Delhi High Court
M/S. Madhucon Projects Ltd. vs National Highways Authority Of ... on 10 March, 2011
Author: Sanjay Kishan Kaul
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 09.02.2011
% Date of decision: 10.03.2011
+ WP (C) No.8418 of 2010
M/s. MADHUCON PROJECTS LTD. ...PETITIONER
Through: Mr. P.V. Kapur & Mr. Rakesh
Munjal, Sr. Advocates with Mr. Amit
Sibal, Mr. Gopal Jain, Mr. Amitabh
Chaturvedi, Mr. Nikhil Srivastav, Mr.
Jeevesh Srivastav, Mr. Parag Maini &
Mr. Akash D. Pratap, Advocates.
Versus
NATIONAL HIGHWAYS AUTHORITY
OF INDIA & ORS. ...RESPONDENTS
Through: Mr. Sudhir Nandrajog, Sr. Advocate
with Ms. Padma Priya, Ms. Saahila
Lamba & Ms. Meenakshi Sood, Advs.
for Respondent Nos.1 & 3/NHAI.
Mr. Ravinder Agarwal, Advocate for
Respondent No.2/ UOI.
Mr. Sunil Gupta, Sr. Advocate with
Ms. Priya Kumar, Advocate for
Respondent No.4.
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON‟BLE MR. JUSTICE RAJIV SHAKDHER
1. Whether the Reporters of local papers
may be allowed to see the judgment? Yes
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be Yes
reported in the Digest?
SANJAY KISHAN KAUL, J.
1. The National Highways Authority of India (for short
„NHAI‟)/respondent No.1, floated a tender for the development and
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operation/maintenance of the four-laning of Ranchi-Rargaon-
Jamshedpur section from KM 114.00 to 277.500 of NH-33 in the
State of Jharkhand on Design, Build, Finance, Operate and Transfer
(DBFOT) Annuity Basis under NHDP Phase-III Project. The
estimated project cost was `1,479.00 crore. The tender process was
divided into two stages. The first stage was the qualification/Request
for Qualification (RFQ), which involved the pre-qualification of
interested parties/bidders so as to shortlist the bidders who would
participate in the second stage. The second stage was the bid
stage/Request for Proposal (RFP) when the shortlisted bidders were
to submit their bids/financial offers in accordance with their bidding
documents whereafter the bids were to be scrutinized on the basis of
lowest semi-annual annuity.
2. The petitioner and other prospective parties submitted their
applications at the first stage in April, 2010 and respondent No.1
announced the list of 18 pre-qualified bidders including the petitioner
vide letter dated 13.5.2010 in accordance with the RFQ documents.
Pursuant thereto respondent No.1 issued a letter to the petitioner of
eligibility for participation in the second stage of bidding process on
2.7.2010 so that the petitioner could collect the RFP documents after
payment of applicable charges. The RFP documents were collected
by the petitioner in August, 2010 on payment of a sum of `3.00 lakh
and were thereafter duly submitted in terms of the requirement of
Clause 2.1.7 read with clause 2.1.8 of the RFP documents.
Respondent No.5/ICICI Bank Limited issued a bank guarantee at the
behest of the petitioner in favour of respondent No.1 for the bid
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security amount of `14.79 crore, which was a requirement as per
Clause 2.1.7 of the RFP.
3. Clause 2.1.9 of the RFP documents required the bidder to submit a
Power of Attorney as per format on Appendix III authorizing the
signatory of the bid to commit the bidder. The petitioner accordingly
submitted a Power of Attorney. It may be noticed that the bid due
date as per the RFP was 16.8.2010 but was subsequently repeatedly
extended and eventually the last date fixed was of 16.11.2010. The
bid documents were opened on the said date when respondent No.1
raised a question about the Power of Attorney submitted by the
petitioner on the ground that the date printed on the Power of
Attorney was of 12.8.2010 which was different from the date on
which it was actually signed of 19.8.2010. The petitioner on
16.11.2010 itself, thus, obtained a certificate of the Notary to the
effect that the Power of Attorney was executed by the Executant on
19.8.2010 and attested by the Notary on the same date. The
petitioner also addressed a letter dated 23.11.2010 giving an
explanation and enclosing the certificate of the Notary. The
petitioner at his behest was granted a personal hearing by the
Chairman of respondent No.1 on 30.11.2010 as the financial bids
were to be opened on 7.12.2010. The petitioner appeared for
personal hearing and again represented that the Power of Attorney
was not invalid and that the bid of the petitioner should be
considered. However, the financial bids of only 9 out of the
shortlisted bidders were opened by respondent No.1 on 7.12.2010
and the bid of the petitioner was not opened. As per the bids opened
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respondent No.4, M/s. NCC Infrastructure Holdings Ltd., was found
to be the L-1. The petitioner claimed that his bid was lower than that
of respondent No.4 and made a representation on 8.12.2010 to the
Chairman of respondent No.1 followed by some further
representations and communications. The petitioner was, however,
informed through a representative that a decision had already been
taken to reject the representation of the petitioner and that the Letter
of Award of the contract is likely to be issued to respondent No.4
shortly. Not only that, it is the claim of the petitioner that respondent
No.1 further threatened to invoke the bank guarantee submitted by
the petitioner as bid security to the extent of 5 per cent of the value
on the ground that the bid of the petitioner was non-responsive on
account of the defective Power of Attorney.
