Graham Satyam Shankaranarayna Jv ... vs National Highways Authority Of ...
1996 Latest Caselaw 684 Del

JUDGMENT

C.M. Nayar, J.

(1) The present petition is directed against respondent No.1 for setting aside the decision to reject the petitioner's bid and award of contract in favour of respondent No.2 in respect of tender for National Highways Project under loan assistance from the Asian Development Bank (for short ADB). The petitioner company is part of a Joint Venture set up by Memorandum of Understanding entered into between M/s Graham Construction Ltd. ( an English Company), Satyam Constructions Ltd. and Shankamarayana Construction Company. Respondent No.1, The National Highways Authority of India, (for short NHAI) is constituted under the provisions of The National Highways Authority of India Act, 1988 (hereinafter referred to as 'the Act) and is an instrumentality of the State and a State within the meaning of Article 12 of the Constitution of India. Respondent No.2 is a Joint Venture between a Malaysian and an Indian company and is a competing bidder. Ministry of Surface Transport on behalf of respondent No.l invited applications from contractors for prequalification for certain civil works to be undertaken in the National Highways Projects under the loan assistance from the ADB. There were five contracts numbered as I to V. The invitation for pre- qualification of contractors appeared in the National Daily 'The Hindustan Times' dated January 9, 1995. The said notice is dated December 23, 1994. The relevant portion may be reproduced as follows: "GOVERNMENTOF India Ministry Of Surface Transport (ROADS WING) New Delhi National Highways Project Under Asian Development Bank Loan Assistance Invitation For Prequalifications Of Contractors New Delhi 23rd December, 1994 1. The Government.of India has received a loan from the Asian Development Bank, hereinafter referred to as the Adb, in various currencies towards the cost of the National Highways Project Under The Asian Development Bank Loan Assistance (Loan No-1274-IND). The National Highway Authority of India is the executing agency for this loan. It is intended that part of the proceeds of this loan will be applied to eligible payments under the contracts for which this invitation for pre-qualification is issued.

(2) The Ministry of Surface Transport on behalf of the National Highway Authority of India, intends to prequalify contractors for the following contracts under this project. Some bridge and cross drainage works will also be included in the contracts. The values of contracts vary from about Rupees 600 million to 2600 million (Approximately Us $19 to 82 million). The contract periods are to about 42 months. * Contract I - Haryana and Rajasthan States, National Highway No.8, 4 laning, including strengthening of existing 2 lane pavement between Gurgaon in Haryana State and Kotputii in Rajasthan State (Km 36.63 to Km 162.50 of N.H. No. 8). * Contract II- West Bengal State, National-Highway No. 2,4 laning, including strengthening of existing 2 lane pavement between Raniganj and Panagarh (Km 474.0 to Km 516.0). * Contract Iii - Bihar State, National Highway No. 2, 4 laning, including strengthening of existing 2 lane pavement between Barwa Adde and Barakar (Km 398.75 to Km. 441.44). * Contract Iv - Andhra Pradesh State, National Highway No. 9. Strengthening of existing 2 lane pavement between Nandigama and Vijayawada (Km 217.0 to Km 265.0) including 4 laning between (Km 252.0 to Km 265.0). * Contract V - Andhra-Pradesh State, National Highway No. 5. Strengthening of existing 2 lane pavement between Vijayawada and Eluru (Km 3.4 to Km 53.8 &. Km. 69.2 to Km 75.0) including 4 laning between Km 3.4 & Km 13.0 and a bypass for Eluru Town (Km 53.8 to Km 69.2).

(3) PRE-QUALIFICATION is open to firms and joint ventures from eligible member countries of the Asian Development Bank. Applications may be made for pre- qualification for one or more of the above contracts in one application form.

(4) Interested eligible contractors may obtain further information and inspect the pre-qualification documents at the office of the Chief Engineer (PIC) Ministry of Surface Transport (Roads Wing), Parivahan Bhavan, I Sansad Marg, New Delhi -110 001, India. Fax : 3710236, Phone 3710358, Telex 3161157 to 1159.

(5) A complete set of pre-qualification documents may be purchased by interested eligible applicants on the submission of.a written application at the address mentioned in para 4 above with effect from 2nd Jan. 1995. The application must clearly state "Request for Pre- qualification Documents for the National Highways Project Under the Asian Development Bank Loan Assistance (Loan No. 1274-IND)". The documents are available for a non-refundable fee of Rs.2,000.00 or Us $ 60.00 . The non-refundable fee should be paid in the form of Demand Draft/Certified Cheque/Cashier's Cheque in favour of The Pay And Accounts Officer, Ministry of Surface Transport, New Delhi payable at New Delhi. The applicant may collect the documents in person through an authorised agent or the Ministry of Surface Transport will promptly dispatch the documents by registered airmail, but under no circumstances will the Ministry be held responsible for late delivery or loss of the documents so mailed to the applicant.

(6) The pre-qualification documents duly completed, original and one copy, must be delivered either by hand or by registered mail, to : Mr. N.K. Sinha, Chief Engineer (PIC), The Ministry of Surface Transport (Road Wing), Parivahan Bhavan, I, Sansad Marg, New Delhi -110001; (India), not later than 1700 hours on 3rd March 1995, and be clearly marked "Application for pre-qualification, of contractors of the National Highways Project Under The Asian Development Bank Assistance (Loan No. 1274-IND)". Documents received late will not be considered and will be returned unopened.

