Ramunia Fabricators Sdn Bhd & Ors vs Oil And Natural Gas Corporation ...
2008 Latest Caselaw 1342 Del

*                       HIGH COURT OF DELHI

%                  Date of decision: August 13, 2008

+               WP(C) 4729/2008 & CM.9121/2008

Ramunia Fabricators Sdn Bhd & Ors         : Petitioners
                            through
                            Mr.Neeraj K Kaul,Sr.Adv
                            with Mr.Ashok Sagar &
                            Mr.R.Vasanth,
                            Advs.

                               Versus

Oil and Natural Gas Corporation Ltd      : Respondents
& anr                          through
                               Mr.Vikas Singh, Addl.
                              Solicitor General with
                              Mr.R.Chandrachud, Adv.

Coram :

Hon'ble Mr.Justice Manmohan Sarin.
Hon'ble Ms.Justice Veena Birbal

     (1) Whether reporters of local paper may be
         allowed to see the judgment?                  Yes

     (2) To be referred to the reporter or not?        Yes

     (3) Whether the judgment should be reported
         in the Digest ?                               Yes

Manmohan Sarin, J.

1. Petitioners have filed the present writ petition,

challenging the rejection of the bid, submitted by petitioner

No.1 in respect of B-22 Field Development Project. A

WP(C). 4729/2008 Page 1 of p direction is further sought for quashing of decision dated

14th May, 2008, by

which the tendering process in respect of B-22 Field

Development Project was annulled. Additionally, a direction

is sought for award of contract in respect of project to

petitioner No.1 in view of the fact that petitioner No.1 was

the lowest bidder.

2. The facts giving rise to the present writ petition

and the subsequent developments necessary for disposal of

this petition may be briefly noted:

Petitioners challenge the decision of respondent

No.1/ONGC to annul the tendering process as mala fide

and detrimental to public revenue. It is assailed as contrary

to the directions given in the judgment dated 11th April,

2008 of this Court in WP (C) No.9661/2007. It is urged that

petitioners, whose bid was 108 million dollar less than that

of respondent No.2, have been ousted from the bid process

to the detriment of the revenue.

Respondent No.1/ONGC had invited bids for the

Project vide Tender No.MR/OW/MM/B-22/04/2007.

Petitioner No.2 was issued the tender documents by

WP(C). 4729/2008 Page 2 of p respondent No.1/ONGC. The bids received from the

petitioner No.1 as also respondent No.2/L&T Ltd. were

forwarded to the Consultants for evaluation. Eventually,

petitioners came to know that respondent No.1 only opened

the price bid of respondent No.2 and called them for price

negotiation and the petitioners' bid was not being

considered by respondent No.1, on the ground that the

tender documents had been purchased by one company

while the bid was submitted by another. Petitioners were

constrained to file WP(C).No.9661/2007, challenging

respondent No.1's action in not considering the petitioners'

price bid. In the event, writ petition was allowed by this

Court vide judgment dated 11th April, 2008, quashing the

decision of respondent No.1/ONGC rejecting the bid of the

petitioners on the ground that tender documents had been

purchased by one company, while the bid was submitted

by another. Respondent No.1/ONGC was directed to

consider the bid offered by petitioner No.1. It is the

petitioners' case that petitioner No.3 was the holding

company of petitioner Nos.1 and 2 and all of them

constitute one single economic entity, combining their

WP(C). 4729/2008 Page 3 of p respective experiences and resources for the tendered

contract. Petitioners claim to have made a full disclosure of

the relationship between them and the documents with the

bid included a corporate guarantee issued by parent

company petitioner No.3 to provide financial and technical

support and expert manpower in procurement etc.

Petitioner Nos.1 and 2 are the wholly owned subsidiary of

petitioner No.3.

3. Following the decision of this Court respondent

No.1 sought from the petitioner extension of the validity of

the bid up to 31st May, 2008 and the bank guarantee and

bonds, which were duly given. Respondent No.2/ L&T, the

other bidder, filed a Special Leave Petition bearing

No.13385/2008 against the judgment dated 11th April,

2008. On 13th May, 2008, notice was issued in the said

Special Leave Petition. The Supreme Court directed

maintenance of status quo. Respondent No.1/ONGC moved

an application in the said SLP seeking directions. In the

said application, it was stated that a decision had been

taken not to award the contract to petitioners even though

their price bid was 108 million dollar less than that of L&T.