4. The petitioner, thus, filed the present writ petition under Article 226
of the Constitution of India for quashing the decision of respondent
No.1 to declare the bid of respondent No.1 as non-responsive as a
sequitur to restrain respondent No.1 from issuing Letter of Award of
contract to respondent No.4 and for restraining respondent No.1 from
taking any steps to invoke the bank guarantee submitted towards bid
security of `14.79 crore.
5. The writ petition along with application for interlocutory relief were
taken up by this Court on 20.12.2010 and on hearing learned counsels
for the parties, for the reasons recorded therein, a prima facie view
was found in favour of the petitioner and an interim order was passed
directing respondent No.1 to open the price bid of the petitioner,
which was stated to be lying in a sealed cover with respondent No.1
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and to process the bid of the petitioner without the contract being
awarded to any party. This order was assailed before the Supreme
Court by both respondent No.1 & respondent No.4. The SLP filed by
respondent No.4, being SLP (C) No.1569/2011 was dismissed on
18.1.2011 but the SLP filed by respondent No.1, being SLP (C)
No.1939/2011, was entertained and the interim orders passed by this
Court on 20.12.2010 was modified vide order dated 20.1.2011 by the
same Bench to the extent that the financial bid of the petitioner herein
should not be opened but be kept in a sealed cover, which would,
however, be produced before this Court at the time of hearing of the
petition and the opening of the financial bid would, thus, depend on
the outcome of the decision of the High Court. The direction that the
contract would not be awarded to any party was to continue.
6. In the aforesaid factual matrix two questions arise for consideration:
i. Whether the Power of Attorney submitted by the petitioner
was defective and/or alleged defect was of such a nature
which could be termed as a technical irregularity or was it
fatal to the bid?; and
ii. Whether respondent No.1 were entitled to encash the bank
guarantee for the bid security amount treating the bid of
the petitioner as non-responsive and/or whether the clauses
contained in the RFP in this behalf can be said to be
unconscionable or penal?
7. In order to appreciate the controversy it would be appropriate to
examine some of the relevant clauses of the RFP. The RFP contains
in the second chapter „Instructions to Bidders‟ where Part A contains
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general instructions. Clause 2.1 deals with „general terms of
bidding‟. The relevant clauses dealing with the bid security amount
are clauses 2.1.7 to 2.1.10, which read as under:
"2.1.7 The Bidder shall deposit a Bid Security of `14.79 Crores
(Rupees Fourteen Crores and Seventy Nine Lakhs Only) in
accordance with the provisions of this RFP. The Bidder has the
option to provide the Bid Security either as a Demand Draft or
in the form of a Bank Guarantee acceptable to the Authority, as
per format at Appendix-II.
2.1.8 The validity period of the Bank Guarantee or Demand
Draft, as the case may be, shall not be less than 180 (one
hundred and eighty) days from the Bid Due Date, inclusive of a
claim period of 60 (sixty) days, and may be extended as may be
mutually agreed between the Authority and the Bidder. The Bid
shall be summarily rejected if it is not accompanied by the Bid
Security. The Bid Security shall be refundable no later than 60
(sixty) days from the Bid Due Date except in the case of the
Scheduled Bidder whose Bid Security shall be retained till it has
provided a Performance Security under the Concession
Agreement.
2.1.9 The Bidder should submit a Power of Attorney as per the
format at Appendix-III, authorizing the signatory of the Bid to
commit the Bidder.