(7) Applicants will be advised, in due course, of the result of their applications. Only firms and joint ventures pre-qualified under this procedure will be invited to bid which is expected to be issued in May 1995." This petition only concerns with the award of contract No.V. 3. The petitioner alleges that one of its constituents Satyam Construction Ltd. purchased the pre-qualification documents from the Ministry of Surface Transport. In this document, at Schedule G, it was specifically mentioned that the bidder was required to furnish a declaration giving information regarding current litigation, debarring/expelling of applicant or abandonment of work by applicant. In schedule F, information was to be furnished regarding work experience in which under Schedule F.3, F.4 and F.5 for similar works, other works, works in hand respectively, a list of all projects having the value of Indian Rupees 30 million and above (i.e. Rs.3 Crores) executed during the last 10 years was to be provided. The petitioners applied to be considered for pre- qualification. By communication dated July 10, 1995, (Annex- ure Ii to the writ petition) respondent No. I informed the petitioners that it had been pre-qualified for the said Project for contracts I, Ii, Iii, Iv and V with a bidding capacity of upto Rs. 1700 million for any combination of contract. The petitioner, Satyam Construction Ltd. was also required to furnish proper Joint Venture Agreement. Thereafter, respondent No.1 by communication dated July 21, 1995, enclosed Model Conditions for preparation of the Joint Venture Agreement which was to be furnished within a period of one month from the date of issue of this letter. In response, Satyam Construction Ltd. sent a letter dated August 19, 1995 to respondent No.l enclosing a copy of Joint Venture Agreement between M/s John Graham Limited, Satyam Constructions Ltd and Shri Shankaranarayana Construction Co. as per the model conditions prescribed by respondent No.l. 4. Respondent No.l vide communication dated September 6, 1995 invited the petitioners to collect the relevant bid documents, if interested, by the payment of a non-refundable fee of Rs.20,000.00 only per set for each contract. Satyam Constructions Ltd. on behalf of the petitioners purchased bid documents for contract No. 1V and V upon payment of Rs.40,000.00 . Thereafter, respondent No.1 by its letter dated October 30, 1995, invited prospective contractors to pre-bid meetings to clarify issues and to answer the questions that may be raised at that stage on November 14th and 15th, 1995. 5. By its letter dated December 14, 1995, respondent No.l wrote a letter to the petitioners staling that the last date for submission of the bidding documents had been extended from December 18, 1995 to January 5, 1996. The petitioners submitted bid documents for contracts Iv and V only within the prescribed period and a suitably modified Joint Venture Agreement was also enclosed. Schedule G of the pre-qualification document provided a format in which the applicant was required to furnish a declaration giving information regarding current litigation, debarring/expelling of applicant or abandonment of work by .the applicant. The bid documents, in the portion titled 'Preparation of Bids' indicated that the documents comprising the bid would inter alia' include copies of Schedules A to J of the pre-qualification document and statements of changes which may have occurred since prequalification. Reference was made to clause 5.1 of the said document. The tenders were opened publicly by respondent No.1 on January 5, 1996 in the presence of the bidders' representatives. The petitioners had bid for contracts Iv and V only and the evaluated bid price of various bidders in respect of the same, as referred to in paragraph 14 of the petition, is set out below: "CONTRACTIV Crores Kmc 85.55-15% 72.72 L&T/COLAS 104.41-6% if Iv and V are awarded LANCO/DEPANTA 96.54 IJM/GAYATRI 91.36 B SEENIAH/RB/ SDM/PATI 89.21 (Lowest) Bridge & Roof 61.16 less 4% i.e. 58.71 (3rd lowest) MADHUCON/BINAPURI 71.84 JANENGG/SINGAPORE 83.04 Afcon PAULING/KIER 197.58 less 4.58% 188.00 OSC/CCI 94.46 General 4%+REBATE 5% - If Ii And Iii Are Awarded RKENGG/TORIE 125.23 less 18% (2nd lowest) Graham Satyam Shankaranarayana 68.58 Progressive 74.22 ALSUDERSAN/TNL 94.53 Contract V L&T/COLAS 219.19 - 6% if Iv & V are awarded LANCO/DEPANTA 170.12 KMC/TDCL 182.01 B SEENIAH/RB/SDN Pati 169.64 less 6% 159.46 (2nd lowest) MADHUCON/BINAPURI 146.44 Afcon Pauling /KIER 303.52 + 3.78% i.e.315.00 Somdutt Builders 178.37 less 1.0% (Lowest) Graham Satyam Shankara Narayana 129.64 ALSUDERSHAN/TNL 184.09 + 3.4% The position can be summarised as follows: Contract Iv Lowest Bidder Bridge &Roof Rs.58.71Crores 2nd lowest Bidder petitioner Rs-68.58 Crores 3rd lowest Bidder respondent no.2 Rs-71.84 Crores Contract V Lowest Bidder Petitioner Rs-129.64 Crores 2nd Lowest Bidder Respondent No. 2 Rs-146.44 Crores"

