Brahler Ics India Pvt. Ltd. & Anr. vs Union Of India & Ors.
2010 Latest Caselaw 3813 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                        Reserved on : 11.08 2010
%                                                   Date of decision: 16.08.2010


+                          WP (C) No. 10380 / 2009


BRAHLER ICS INDIA PVT. LTD. & ANR.                      ...       ...       ..PETITIONERS

                        Through : Mr. Jos Chiramal, Ms. Kailash Golani,
                                  Mr. Ramesh Kumar and
                                  Mr. Hari Om Kumar, Advocates


                                    -VERSUS-


UNION OF INDIA & ORS.                   ...     ...       ...       ...     RESPONDENTS

                        Through : Mr. A.S. Chandhiok, ASG with
                                  Mr. Jatan Singh and Ms. Shweta Kakkad,
                                  Advocates for R - 1 to R - 4.
                                        Mr. Kalyan S. Vadlamani,
                                        Advocate for R - 5 / BOSCH.
                                        None for R - 6.

CORAM :
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON‟BLE MR. JUSTICE VALMIKI J. MEHTA

1.        Whether the Reporters of local papers
          may be allowed to see the judgment?                           No

2.        To be referred to Reporter or not?                            No

3.        Whether the judgment should be
          reported in the Digest?                                       No


SANJAY KISHAN KAUL, J.

1. The petitioners are the manufacturer and authorised

dealer respectively of „Brahler ICS‟ and „DIS‟ brands of

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digital audio-conferencing systems. The same product is

manufactured and sold through authorised dealers being

respondents No. 5 and 6 respectively in respect of the

brand „Bosch‟. The petitioners claim that they are world-

renowned in their product, which has been installed in

different UN Organizations as also at both the Houses of

Parliament, Prime Minister‟s House, Vigyan Bhawan,

various State Legislatures, etc.

2. The Central Public Works Department ( for short,

„CPWD‟ ) floated a tender in March, 2009 short-listing the

aforesaid three brands for participating in the tender for

supply, installation, commissioning and after-sales service

of digital audio-conferencing system in Lok Sabha replacing

the existing system installed about 18 years‟ back by

petitioner No. 1. One of the clauses of the tender

document, i.e., clause 2.2(a) provided that the

manufacturer ought to have office set-up and service

centre in India for seven years, while clause 2.2(c)

provided that the manufacturer ought to have annual

financial turnover in India / export to India of minimum

Rs.12.8 crores during the last three consecutive financial

years ending 31.03.2008. These tender conditions were

objected to by petitioner No. 2 vide letter dated

23.03.2009. The petitioners also submitted their

respective bids along with earnest money deposit (EMD).

There was no participation at that stage by respondent No.

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5 or its authorised dealer. The bid was cancelled as none

of the bidders met the qualifying requirements of the

tender and a revised tender document was issued on

20.05.2009. The same clauses were once again

incorporated though with diluted requirements and read as

under :-

"2.2 The manufacturer, whose system is proposed to be used for this work:-

a) Must have their permanent office set up and service center in India since 01-04-2007 and the satisfactory proof of the same to the satisfaction of the competent authority of the department must be enclosed along with PQ application failing which their tender application shall not be considered. The address, telephone number and fax number of both, i.e., office and service center, must be clearly mentioned.

                        ...       ...       ...       ...       ...       ...       ...       ...

                (c)     Must have average annual financial turnover

in India / export to India of minimum Rs.320 Lacs during the last three consecutive financial years ending 31st March, 2008. This should be duly audited and certified by a registered chartered accountant or submit proof of custom duty or such other documents for the export of average Rs.320 Lacs during last three years to India. Year in which no turnover is shown would also be considered for working out the average.

(emphasis supplied)

3. Petitioner No. 1 once again protested, but submitted

fresh tender and the same was the position of petitioner

No. 2. The bids of the petitioners were rejected vide the

impugned letters dated 07.07.2009 and it is the case of the

petitioners that the apparent reason for the same is the

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non-compliance of clauses 2.2(a) and 2.2(c) of the tender

document.