2.1.10 In case the Bidder is a Consortium, the Members thereof
should furnish a Power of Attorney in favour of the Lead
Member in the format at Appendix-IV."
8. Part B of Chapter 2 deals with „documents‟. Clause 2.7.1 includes
as appendices inter alia the format of the Power of Attorney for
signing of bid. Clause 2.11 deals with „sealing and marking of bids‟
while clause 2.15 deals with „modifications/substitution/ withdrawal
of bids‟. The relevant clause 2.15.3 reads as under:
"2.15 Modifications/Substitution/Withdrawal of Bids
.... .... .... .... .... .... .... .... ....
2.15.3 Any alteration/modification in the Bid or additional
information supplied subsequent to the Bid Due Date, unless
the same has been expressly sought for by the Authority, shall
be disregarded."
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9. Respondent No.1, however, retained certain rights in the context of
Clause 2.15.3 in para 6 under the heading of „Miscellaneous‟ where
clause 6.2 provides as under:
"6. Miscellaneous
6.2 The Authority, in its sole discretion and without
incurring any obligation or liability, reserves the right, at any
time, to;
(a) Suspend and/or cancel the Bidding Process and/or amend
and/or supplement the Bidding Process or modify the dates or
other terms and conditions relating thereto;
(b) Consult with any Bidder in order to receive clarification
or further information;
(c) Retain any information and/or evidence submitted to the
Authority by, on behalf of, and/or in relation to any Bidder;
and/or
(d) Independently verify, disqualify, reject and/or accept any
and all submissions or other information and/or evidence
submitted by or on behalf of any Bidder."
10. Insofar as the question of forfeiting of the bid security amount is
concerned, part D of Chapter 2 deals with „Bid Security‟. The
relevant clauses are as under:
"D. BID SECURITY
2.20 Bid Security
2.20.1 The Bidder shall furnish as part of its Bid, a Bid Security
referred to in Clauses 2.1.7 and 2.1.8 hereinabove in the form of
a bank guarantee issued by a nationalized bank or a Scheduled
Bank in India having a net worth of at least `1,000 crore (` One
thousand crore), in favour of the Authority in the format at
Appendix-II (the "Bank Guarantee") and having a validity
period of not less than 180 (one hundred eighty) days from the
Bid Due Date, inclusive of a claim period of 60 (sixty) days, and
may be extended as may be mutually agreed between the
Authority and the Bidder from time to time. In case the Bank
Guarantee is issued by a foreign bank outside India,
confirmation of the same by any nationalized bank in India is
required. For the avoidance of doubt, Scheduled Bank shall
mean a bank as defined under Section 2(e) of the Reserve Bank
of India Act, 1934.
.... .... .... .... .... .... .... .... ....
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2.20.6 The Authority shall be entitled to forfeit and
appropriate the Bid Security as Damages inter alia in any of
the events specified in Clause 2.20.7 herein below. The
Bidder, by submitting its Bidding pursuant to this RFP, shall
be deemed to have acknowledged and confirmed that the
Authority will suffer loss and damage on account of
withdrawal of its Bid or for any other default by the Bidder
during the period of Bid validity as specified in this RFP. No
relaxation of any kind on Bid Security shall be given to any
Bidder.
2.20.7 The Bid Security shall be forfeited and appropriated by
the Authority as mutually agreed genuine pre-estimated
compensation and damages payable to the Authority for, inter
alia¸ time cost and effort of the Authority without prejudice
to any other right or remedy that may be available to the
Authority thereunder, or otherwise, under the following
conditions:
(a) If a Bidder submits a non-responsive Bid;
Subject however that in the event of encashment of
Bid Security occurring due to operation of para 2.20.7
(a), the damage so claimed by the Authority shall be
restricted to 5% of the value of the Bid Security.
(b) ....
(c) ....
(d) ....
(e) ...."
11. The evaluation of the bids is dealt with in Part 3. Clause 3.2 deals
with the Tests of responsiveness of the bid and the relevant clause
reads as under:
"3.2 Tests of responsiveness
3.2.1 Prior to evaluation of Bids, the Authority shall determine
whether each Bid is responsive to the requirements of this RFP.
A Bid shall be considered responsive if:
.... .... .... .... .... .... .... .... ....
(e) it is accompanied by the Power(s) of Attorney as
specified in Clauses 2.1.9 and 2.1.10, as the case may be;
.... .... .... .... .... .... .... .... ....