(8) The reading of the above will indicate that the petitioners were the lowest bidders in Contract V and. the second lowest in Contract IV. The petitioners further alleged that some motivated people made a complaint to respondent No.1 on or about February 15, 1996. The said respondent wrote a letter to the petitioners referring to clause 5 and Clause 13 of Instructions to Bidders staling that it had been brought to the notice of the Authority through a complaint received that in several projects awarded to M/s Shankaranarayana, a partner in the Joint Venture, the contracts had to be cancelled or withdrawn due to unsatisfactory performance. It may be noticed that only extract of the alleged anonymous complaint was enclosed and respondent No.1 required the petitioner to give the factual comments on the same immediately so that their bid could be further evaluated fairly. The communication dated February 15,1996 along with the extracts of the complaint filed as Annexure Vii to the writ petition makes the following reading: TO Joint Venture of M/s Grahan-Satyam and Shankaranarayana Construction Co. 2nd Floor, Kpr House, Sardar Patel Road, Secunderabad 500 003, Andhra Pradesh Sub: National High ways Project under loan assistance of Adb (Loan No. 1274-IND)- Civil Work Contract Iv & V. Sir, Please refer to your bid dated Jan. 5th, 1996 for the above cited project. As per clause 5 and clause 13 of the instructions to bidders you were required to furnish copies of schedules A to J of the prequalification documents furnished by you at the time of pre- qualification along with a statement of changes which may have occurred since prequalification. It has been brought to the notice of the Authority, through a complaint received (relevant extracts enclosed) that in several projects awarded to M/s Shankaranarayana, a partner in the Jv, the contracts had to be cancelled or withdrawn due to unsatisfactory performance. Your factual comments on this complaint may kindly be furnished immediately, but not later than 22nd Feb. 1996 so that your bid can be further evaluated fairly. Yours faithfully, sd/- (G.SHARAN) General Manager End: As above Extracts Of The Complaint 1) In the prestigious Konkan Railway project of the Konkan Railway Corporation Limited (KRCL), M/s Shankaranarayana have failed miserably with the result that the Krcl had to rescind their contract, encash the B.G.s and seize their equipment. 2) The Bindur tunnel work at Udipi awarded to Shankaranarayana was terminated by Krcl on 7th November, 1995 and their Bank Guarantees given towards security deposit and performance guarantee were also encashed by the department (Canara Bank, Bangalore). 3) Similar is the case in respect of Loniam tunnel work of the same project which was withdrawn from them and is being executed departmentally by KRCL. 4) The railway guage conversion project work (from Giddalur to Nandyal of Sc Railway) awarded to M/s Shankaranarayana by Indian Railway Construction Company (IRCON) is proceeding at very slow speed and several notices have been issued. Major part of the work is being got executed through sub- contractors by Ircon at the risk & cost of the contractor."

(9) The petitioners replied to the communication by letter dated February 16, 1996 refuting the said allegations. The same were denied as factually incorrect and baseless and relevant certificates issued by Konkan Railway Authority, Ircon and Canara Bank were enclosed for perusal of respondent No. 1. The petitioners have taken the plea that they had not withheld any information or failed to update Schedules A to J of the prequalification documents. It is contended in the petition that such updating was obviously to be done till the date of submission of the bid i.e. January 5, 1996. Undisputedly as on that date, work regarding Tunnel No.9 was ongoing work of the value of less than Rs.3 Crores. The said work could not, in any event, have figured in the schedule as updated as the date of submission of the bid. The enquiry into the same was based on irrelevant considerations, contrary to the terms of the Instructions to Bidders. The petitioners alleged that they had written a letter dated February 29, 1996' to respondent No.1 giving complete and full information about Tunnel No.9 and it was specifically mentioned that (a) the value of the work was only Rs.l.94 Crores i.e. less than Rs.3 Crores (b) only a portion of the work was off-loaded due to soft soil conditions and since the said item was not included in the tender, the department decided to execute this item of work on its own which was a normal practice, and that no bank guarantees were encashed as alleged in the false and frivolous complaint. Certain clarifications were further sought vide letter dated March 1, 1996 and respondent No.1 was invited to confirm the facts by making a site visit so that evaluation of the petitioner's tender was done in a just and fair manner.

(10) The petitioners allege that on March 7, 1996 a meeting was held between Mr.A.D.Narayan, Member (Technical) of respondent No.1 and Mr.B.Ramaraju, Director Satyam Construction Ltd., Mr.M.Shetty, Partner Shankaranarayana Construction Co. and Mr.P.M.Mathur also a representative of the petitioners when in that meeting respondent No.l had pointed out adverse report received from Mr.Richardson, Chief Engineer of Konkan Railway Authority. It is contended that copy of that report was not furnished to the petitioners. The petitioners, in any case, were told to furnish certificates and testimonials issued by various clients for some of the prestigious contracts executed by them and the same were duly furnished on March 8, 1996. The communication of the above Mr.Richardson Asir dated March 7, 1996 to respondent No.l may be reproduced as follows: "DEAR Shri Sharan, Sub : Performance of M/s Shankaranarayana Construction .Co. Bangalore in respect of Tunnel No.9 Ref: Your letter No.NHAI/ADB-III/BD/95/131.8 dated 6.3.1996 With reference to your letter quoted above, it is clarified that: (1) The offloading of work from the North face was due to poor progress on the part of the contractor. (2) The Bank Guarantee relates to Mobilisation Advance/Plant & Machinery Advance. (3) The contract was terminated for poor performance of the contractor and there is no litigation on this aspect."