4. The petitioners allege that the conditions in the tender

document have been tailor-made to suit and create the

exclusive monopoly for Bosch, which is making inferior

quality products in China and the rates quoted by Bosch

are considerably higher to those quoted by the petitioners.

The petitioners have, thus, laid a challenge to these

clauses of the impugned tender document and the letter

dated 07.07.2009 by filing the present writ petition under

Article 226 of the Constitution of India ( for short, „the

Constitution‟ ).

5. The respondents have opposed the writ petition.

Respondent No. 1 / Union of India (UOI) in the counter

affidavit have pointed out the specialised nature of job,

which had to be carried out requiring that the system

should be based on the latest and state-of-the-art

technology. There are stated to be three leading / premier

manufacturers of the digital sound system, namely, M/s.

DIS, M/s. Brahler ICS and M/s. Bosch (formerly known as

Phillips Ltd.). These firms are based in Denmark, Germany

and Germany respectively. It is the case of respondent No.

1 / UOI that when the previous sound system was installed,

the manufacturer office set-up was not available in India

and difficulties were faced in removal of defects and

maintenance including taking up the matter with the

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manufacturers. It was, thus, found appropriate to

specifically stipulate for a permanent office in India for

removal of defects and maintenance and for a minimum

turnover in India to ensure that the products of the

company are being supplied within the country.

Respondent No. 1 / UOI has further explained that the

prescribed procedure for preparation of eligibility criteria

for specialised work is set out in the CPWD Works Manual,

2007, Amendment Circular No. DGW/MAN/160,

DGW/MAN/172A and Para No. 5(a) of the CVC Circular No.

12-02-1-CTE-6, which read as under :-

"(i) Experience of having successfully completed works during last seven years ending last day of the month previous to the one in which applications are invited. Three similar works each of value not less than 40% of the estimated cost put to tender; or two similar works each of value not less than 60% of the estimated cost; or one similar work of value not less than 80% of the estimated cost, all amounts rounded off to a convenient figure.

Apart from the criteria of work experience, NIT approving authority may lay other suitable conditions depending upon the nature of work.

(ii) „Similar Work‟ shall be spelt out clearly in NIT.

(iii) System of two / three envelope may be followed for call of tenders. In such a case, the technical bids shall be approved by NIT approving authority and the financial bids by the authority as per delegations of powers for approval of tenders.

(iv) The average annual financial turnover should be at least 30% of the estimated cost during the immediate last three consecutive financial years.

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Keeping in view the past experience of the department as mentioned in Para 7 above, suitable conditions of permanent office set-up and service centre of the manufacturer along with Indian turnover were inevitable to safeguard the Government interest."

It has, thus, been explained that the eligibility criteria of the

work has been made as per the procedure prescribed

hereinabove.

6. The rationale for inclusion of clauses 2.2(a), 2.2(b) and

2.2(c) have also been explained. It has been stated that

the manufacturer must have the permanent office set-up

and service centre in India, but requirement for the same

has been scaled down from last seven years to two years

in the second tender. The objective is to ensure adequate

service support / service back-up of the manufacturer for

proper maintenance and functioning of such sophisticated

and specialised systems. The necessity was felt to bind

the manufacturer(s) by Indian law in case they back out of

their commitments. The annual financial turnover

requirement as per clause 2.2(c) was diluted from Rs.12.8

crores to Rs.3.8 crores in the second tender, which is

actually half the tender amount of goods to be supplied.

7. The cancellation of the first tender has been explained

as out of six tenders sold, only two bids were received in

three envelope system from petitioner No. 1 and petitioner

No. 2, but neither of the two qualified the eligibility criteria

and, thus, the tender was rejected and called afresh.

Some parameters were diluted to facilitate greater _____________________________________________________________________________________________

participation. Thus, in the second tender, which is under

challenge, five firms submitted their technical and financial

bids, but only two firms were found eligible for opening of

technical and financial bids.