WP(C). 4729/2008 Page 4 of p The decision was said to be taken on the basis that ONGC

having lost confidence in petitioners as it had failed to

provide a performance bank guarantee and Certificate of

Insurance etc., in respect of another Contract, which had

been awarded to it, namely, B-193 Field Development

Project, It was further stated that considering that there

was only one competent bidder i.e., of L&T remaining,

ONGC had decided on 14th May, 2008 to annul the

tendering process under Clause 25 of the "Instructions to

Bidders". The contract relating to B-193, Field

Development Project, which had been awarded to the

petitioners had been terminated on 16th May, 2008.

4. L&T in view of the application moved by ONGC

and the facts stated therein withdrew the Special Leave

Petition. The order as passed by the Supreme Court is

reproduced for facility of reference:

"Oil and Natural Gas Corporation, respondent No.4 has filed I.A.No.7/2008 stating the circumstances mentioned therein that in view of subsequent development, the Special Leave Petition © No.13385 of 2008 has become infructuous. The said statement has not been controverted.

In view of the fact that the Special Leave

WP(C). 4729/2008 Page 5 of p Petition has become infructuous, as stated in the I.A., learned counsel for the petitioner seeks leave of the Court to withdraw this petition. Permission granted. The Special Leave Petition is disposed of as withdrawn. I.A., is, accordingly, ordered."

5. The learned Additional Solicitor General on

behalf of respondent/UOI submits that in view of the failure

of the petitioner to submit the performance guarantee in a

contract awarded to it in respect of Project B-193 for 683

million dollar, they have lost confidence in the petitioner

and accordingly they decided that they could not entrust

the present strategically important project to the petitioners

and have accordingly cancelled the tender process. In the

aforesaid background of facts, learned counsel for the

petitioner submitted that respondent ONGC, which is an

instrumentality to the State, has acted in a discriminatory

manner. Firstly, petitioners were sought to be disqualified

and made ineligible on the specious ground of the tender

having been purchased by one entity and the bid having

been submitted by two other petitioners, ignoring the

relationship between petitioner No.3, who is the holding

WP(C). 4729/2008 Page 6 of p company of petitioner Nos.1 and 2. Respondent ONGC had

ignored the documents, including the corporate guarantee

and other documents placed on record and the fact that

petitioners were single economic entity and petitioner Nos.1

and 2 were wholly owned subsidiary of petitioner No.3.

6. Petitioner was, therefore, constrained to file

WPC.No.9661/2007 to vindicate its position as to its

eligibility for the bid. Petitioners having succeeded there

and their bid being 108 million dollar less,

respondent/ONGC have chosen to annul and cancel the

tender process itself to the detriment of the revenue.

Mr.Neeraj Kaul submitted that there was no justification in

denying the award of the present contract to the petitioner

on the ground that petitioners had failed to furnish a

performance guarantee in respect of another contract i.e.,

B-193 Field Development Project. Mr.Kaul further

submitted that considerations of public revenue itself

should have outweighed lapses in performance of another

contract, which deserved to be condoned. Petitioner should

have been given the chance to perform this contract after

furnishing the requisite guarantees in terms of this contract

WP(C). 4729/2008 Page 7 of p as its bid was 108 million less. Mr.Kaul also assailed the

contemplated issuance of notice, whereby petitioners were

sought to be blacklisted for all the tenders as a draconian

measure.

7.           We     have       heard     Mr.Vikas     Singh,    learned

Additional     Solicitor       General    in   opposition.      Learned

Additional         Solicitor       General          submitted      that

respondent/ONGC had moved the application, referred to

earlier, seeking directions in the pending SLP, filed by L&T,

challenging the order of High Court of Delhi, holding the

petitioners eligible and directing considerations of their bid.