(11) The other communications were also sent by the same person on February 27, 1996 and May 30, 1996 respectively. The first communication reads as follows: "THE work of construction of Tunnel 9 in Karwar Zone was awarded to M/s Shankaranarayana Construction Co., Bangalore vide Agreement NO.KR/CE/KW/W/ Contract/62/92 dated 24.9.1992 with the date of completion as 2.11.93. The date of completion was extended from time to time, the last being upto 28.02.96. They were granted Mobilisation Advance of Rs.l9,40,000.00 and Plant & Machinery Advance of Rs.l9,40,000.00 on production of Bank Guarantees. Since they were not able to cope up with the work and conform to the schedule of work to be done, a portion of the work was offloaded in March'95. Further, validity of one of the Bank Guarantees for Rs.5 lakhs was to expire on 2.6.95. Therefore, action was initiated on 25.5.95 and the Bank was requested to remit the amount. However, the Contractors paid the amount covered by the Bank Guarantee on 31.5.95 and the letter for encashment was withdrawn. Since they could not complete the balance works also, the same was terminated at risk and cost with effect from 17.2.96."

(12) The petitioners did not feel satisfied about the matter and addressed a communication to respondent No.l to verify the facts from Mr. Sridharan, Chairman-cum-Managing Director of Konkan Railway Corporation Ltd. of which Mr.Richardson Asir was the Chief Engineer at the relevant time. The said Mr.Sridharan wrote a letter dated June 18, 1996 in answer to the communication dated May 28, 1996 of respondent No.l The same reads as follows: "THE report of Shri R.Richardson Asir, Chief Engineer, Karwar, contained in his letter No. KR/KAWR/F/CN-26 dated 27.2.96, is factually correct. However, it is necessary to furnish little more background to this termination and subsequent events. M/s Shankaranarayana Construction Co., Bangalore had no tunneling experience. They are essentially earthwork contractors who have done a complete Reach on this Project very successfully. Since there are 92 tunnels on this Project, aggregating to a total length of 82 km, we could not get contractors with tunneling experience for all the tunnels. Tunnel No. 9 was originally awarded to a well known and experienced tunneling contractor, M/s R.J. Shah. As their progress was unsatisfactory, their contract was terminated at their risk and cost. Fresh tenders were invited, based on which, Tunnel No. 9 was awarded to M/s Shankaranarayana Construction Co. Prior to Tunnel No. 9, one more Tunnel viz. No. 1 at Byndoor for a length of approximately 2 km (which was also a terminated one and taken over form M/s R.J. Shah) was entrusted to M/s Shankaranarayana Construction Co. These two tunnels were awarded to M/s Shankaranarayana Construction Co. purely based on their very satisfactory performance on the earthwork contract. However, in Tunnel No. 9, there was a serious hazard at a location 665 metre from south portal, resulting in sky- lighting of the tunnel, purely due to adverse geological conditions which were beyond the control of the contractors. This hazard resulted in formation of a major crater on top of the tunnel to adverse soil conditions and the contractor was not able to make such progress. With his pre-occupation in Tunnel No. 1, the progress achieved on Tunnel No. 9 from the southern face was not satisfactory and, therefore. Chief Engineer, Karwar, terminated the balance work on Tunnel No. 9, at his risk and cost on 17.2.1996. The contractor has been representing that the termination of the contract 'at his risk and cost' was not justified on account of the various problems faced by him in the tunnel works which were all beyond his control. The Corporation has not taken a final decision on the request made by him to review the termination. He has, vide his letter No. SMC/BNG/HO/l-(a)/96- 97/113 dated 18.5.1996, has requested the Corporation to appoint a Conciliation Committee to review the case of termination. The Corporation has now constituted a Conciliation Committee consisting of two Chief Engineers and the Financial Adviser to go into the matter. The final decision as to whether the termination of the southern portion of the tunnel should be 'at his risk and cost' will be taken after the report of the conciliation Committee is received."

(13) The reading of the above letter will indicate that Konkan Railway Corporation is re-considering the matter and has not taken a final decision on the request made by the petitioners. The representations of the petitioners did not receive favourable consideration by respondent No. I and the same were obviously rejected. The Asian Development Bank in the first instance vide communication dated May 27, 1996 addressed to respondent No.1 raised the following query with regard to the claim of the petitioners who were the lowest bidder in the project: "THE Bank is not able to accept your contract award recommendations in respect of civil works contracts 4 and 5 on the basis of the information submitted todate. Specifically, before approving your recommendation, the Bank will need clarification of information used to rule the Graham, Satyam and Shankaranarayana Joint Venture non- responsive. The letters from the Konkan Railway Corporation (KKRC) dated 27 February 1996 and 07 March 1996 both referred to Messers Shankaranarayana's Tunnel No.9 contract being 'terminated'. Satyam's letter of 18 March 1996, however, was adamant that termination was not the proper term for what they maintain was merely offloading of work. Satyam requested that Nhai seek further clarification from the Chairman-cum-Managing Director of KRC. Such clarification would assist the Bank. Please also pro- vide the Bank with copies of the prequalification submissions in respect of the three lowest opened bids for each of contracts 4 and 5."

(14) The respondent No.1 obviously must have rejected the contentions of the petitioners and again recommended the claim of respondent No.2 as will be indicated from communication of Adb dated June 29, 1996 which reads as follows: -1m2" "ASIANDEVELOPMENT Bank Manila Philippines Transport and Communications Division West To Mr.Y. Narain Chairman National Highways Authority of India, New Delhi Fax: 00 91 11 692 4363 Date 29 June 1996 Urgent Subject : Loan 1274-IND : National Highways Project Award of Civil Works Contract 5: Andhra Pradesh Nhs Improvement 1. The Bank approves award of civil works contract 5 to the lowest evaluated substantially responsive bidder as recommended by Nhai, namely to the joint Venture of Madhucon (India) and Bina Puri Holdings Bhd (Malaysia), subject to Nhai first awarding the contract for the associated construction supervision consulting ser- vice and issuing the consultant with the notice to proceed. The contract award price for civil works contract 5 should be Rs.1,471,749,053. Please provide the Bank in due course with two copies of all signed contracts and with a copy of the notice issued to the consultant to proceed. It would be most helpful if you could fax copies of the signed main agreement pages to the Bank immediately after signature. 2. Please advise the deployment schedule for bringing the associated Project Implementation Unit to full strength. Please also arrange for the Monthly Progress Reports to update schedules for (i) Piu staff deployment; and (ii) completing all preconstruction activities."