8. It is noticed in our Order dated 11.01.2010 while

admitting the writ petition that the sole plea advanced by

learned counsel for the petitioners is that the tender

conditions impugned by him tend to create monopoly in

favour of respondent No. 5, which is contrary to CVC

guidelines and CPWD Works Manual. Such a monopoly is

sought to be created, as per the contention of learned

counsel for the petitioners, on the basis of the said clauses

2.2(a) and 2.2(c) whereby the requirement of local service

centre of a dealer has not been found enough and the

manufacturer is required to have a local office apart from

the requirement of minimum annual financial turnover. It

was the submission of learned counsel for the petitioners

that the job being a specialised job and only three makes

being listed at a pre-qualification stage, the requirement of

turnover was irrelevant.

9. We fail to see any reason in the aforesaid argument.

The rationale for including these two clauses has already

been given in the counter affidavit. It can hardly be said

that the requirement of the presence of the manufacturer

in the country with the minimum annual financial turnover

is irrational or so absurd as to shock the conscience of the

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Court and / or for the Court to interfere under Article 226 of

the Constitution of India. It is not a one-time supply for

product, but requires continuous maintenance. Thus, the

supplies made can be serviced if there is a local presence

of the manufacturer because the principal liability would

remain of the manufacturer. If the dealer disappears from

the scene, then respondent No. 1 / UOI may be left high

and dry and they had stated that in the past they had such

an experience. Similarly, the requirement of a minimum

turnover in the country is equally important and the

amount specified of annual financial turnover is only half

the value of the goods to be supplied. It is not irrationally

high.

10. Learned counsel for the petitioners sought to contend

that CVC guidelines contained in its Office Memorandum

dated 17.12.2002 dealing with prequalification criteria (PQ)

has been breached. The relevant portion of the said Office

Memorandum is as under :-

"OFFICE MEMORANDUM

Subject :- Prequalification criteria (PQ).

The Commission has received complaints, regarding discriminatory prequalification criteria incorporated in the tender documents by various Deptts./Organizations. It has also been observed during intensive examination of various works/ contracts by CTEO that the prequalification criteria is either not clearly specified or made very stringent/very lax to restrict/facilitate the entry of bidders.

2. The prequalification criteria is a yardstick to allow or disallow the firms to participate in the _____________________________________________________________________________________________

bids. A vaguely defined PQ criteria results in stalling the process of finalizing the contract or award of the contract in a non-transparent manner. It has been noticed that organizations, at times pick up the PQ criteria from some similar work executed in the past, without appropriately amending the different parameters according to the requirements of the present work. Very often it is seen that only contractors known to the officials of the organization and to the Architects are placed on the select list. This system gives considerable scope for malpractices, favouritism and corruption. It is, therefore, necessary to fix in advance the minimum qualification, experience and number of similar works of a minimum magnitude satisfactorily executed in terms of quality and period of execution.

3. Some of the common irregularities/lapses observed in this regard as highlighted as under:-

i) For a work with an estimated cost of Rs.15 crores to be completed in two years, the criteria for average turnover in the last 5 years was kept as Rs.15 crores although the amount of work to be executed in one year was only Rs.7.5 crores. The above resulted in prequalification of a single firm.

                                ...       ...       ...       ...       ...       ...       ...

                iv)     In a work for supply and installation of A.C.
                        Plant, retendering was resorted to with

diluted prequalification criteria without adequate justification, to favour selection of a particular firm.

                                ...       ...       ...       ...       ...       ...       ...

                4.     The above list is illustrative and not
                exhaustive.    While framing the prequalification

criteria, the end purpose of doing so should be kept in view. The purpose of any selection procedure is to attract the participation of reputed and capable firms with proper track records. The PQ conditions should be exhaustive, yet specific. The factors that may be kept in view while framing the PQ Criteria includes the scope and nature of work, experience of firms in the same field and financial soundness of firms.

... ... ... ... ... ... ... ..."

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11. If the aforesaid Office Memorandum is examined

carefully, we find that the submission of learned counsel

for the petitioners is without any basis. The illustrations

given in respect of annual financial turnover show that the

very high turnover requirement as compared to the

estimated cost is what is sought to be discouraged. This is

factually not so in the present case where the minimum

turnover is only 50% of the value of the goods to be

supplied. The requirement of average annual financial

turnover is itself envisaged.

