates that the
GeM portal evaluated the petitioner as a regular bidder and
not as an MSE due to the petitioner's failure to opt for
purchase preference.
39. The tender document governing MSEs and purchase
preference require definitive action by the bidder to opt for
purchase preference during the bidding process. In this case,
the system was designed to automatically extend the
purchase preference to eligible bidders who had selected this
908-oswp1508-2024-J -Final.doc
option and met the necessary criteria. Since the system did
not extend purchase preference to the petitioner, it indicates
that the petitioner failed to fulfill this procedural requirement.
40. While the exemption from EMD may be a benefit granted
to MSEs, it does not automatically imply that the petitioner
exercised the purchase preference option. The fact that the
petitioner was treated as an MSE for the limited purpose of
EMD exemption does not establish that it had opted for
purchase preference in the bid process, as these are two
distinct benefits under the MSE policy. The note appended to
the undertaking emphasized that exemption from Earnest
Money Deposit (EMD) would continue to be available to all
MSE bidders, even if they selected the MII policy.
41. In light of the foregoing discussion, we are of the
considered opinion that the petitioner has failed to establish
that it had selected or exercised the MSE purchase preference
option during the bid submission stage. The absence of
supporting documentation or system-generated records
confirming the petitioner's selection of the MSE purchase
preference option, coupled with the petitioner's submission of
documents under the MII policy, leads to the conclusion that
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the petitioner did not meet the tender requirements to claim
purchase preference as an MSE.
42. In this case, if the petitioner did not explicitly opt for
purchase preference despite being an MSE, the court finds it
difficult to interfere with the tender process on this ground,
particularly given the established principle that judicial review
of tender conditions is limited to examining arbitrariness or
unreasonableness. There is no evidence to suggest that
respondent No.1 acted arbitrarily in not extending purchase
preference to the petitioner, as the decision was based on the
petitioner's failure to opt for it.
43. The petitioner's grievance also revolves around the
alleged arbitrary modification of respondent No.3's bid price
after the reverse auction process had concluded. He raises
concerns about the transparency of the process. However,
respondent No.1 has explained the price modification after the
L-1 price match due to the reduction in the scope of work on
account of the closure of its Lube Plant at Rampur, which was
originally part of the tender. This reduction in the scope of
work resulted in a corresponding reduction in the quantity of
work, which necessitated a proportional adjustment in the
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price quoted by the L-1 bidder. Respondent No.1 has
emphasized that this adjustment was made in accordance
with the tender conditions, which allow for such modifications
in the event of changes to the scope of the project. The
reduction in scope and corresponding price adjustment were
implemented transparently, ensuring that the revised price
remained consistent with the proportionate reduction in the
workload.
44. Respondent No.1 further explained that after the
proportional reduction of the quantity of work to the quoted L-
1 price, it called upon the petitioner to match the reduced L-1
price, as required by the terms of the tender. In parallel, an
opportunity was also extended to respondent No.3, who, as
an MSE bidder having opted for purchase preference, was
entitled to match the reduced L-1 price under the Public
Procurement Policy for MSE. Respondent No.3 agreed to
match the reduced L-1 price, and accordingly, its price bid was
revised in line with the reduced scope of work and the
reduced L-1 price.
45. The record indicates that the price revision was not an
arbitrary modification, but rather a procedural adjustment
908-oswp1508-2024-J -Final.doc
necessitated by the change in the scope of the project and
carried out in accordance with the tender provisions.
Respondent No.1 has provided detailed justification for the
price revision, which was communicated to both the petitioner
and respondent No.3, ensuring transparency in the process.
Respondent No.3's agreement to match the revised L-1 price
as part of its MSE purchase preference was in line with the
tender's provisions on purchase preference and price
matching.
46. Therefore, in our opinion, the petitioner's grievance
regarding the alleged arbitrary modification of respondent
No.3's bid price is without merit. The modification of the bid
price was a necessary and proportionate response to the
reduction in the scope of work, and respondent No.1 followed
due process in seeking price adjustments from both, the
petitioner and the respondent No.3. The opportunity for
respondent No.3 to match the revised L-1 price was in
compliance with the purchase preference provisions under the
MSE policy, and no arbitrariness or favoritism can be inferred
from the actions of respondent No.1 in this regard.
908-oswp1508-2024-J -Final.doc
47. Moreover, price reduction permitted by respondent no.1
can, at the most, be termed as procedural irregularity in the
tender process which does not outweigh the public interest in
completing the project. Given that the tender pertains to an
essential service involving the national petroleum supply
chain, the public interest in ensuring the swift completion of
this project is considerable. Unless the petitioner can
demonstrate clear mala fides, arbitrariness, or a breach of
statutory duties, judicial intervention may not be justified.
48. In the context of tender matters, the continuation of the
procurement process for "Track and Trace" services by HPCL
can be termed as serving public interest. The system is
aimed at enhancing operational efficiency, ensuring
transparency, and safeguarding national resources, all of
which are closely tied to public welfare. By implementing a
"Track and Trace" system, HPCL aims at acting in the interest
of ensuring accountability and reducing the scope for fraud,
which further strengthens the argument that the continuation
of this procurement process serves the public interest. The
public interest is also served by ensuring that such services
are procured efficiently and in a cost-effective manner. Delays
or procedural inefficiencies in the tender process could lead to
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higher costs or even derailment of the project, which in turn
would have negative implications for the public. Therefore,
unless there is a manifest and serious irregularity in the
tender process, judicial restraint is advisable, as the public
interest in this case outweighs any procedural concerns raised
by the petitioner.
49. Since 35% of the work has already been completed by
the end March 2024, the exercise of the purchase preference
option, at this stage, could disrupt the project, particularly if
the MSE is unable to maintain the same quality, standards, or
timeline. The nature of Track and Trace services often involve
intricate processes that demand continuity and technical
expertise. Any significant change in contractors at this stage
may affect the seamless integration of the remaining project
components with what has already been done. The Court is
often reluctant to halt or reverse procurement processes once
substantial implementation has occurred, as this could lead to
wastage of resources and delay in project completion,
ultimately impacting public welfare.
50. The petitioner filed the writ petition on 12th March 2024,
nearly five months after the reverse auction process
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concluded, and after substantial work had already been
undertaken by respondent No.3 under the project. Courts
have often denied relief where there is an undue delay in
challenging tender decisions, particularly when the successful
bidder has already commenced substantial work. In this case,
respondent No.3 had completed 35% of the project by the
end of March 2024, incurring substantial costs and engaging
significant resources. The delay in filing the petition, coupled
with the petitioner's failure to establish that it exercised the
purchase preference, weakens the petitioner's case for relief.
51. Based on the foregoing analysis, it is apparent that the
petitioner has utterly failed to successfully establish that it
had exercised the purchase preference as an MSE. The failure
to explicitly opt for purchase preference during the bidding
process, as required by the tender conditions, resulted in the
petitioner being treated as a non-MSE bidder. The court is,
therefore, of the opinion that the petitioner's claim for
purchase preference cannot be sustained. Moreover, the delay
in filing the writ petition, coupled with the fact that
substantial work has already been completed by respondent
No.3, further diminishes the petitioner's case for judicial
intervention.
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52. For the aforesaid discussions made herein above, the
writ petition deserves to be dismissed, which, resultantly, is
hereby dismissed.
(AMIT BORKAR, J.) (CHIEF JUSTICE)