3.2.2 The Authority reserves the right to reject any Bid which
is non-responsive and no request for alteration, modification,
substitution or withdrawal shall be entertained by the Authority
in respect of such Bid."
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12. Para 5 deals with „Pre-Bid Conference‟ and the same reads as under:
"5. PRE-BID CONFERENCE
5.1 Pre-Bid conferences of the Bidders shall be convened at the
designated date, time and place. Only those persons who have
purchased the RFP document shall be allowed to participate in the
Pre-Bid Conferences. A maximum of five representatives of each
Bidder shall be allowed to participate on production of authority
letter from the Bidder.
5.2 During the course of Pre-Bid conference(s), the Bidders
will be free to seek clarifications and make suggestions for
consideration of the Authority. The Authority shall endeavour to
provide clarifications and such further information as it may, in its
sole discretion, consider appropriate for facilitating a fair,
transparent and competitive Bidding Process."
13. We have already noticed above that Appendix III gives the format of
the Power of Attorney for signing of a bid with reference to clause
2.1.9. The format is followed by certain notes which were referred to
during the course of the argument and thus we reproduce the same as
under:
"Notes:
The mode of execution of the Power of Attorney should be in
accordance with the procedure, if any, laid down by the applicable
law and the charter documents of the executants(s) and when it is
so required, the same should be under common seal affixed in
accordance with the required procedure.
Wherever required, the Bidder should submit for verification the
extract of the charter documents and documents such as a board of
shareholders resolution/power of attorney in favour of the person
executing this Power of Attorney for the delegation of power
hereunder on behalf of the Bidder."
14. The bid has to be accompanied by a declaration in the form provided
in Appendix-I of the letter comprising the Bid and contains the
following relevant clauses:
"7. We declare that:
(a) We have examined and have no reservations to the
Bidding Documents, including any Addendum issued by the
Authority; and
(b) ....
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(c) ....
(d) ....
(e) ....
8. We understand that you may cancel the Bidding Process
at any time and that you are neither bound to accept any Bid that
you may receive nor to invite the Bidders to Bid for the Project,
without incurring any liability to the Bidders, in accordance
with Clause 2.16 of the RFP document."
15. In view of the aforesaid clauses, we now proceed to examine the rival
contentions:
The validity of Power of Attorney:
16. The Power of Attorney submitted with the bid of the petitioner has
been placed on record. There is no dispute that it is in the proper
format. However, at the end of the Power of Attorney in the
prescribed format the following is stated:
"IN WITNESS WHEREOF WE, MADHUCON PROJECTS
LIMITED THE ABOVENAMED PRINCIPAL HAVE
EXECUTED THIS POWER OF ATTORNEY ON THIS
12TH DAY OF AUGUST, 2010."
17. Thus, the typed date as given is of 12.8.2010. This is followed up by
the signatures of the Managing Director of the petitioner company -
above the address of the company at Hyderabad. On the left side of
the document there is an acceptance by Mr. S.V. Patwardhan, Chief
Executive Director of the petitioner, who has been authorized as per
the Power of Attorney to submit the bid followed by the signatures
and addresses of the two witnesses. Mr. S.V. Patwardhan after
appending the signatures has put down the date as 19.8.2010. There
is a seal of the Notary putting down the number at which it is
authorized, the signatures of the Notary followed by the date stamped
of 19.8.2010.
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18. Learned counsel for the petitioner while referring to the pleadings in
the petition drew our attention to the first communication in this
behalf addressed by the petitioner on 23.11.2010. The letter sets out
that in the past there was never any grievance raised in respect of
similar discrepancies submitted by various bidders. This is stated to
be apparent from the fact that respondent No.1 issued a check list for
scrutinizing of documents in respect of various projects on
22.11.2010. Such a check list was issued in respect of Krishnagar-
Baharmpore RFP. In the past no such check list was issued including
in the present case. Thus, seeking to make this check list applicable
retrospectively without circulation is pleaded to be unfair. Not only
that, financial bids of other projects up to 16.11.2010 are stated to
have been accepted with deficiencies. These norms were never
brought to the notice of any of the bidders, which was being done in
respect of the bids starting retrospectively with closing date as early
as August, 2009. An important aspect emphasized was that though
the document was prepared on 12.8.2010, the same was signed on
19.8.2010 and was presented for notarization on the same date. In
support of this plea a certificate dated 16.11.2010 of the notary has
been annexed to the letter dated 23.11.2010. The certificate reads as
under:
"TO WHOM IT MAY CONCERN
This is to certify that the document named "Power of
Attorney for signing of Bid" for the NHAI project "Four
laning of Ranchi-Rargaon-Jamshedpur section from
Km114.00 to Km 277.500 of NH-33 in the State of Jharkhand
on Design, Build, Finance, Operate and Transfer (DBFOT)
Annuity basis under NHDP Phase-III" prepared by Madhucon
Projects Limited was presented before by the executants Mr.