(15) The petitioners, felt aggrieved by rejection of their bid and acceptance of bid of respondent No.2, have approached this court by means of the present writ petition.

 (16) At this stage the relevant essential clauses for award of contract as contained in pre- qualification document dated January 19, 1995 may be referred to:    "2.4Failure to provide information which is essential to evaluate the applicant's qualifications, or failure to provide timely clarification or substantiation of the information supplied, may result in disqualification of the applicant. 3.3 To be eligible for prequalification, applicants shall provide evidence of their eligibility and of their capability and adequacy of resources to carry out the contracts effectively. To this end, all applications submitted shall include the following information: a).......... h) information regarding current litigation, debarring/expelling of applicant, or abandonment of work by applicant, in Schedule "G". 3.6.4.1 Minimum experience i)..........., 3.6.4.4 An applicant or any of its constituent partners should in the last five years have neither failed to perform on any contract nor been expelled nor any of their contract has been rescinded for any reason. 3.8 Even though an applicant may meet the above criteria, they are liable to be disqualified if they have made misleading or false representation in the document, statements and attachments submitted."  

 (17) The information to be supplied by the applicant as referred to in clause 3.6.4.4 is more clearly specified in Schedule G which will indicate the questions to be answered by the applicant:    "SCHEDULEG Information Regarding Current Litigation, DEBARRING/ Expelling Of Applicant Or Abandonment Of Work By Applicant 1. (a)ls the applicant currently involved in any litigation relating to the contract works.....YES/NO (b) If yes, give details: 2. (a) Has the applicant or any of its constituent firms been debarred/ expelled by any Agency in India, during the last 5 ycars.....YES/NO (b) If yes, give details: "" 3.(a)Has the applicant or any of its constituent firms failed to perform on any contract work in India during the last 5 years.....YES/NO (b) If yes, give details: Note : The Ministry may require the applicant to verify the information provided in this Schedule and may, on the basis of this verification, reject the applicant if the information provided is found to be incorrect."  

 The qualifications of the bidder as contained in the bidding documents are referred to in clause 5 and can be stated as below: .    "5.Qualification of the Bidder 5.1 To be qualified for award of Contract, bidders shall: a) submit a written power of attorney authorising the signatory of the bid to commit the bidder; and b) update the following information, submitted with their application for prequalification and continue to meet the minimum threshold criteria, set out in the prequalification documents. i) evidence of access to lines of credit and availability of other financial resources. ii) financial predictions for the current year and the two following years, including the effect of known commitments. iii) work commitments acquired since prequalification. iv) current litigation. v) Evidence of the availability of the required nominated key personnel in the site organisation proposed for the administration and execution of the contract. vi) Any other information details furnished at the time of prequalification which require to be updated."  

 Clause 28 deals with the examination of bids and determination of responsiveness. The same reads as follows:    "28.Examination of Bids and Determination of Responsiveness 28.1 Prior to the detailed evaluation of bids, the Employer will deter- mine whether each bid (i) meets the eligibility criteria of the Bank, (ii) has been properly signed; (iii) is accompanied by the required securities; (iv) is substantially responsive to the requirements of the bidding documents; and (v) provides any clarification and/or substantiation that the Employer may require pursuant to Sub-Clause 15.4 28.2 A substantially responsive bid is one which conforms to all the terms, conditions and specifications of the bidding documents, without material deviation or reservation. A material deviation or reservation is one (i) which affects in any substantial way the scope,, quality or performance of the Works, (ii) which limits in any substantial way, inconsistent with the bidding documents, the Employer's rights or the bidder's obligations under the Contract; or (iii) whose rectification would affect unfairly the competitive position of other bidders presenting substantially responsive bids. 28.3 If a bid is not substantially responsive it will be rejected by the Employer and may not subsequently be made responsive by correction or withdrawal of the nonconfirming deviation or reservation."  

 The award of contract is governed by clauses 33 and 34. The same make the following reading:    "33.Award 33.1 Subject to Clause 34, the Employer will award the Contract to the bidder whose bid has been determined to be substantially responsive to the bidding documents and who has offered the Lowest Evaluated Bid Price, provided that such bidder has been determined to be (i) eligible in accordance with the provisions of Sub-Clause 3.1; and (ii) qualified in accordance with the provisions of Clause 5. 34. Employer's right to Accept any Bid and Reject any or all Bids 34.1 Notwithstanding Clause 33, the Employer reserves the right to accept or reject any bid and to annul the bidding process and reject all bids, at any time prior to award of contract, without thereby incurring any liability to the affected bidder or bidders or any obligation to inform the affected bidder or bidders of the grounds for the Employer's action."  