12. Learned ASG has rightly pointed out that petitioner

No. 1 in its letter dated 26.05.2009 while representing for

reconsideration of eligibility criteria for work had set out

the reason for seeking relaxation in tender conditions on

the ground of tough conditions of currency Euro with the

result that it could not compete with other competitors.

The relevant portion of the said letter is extracted as

under:-

"A tender was called on 28.03.2009 for opening on 09.04.2009 for the above work and we participated in it. We were meeting all the condition (about a dozen of them) except the turnover condition of the firm in India. For which we had explained clearly that due to tough condition of currency Euro in the world market for past few years, we could not compete with our competitors who were offering their product from Chinese Market and Thai Market. Products by M/s.

Bosch are of Chinese origin and of M/s. DIS are of Thai origin and due to our equipment of being of German origin we could not match the prices for competition therefore are not able to meet your requirement of turnover in Indian Market. We have a very sound financial standing of the parent _____________________________________________________________________________________________

company which owns this company in India and had submitted the financial figures in our bid earlier also."

(emphasis supplied)

13. Learned ASG has also invited our attention to the

financial status of respondent No. 5 to contend that though

respondent No. 5 did not participate in the first tender, it

actually met the financial requirements of that tender.

14. It has, thus, been rightly contended that petitioner No.

1 itself accepted that it was having a tough period where it

was finding it difficult to compete with its competitors. The

objective of a second tender on the first tender failing was

served by better participation and though respondent No. 5

had not participated in the first tender, it met the financial

requirements for that tender. Learned ASG also invited our

attention to Appendix 20 with reference to para 16.12.1

dealing with guidelines for fixing eligibility criteria for two /

three envelope systems, which stipulates that the average

annual financial turnover should be 50% of the estimated

costs during the immediate last three consecutive financial

years.

15. In sum and substance, we find that learned ASG has

rightly contended that the inclusion of the two clauses, i.e.,

clauses 2.2(a) and 2.2(c), as noticed hereinabove, is based

on the requirements of respondent No. 1 / UOI for the

contract in question and there is nothing so arbitrary,

illegal or onerous in the terms, which would shock the

conscience of the Court or make the Court interfere under _____________________________________________________________________________________________

Article 226 of the Constitution. In fact, we find these

clauses not unreasonable.

16. No doubt, the net result of the tenders twice floated is

that on the first occasion, there was no bid qualified; while

on the second occasion, only Bosch has qualified. We put

a specific query to learned counsel for the petitioners to

point out to us any CVC guidelines in terms whereof even if

the terms and conditions of the contract are not

unreasonable, a single bid would require something more

to be done. Learned counsel for the petitioners is unable

to do so. The fact that Bosch has emerged as the only

successful party is a consequence of participation in the

tender whose conditions have been found by us not to be

unreasonable. It is apparent that the petitioners wanted

the contract once again. We do feel that it is the

endeavour of the petitioners to seek deletion of clauses

which do not suit them or which disqualifies them. The

petitioners want a tender tailor-made for their requirement

and want the intervention of the Court to re-draft the

tender to suit them. This is hardly permissible in law.

17. In the end, we may note that we had put the learned

counsels to notice at the beginning of the hearing that the

losing party would have to bear the actual costs. We had

asked the counsels for the parties to file memo(s) of fee

and costs, which have been so filed. The memo of

respondents No. 1 to 4 shows a professional fee amount of

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Rs.1,92,500/- as certified by the counsel and of respondent

No. 5 of Rs.1,65,000/- for counsel on record apart from

certain miscellaneous expenses, service tax and senior

counsel‟s fee of Rs.7,64,500/-. No senior counsel assisted

us in the matter at the stage of final hearing. We, thus,

quantify the costs at Rs.1,65,00/- for respondent No. 5.

18. The writ petition is, thus, accordingly dismissed with

costs quantified at Rs.1,92,500/- for respondents No. 1 to 4

and Rs.1,65,000/- for respondent No. 5 to be borne by the

petitioners and paid within 15 days.

SANJAY KISHAN KAUL, J.

August 16, 2010                                         VALMIKI J. MEHTA, J.
madan

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