In the said application, respondent/ONGC had duly placed

before the Supreme Court the circumstances in which the

decision to annul the tender process covered by the present

writ petition, namely, B-22 Field Development Project was

taken. Respondent/ONGC had duly placed on record the

failure of the petitioners to furnish the performance

guarantee and certificate of insurance despite opportunity

and time being given in respect of B-193, Field Development

Project. Petitioners in the writ petition had set out in detail

the circumstances, namely, the process of under-going a

WP(C). 4729/2008 Page 8 of p reverse take over and resultant negotiations with other

major construction groups and the efforts made to submit

the performance bank guarantee and Certificate of

Insurance. The fact remains that despite this petitioner was

unable to do so and this is the admitted position. In these

circumstances, respondent/ONGC contended that there

was loss of confidence in the petitioners and it had taken a

decision to annul and cancel the tender process in respect

of B-22, Field Development Project. Learned Additional

Solicitor General submits that ONGC was fully justified in

nurturing bona fide doubts on the performance and

capability of the petitioners to execute the contract in

respect of B-22, Field Development Project, if awarded to

them. This strategic contract had already been delayed over

9 months and it could not afford to take any risk or

chances in respect thereof. In these circumstances, it was

decided to cancel and annul the tender process and invite

fresh bid. He submitted that the allegation of ONGC having

acted mala fide with a view to favour L & T stands repelled

with the decision to call fresh tender and not awarding the

work to the sole surviving bidder that is L & T.

WP(C). 4729/2008 Page 9 of p

8. The Supreme Court after hearing the parties

including the petitioners' counsel, who was present, passed

the order, reproduced in para 4 hereinabove. From the

order passed, as aforesaid, by the Supreme Court, it was

clear that the Supreme Court acted on the submissions in

the application, filed by L & T and SLP was held to have

become infructuous. Further, this position was not

controverted by the parties, as recorded in the order. Thus,

the decision to annul the tender process had been duly

brought to the notice of and placed on record before the

Supreme Court in the SLP also and whereafter the aforesaid

petition was permitted to be dismissed as withdrawn.

9. We may also note that during the course of

proceedings in this writ petition on 9th July, 2008 itself, we

had put to the learned counsel for the petitioners that even

in these proceedings, petitioners could prima facie

demonstrate their capacity and financial capability to

perform the contract by furnishing of performance/bank

guarantee, as required for the purposes of this Project to

allay the fear and apprehension of the respondent/ONGC.

Learned      counsel   for    the   petitioners    after   obtaining


WP(C). 4729/2008                                                         Page 10 of

instructions on 5th August, 2008, submitted that they were

unable to do so in the absence of formal award of contract,

as their Bankers insist on formal award of contract prior to

issuance of any performance or bank guarantee and are not

willing to furnish the performance guarantee in the absence

of deposit being made or formal order being placed. It

would, thus, be seen that unfortunately petitioners were

not able to avail of this opportunity to demonstrate their

financial capacity to perform the contract.

10. In view of the foregoing discussion and the

decision to annul the tender process and the contemplated

issuance of show cause notice to the petitioners, it would be

for them to challenge the said show cause notice in

separate proceedings. The present writ petition has become

infructuous in view of the decision to call fresh tenders and

in particular the decision not to award the contract to the

petitioners due to loss of confidence on its failure to furnish

the performance guarantee and insurance certificate in

respect of B-193, Field Development Project.

We are of the view that the Supreme Court

having permitted the SLP, challenging the judgment in

WP(C). 4729/2008 Page 11 of favour of the petitioners, to be withdrawn as having become

infructuous on being informed by the ONGC of its decision

to cancel the tendering process, the challenge by the

petitioners to the same in these proceedings would not be

maintainable. Moreover, we are prima facie of the view that

the plea of loss of confidence taken by the

respondent/ONGC in the petitioners for having failed to

furnish the performance guarantee appears to be justifiable

deserving credence. However, we refrain from expressing

any final opinion in the matter lest it affects the petitioners'

case in challenging any contemplated show cause notice

debarring them from participating in tenders in future.

Writ petition is, accordingly, dismissed.

Manmohan Sarin, J.

Veena Birbal, J.

August 13, 2008 aka.

WP(C). 4729/2008                                                     Page 12 of