 (18) The learned counsel for the petitioners have contended that the petitioners were the lowest bidders at Rs-129.64 Crores whereas respondent No.2 who is being considered for the award of the contract had bid for Rs.146.44 Crores and they are, accordingly, eligible for award of contract as their bid is responsive. They were also pre- qualified for the project and the responsiveness of the bid has to be determined by material sought on the dates of the bid and opening of the tender and cannot be determined on the basis of subsequent fishing enquiry. There is obviously lack of good faith when termination took place as the petitioners were not confronted with the material on the basis of which their bid had been rejected. The same yardstick was not followed in the case of respondent No.2 who was not even qualified and there were complaints against the said respondent. The impugned action of respondent No. 1 is, therefore, arbitrary, discriminatory and fraud on power. Strong reliance is placed on the judgment of the Supreme Court as reported in Tata Cellular v. Union of India .   

(19) The learned counsel for respondent No.1, on the other hand, has argued that (a) the touchstone for deciding the matter is on the basis of the loan agreement entered into with ADB. There is no challenge to the clauses as arbitrary and discriminatory. Therefore, the challenge has to be restricted to the manner it has been done. Mr.Thakur has referred to the genesis of the scheme by which Adb dictates to the Government of India the way the project is to be initiated and handled. The necessary guidelines as framed for procurement under Asian Development Bank Loans have been filed by respondent No.1. Reference is made to paragraph 4.03 of the guidelines which define the pre-qualification procedures. The learned counsel contends that on the basis of the guidelines respondent No.l is left with no choice but to select a bidder only on the satisfaction of the lender bank. He has then based his arguments on the ground that the petitioners failed to comply with the necessary conditions as contained in clause 3.3(h) of pre-qualification document in as much as that the petitioners did not give information regarding current litigation, debarring and expelling of applicants or abandonment of work and falsely filled the columns as referred to in schedule G. The petitioners did not comply with the terms and conditions as contained in bidding documents particularly with regard to clause 5.1 which has already been reproduced above. The crux of the argument, therefore, is that there were complaints against the petitioners and their contract with Konkan Railway Corporation Ltd stood terminated with effect from February 17, 1996 as will be indicated from the communication dated February 27, 1996 by Mr.Richardson Asir. The petitioners were also facing problems and portion of their work was offloaded. The learned counsel for respondent No.l has accordingly argued that the petitioners are guilty of misrepresentation and not updating the information which was expected of them. The respondent has only operated within the terms of the clauses as contained in the pre-qualification and bidding documents and there is no basis for dubbing their action as malafide, arbitrary, unreasonable or violative of principles of natural justice. There is neither malafide in fact nor in law. There is no allegation that certain facts as put forward by the petitioners have not been considered. The question of violation of law and the rules of natural justice does not arise as the respondent has acted strictly in terms of the tender notice. Reference is made to pages 485-487 of 'Administrative Law' by H.W.R.Wade, Fifth Edition which read as follows: "Lord Denning M.R. has summed up the procedure in the case of an investigating body such as the Commission for Racial Equality which is under a duty to act fairly : The investigating body, is, however, the master of its own procedure. It need not hold a hearing. It can do everything in writing. It need not allow lawyers. It need not put every detail of the case against a man. Suffice it if the broad grounds are given. It need not name the informants. It can give the substance only. Moreover, it need not do everything itself. It can employ secretaries and assistants to do all the preliminary work and leave much to them. But, in the end, the investigating body itself must come to its own decision and make its own report. Reasons for decisions It has never been a principle of natural justice that reasons should be given for decisions. Since there is no such rule even in the courts of law themselves, it has not been thought suitable to create one for administrative bodies. Nevertheless there is a strong case to be made for giving the reasons as an important element of administrative justice. This was recognised both by the Committee on Ministers' Powers of 1932 and by the Committee on Administrative Tribunals and Enquiries of 1957; and the latter's recommendation was implemented by the Tribunals and Inquiries Act 1958, as explained elsewhere, which required reasons to be given on request by statutory tribunals and by ministers after statutory inquiries. In Australia this requirement has been extended to administrative decisions generally. The courts might well have done as much on their own initiative, since the giving of reasons is required by the ordinary man's sense of justice and is also a healthy discipline for all who exercise power over others. 'No single factor has inhibited the development of English administrative law as seriously as the absence of any general obligation upon public authorities to give reasons for their decisions. Although there is no general rule of law requiring the giving of reasons, an administrative authority may be unable to show that it has acted lawfully unless it explains itself. Thus where the Act empowered licensing justices to refuse a licence on one of several specified grounds, and they refused an application without stating any ground, mandamus was granted to make them state the ground even though they were not obliged to give their reasons for it. Going still further the Privy Council held that a minister who had failed to give reasons for a special tax assessment had not shown that it was correct and that the taxpayer's appeal must be allowed. And in a series of industrial cases it has been held that industrial tribunals must give satisfactory reasons in order that the losing party may know whether he should exercise his right of appeal on a point of law. The principle of these decisions comes close to recognising a general right to reasoned decision, since the right of appeal on a point of law is very common; and the same logic might be invoked elsewhere, since there is always a right of recourse to the High Court for error on the face of the record. Yet a further consideration is that the House of Lords has indicated that if a minister fails to explain a decision satisfactorily, it may be condemned as arbitrary and unreasonable."

(20) It is further contended that if the manner in which the decision has been arrived at is prima facie fair in an action which is essentially an administrative action, there can be no application of the principles of natural justice. The rule of audi alteram partem is fully satisfied in the facts of the present case as adequate opportunity has been granted to the petitioners to represent. The argument is made on the basis of the settled law that though the principles of natural justice do apply to administrative orders or proceedings, the concept of natural justice can not be put into a strait-jacket. The only essential point that has to be kept in mind in all cases is that the person concerned should have a reasonable opportunity of presenting his case and that an administrative authority concerned should act fairly, impartially and reasonably. Where administrative officers are concerned, the duty is not so much to act judicially as to act fairly. Reliance is placed on the judgments as reported in Local Government Board v. Arlidge (1915) Appeal Cases page 120; Russell v. Duke of Norfolk and others 1949 (vol 1) All England Law Reports page 109; The Kesava Mills Co. Ltd. and another v. Union of India and others ; Max-well v. Department of Trade and Industry and others (1974) 2 All England Law Reports page 122: Dr.Amarjit Singh Ahluwalia v. The State of Punjab and others ; Ramana Dayaram Shetty v. The International Airport Authority of India and others : State ofM.P. and others v. Nancllal Jaiswal and others ; G.J.Femandez v. State of Karnataka and others ; M/s Star Enterprises and others v. City and Industrial Development Corporation of Maharashtra Ltd. and others ; Food Corporation of India v. M/s Karndhenu Cattlefeed Industries ; Tata Cellular v. Union of India ; New Horizons Limited and another v. Union of India and others and M/s Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and another .

(21) The main ground of rejection of the bid of the petitioner is that he has withheld from the respondents the information with regard to (a) that some portion of work in another contract with Konkan Railway Corporation Ltd. was offloaded and the contract was terminated on February 17, 1996 for default in construction of tunnel No.9 in Karwar Zone at risk and cost of the petitioner. The learned counsel for respondents has contended that clause 33.1 of the Tender Instructions expressly provided that the contract will be awarded to the lowest bidder, inter alia if he is qualified in accordance with the provisions of clause 5 of the Tender Instructions. Clause 5.1 (b) expressly provided that to be qualified for award of the contract the bidder, shall, inter alia, update the information furnished with the application for pro-qualification and shall continue to meet the minimum threshold criteria set out in the pre-qualification documents. The petitioners also deliberately concealed other relevant information as required by provisions of clauses 13 and 28. These are the short grounds for rejection of the bid of the petitioners. On the other hand, the learned counsel for the petitioners has vehemently argued that respondent No.1 has acted in a mala fide manner as all the relevant information was supplied to respondent No.l and, therefore, an approval was ac- corded at the pre-qualification stage by letter dated July 10, 1995. The tenders were publicly opened on January 5, 1996 and the subsequent anonymous complaint against the. petitioners is motivated, mala tide and procured. Respondent No.1 has taken undue interest in cancellation of the bid of the petitioner and the subsequent alleged termination of contract with regard to tunnel No.9 has not yet taken place and the matter is still under consideration with the Authorities. Lastly, it is argued that respondent No.2 who is now being favoured with the contract does not have the clean record and certain complaints were also received against the said respondent which were not duly investigated and, therefore, respondent No.l can not judge the petitioner on a different pedestal in comparison to respondent No.2 whose track record is worst in comparison to the petitioners who have completed many projects successfully. Therefore, the action of respondent No.l is discriminatory, arbitrary and violative of the principles of natural justice.

(22) The judgments as cited by learned counsel for the petitioners which are of relevance to the facts of the present case may now be examined.

(23) In Ramana Dayaram Shetty (supra) the Supreme Court was examining the validity of tender notice and the basis of award of contract. The role of the State or of a Corporation, which is an instrumentality of Government, is summarised in paragraphs 20 and 21 of this judgment and the same may be reproduced as follows: "20. Now, obviously where a corporation is an instrumentality or agency of Government, it would, in the exercise of its power or discretion, be subject to the same constitutional or public law limitations as Government. The rule inhibiting arbitrary action by Government which we have discussed above must apply equally where such corporation is dealing with the public, whether by way of giving jobs or entering into contracts or otherwise, and it cannot act arbitrarily and enter into relationship with any person it likes at its sweet will, but its action must be in conformity with some principle which meets the test of reason and relevance." "21.This rule also flows directly from the doctrine of equality embodied in Art. 14. It is now well settled as a result of the decisions of this Court in E.P.Royappa V. State of Tamil Nadu, that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rational and relevant principle which is non- discriminatory : it must not be guided by any extraneous or irrelevant consideration, because that would be denial of equality. The principle of reasonableness and rationality which is legally as well as philosophically an essential element of equality or non-arbitrariness is projected by Article 14 and it must characterise every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and nondiscriminatory. Thus principle was recognised and applied by a Bench of this Court presided over by Ray, CJ., in Erusian Equipment and Chemicals Ltd., V. State of West Bengal (supra) where the learned Chief Justice pointed out that 'the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part Iii of the Consititution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black-listing - A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling - It is true that neither the petitioner nor the respondent has any right to enter into a contract but they are entitled to equal treatment with others who offer tender or quotations for the purchase of the goods.' It must, therefore follow as a necessary corollary from the principle of equality enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with any one, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from such standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground."

(24) This judgment further highlighted the fact that having regard to the constitutional mandate of Article 14 as also the judicially evolved rule of administrative law, the State was not entitled to act arbitrarily in accepting the tender but was bound to conform to the standard or norms laid down in the notice inviting tenders. It is also open for this Court to examine the validity of award of contract in favour of respondent No.2. The contention of the petitioners that they have been differently treated and arbitrarily excluded which violates the equality clause can be considered even if no relief can be granted to them. In this context, para 9 of the judgment may be produced: "THAT takes us to the next question whether the acceptance of the tender of the 4th respondents was invalid and liable to be set aside at the instance of the appellant. It was contended on behalf of the 1st and the 4th respondents that the appellant had no locus standi to maintain the writ petition since no tender was submitted by him and he was a mere stranger. The argument was that if the appellant did not enter the field of competition by submitting a tender, what did it matter to him whose tender was accepted; what grievance could he have if the tender of the 4th respondents was wrongly accepted. A person whose tender was rejected might very well complain that the tender of someone else was wrongly accepted, wrongly accepted, but, it was submitted, how could a person who never tendered and who was at no time in the field, put forward such a complaint? This argument, in our opinion, is misconceived and cannot be sustained for a moment. The grievance of the appellant, it may be noted, was not that his tender was rejected as a result of improper acceptance of the tender of the 4th respondents, but that he was differentially treated and denied equality of opportunity with the 4th respondents in submitting a tender. His complaint was that if it were known that non-fulfilment of the condition of eligibility would be no bar to consideration of a tender, he also would have submitted a tender and competed for obtaining a contract. But he was precluded from submitting a tender and entering the field of consideration by reason of the condition of eligibility, while so far as the 4th respondents were concerned, their tender was entertained and accepted even though they did not satisfy the condition of eligibility and this resulted in inequality of treatment which was constitutionally impermissible. This was the grievance made by the appellant in the writ petition and there can be no doubt that if this grievance were well founded, the appellant would be entitled to maintain the writ petition. The question is whether this grievance was justified in law and the acceptance of the tender of the 4th respondents was vitiated by any legal infirmity."

(25) The other judgment cited by learned counsel for the petitioner as reported in G.J.Fernandez (supra) has stated the proposition that the Court would not interfere and substitute an interpretation which it considers to be correct where the instrumentality of State consistently and bonafidely interpreting the standard so prescribed in a particular manner and acted accordingly. There can, however, be no arbitrary action in accepting tender of one party and rejecting that of another and the standard or norm must be reasonable and non-discriminatory.

(26) The Supreme Court in M/s Star Enterprises and others (supra) dealt with the necessity to record reasons in administrative action. Paragraph 10 of this judgment, which may be of some relevance with regard to necessity of giving reasons in support of the action read as follows: "10.In recent times, judicial review of administrative action has become expansive and is becoming wider day by day. The traditional limitations have been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast pervasive. As the State has descended into the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executing actions including cases of rejection of highest offers. That every often involves large stakes and availability of reasons for actions on the record assures credibility to the action ; disciplines public conduct and improves the culture of accountability. Looking for reasons in support of such action provides an opportunity for an objective review in appropriate cases both by the administrative superior and by the judicial process. The Submission of Mr. Dwivedi, therefore, commends itself to our acceptance, namely, that when highest offers of the type in question are rejected reasons sufficient to indicate the stand of the appropriate authority should be made available and ordinarily the same should be communicated to the concerned parties unless there be any specific justification not to do so."

(27) The next case decided by the Supreme Court as reported in Food Corporation of India (supra) deals with the point, as to whether. Food Corporation of India, appellant therein, could reject even the highest tender on cogent grounds and follow another method of negotiating with all the tenderers and whether such an action will satisfy the requirement of non-arbitrariness. The Court held that this course was open when cogent reasons of inadequacy of the price was held to be the reason when all the tenderers were invited to participate in the negotiations. The decision, however, has to be non-arbitrary. Paragraphs 7 and 8 of the judgment may be reproduced as under: .lm2" .1s1 .rm6" ' "7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona tides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unreaslistic, but provides for control of its exercise by judicial review." "8.The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non- arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non- arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent."

(28) The basic contention which has been raised by the petitioner in this case is that it was their reasonable and legitimate expectation to be awarded the contract as they had given the lowest evaluated bid. Their exclusion on extraneous considerations is, accordingly, arbitrary and discriminatory particularly in view of the fact that the contract is now sought to be awarded to respondent no.2 whose bid is higher than the petitioners by a large amount of Rs-16.80 Crores. This amounts to discriminatory and arbitrary action on the part of respondent No.1 as it has the duty to act fairly. The petitioners cannot be non-suited on the ground of non-disclosure of information as respondent No.2 is similarly placed. The petitioners are sought to be displaced merely on the ground that their contract with regard to tunnel no.9 was cancelled With effect from 17th February, 1996. The petitioners have also been accused of not updating the information. The entire case against them is based on .p112" the anonymous complaints received by respondent No.l though, it is on record that the cancellation of particular contract is still under re-consideration as is indicated from the communication dated June 18, 1996 of Shri E.Sridharan, Chairman-cum- Managing Director of Konkan Railway Corporation. This was allegedly cancelled on February 17, 1996 whereas the tenders were opened on January 5, 1996. Therefore, the cancellation was subsequent to the date of opening of bids. Be that as it may, it is not in dispute that part of the work of the petitioners was alleged to be offloaded and there was some dispute going on between the parties and the same had not been referred to in the proforma filed as Schedule "G" to the Prequalification Document dated January 19, 1995. This proforma did not at any place indicate that the petitioners had problems in execution of their contract with other parties nor an attempt was made to update the information. Therefore, the exclusion of the petitioner can be justified for violation of various clauses of the bid documents, such as 2.4 for failure to provide information which is essential to evaluate the applicant's qualifications and sub clause (h) of clause 3.3, clauses 3.6.4.4, 3.8 and 5 as contained the Bidding Documents. The examination of bid of the petitioner, in view of the admitted facts, therefore, was held to be non-responsive on the grounds as stated above.