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N. Seethaiah in person on 19th August, 2010 which I attested
on the same day."
19. The petitioner has also relied on the register of the Notary which has
number seriatim and the serial number of the Power of Attorney is at
291 in the register which is duly signed in the register. The further
material sought to be relied upon by the petitioner are the air tickets
of Mr. N. Seethaiah to show that he came to Delhi and was in Delhi
on the relevant dates as also the mobile bill to show user from Delhi.
This is stated to be additional material placed before this Court to
substantiate the plea that there could be no doubt about the execution
and notarization of the Power of Attorney on 19.8.2010.
20. The other aspect as set out in the petition flows from the provisions
of Section 85 of the Indian Evidence Act, 1872 (hereinafter referred
to as the „Evidence Act‟), which reads as under:
"85. Presumption as to powers of attorney - The Court
shall presume that every document purporting to be a Power
of Attorney, and to have been executed before, authenticated
by, notary public, or any Court, Judge, Magistrate, Indian
Consul, or Vice Consul, or representative of the Central
Government, was so executed and authenticated."
21. The plea, thus, is that a presumption has to be drawn about the
execution and authenticity of the Power of Attorney which has been
executed inter alia before a Notary Public.
22. It was emphasized by learned counsel for the petitioner that there was
no particular manner of authorization prescribed. In different States
the Notaries carry out notarization in different manner and the
manner in which the Power of Attorney has been notarized is the
practice followed in Delhi. In this behalf learned counsel referred to
the check list circulated vide letter dated 22.11.2010 in respect of
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another project where notarization of Power of Attorney was
specifically referred to and the mode & manner of attestation
prescribed. The mode & manner reads as under:
"Mere attestation of POA cannot lead to an inference that it was
executed before the Notary Public. Execution of POA before
the Notary Public and authentication by it is essential condition
for valid notarization under the Notary Act and Evidence Act.
The condition of notarization as envisaged in the RFP document
can only be fulfilled if it was executed before the Notary Public,
meaning thereby that execution and notarization of the POA are
on the same date and notarization bears the words
"signed/executed before me". The Stamp of Notary indicating
the registration number need to be affixed by the Notary."
23. This document was not circulated vis-à-vis the tender in question in
the present case and thus in the absence of any prescribed manner of
notarization, it was notarized the way it had been done in the past and
accepted. To advance this plea further it was submitted that the
format of the Power of Attorney in respect of consortium is not even
required to be notarized.
24. Learned counsel also referred to the judgement of the Supreme Court
in Lalitaben Jayantilal Popat Vs. Pragnaben Jamnadas Kataria & Ors.
(2008) 15 SCC 365, which dealt with a case of the proof of execution
of a Will. In that context a discussion took place about the proof of
execution of a document required by law to be attested as specified
under Section 68 of the Evidence Act. As to what is meant by the
word „attestation‟ is defined under Section 3 of the Transfer of
Property Act, 1882 (hereinafter referred to as the „TP Act‟), which
reads as under:
"3. Interpretation-clause.-In this Act, unless there is
something repugnant in the subject or context,--
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["attested", in relation to an instrument, means and shall be
deemed always to have meant attested by two or more witnesses
each of whom has seen the executant sign or affix his mark to
the instrument, or has seen some other person sign the
instrument in the presence and by the direction of the executant,
or has received from the executant a personal acknowledgment
of his signature or mark, or of the signature of such other
person, and each of whom has signed the instrument in the
presence of the executant; but it shall not be necessary that more
than one of such witnesses shall have been present at the same
time, and no particular form of attestation shall be necessary:]"
25. It was, thus, emphasized by reference to the aforesaid definition that
no particular form of attestation is necessary.
26. Learned counsel for respondent No.1, on the other hand, has referred
to the pleadings in the writ petition, more specifically para 15, to
submit that the explanation in respect of the discrepancy in the Power
of Attorney has been explained as under:
"15. The Power of Attorney submitted by the Petitioner was
printed on 12th August 2010. The officer who printed the same
put the date on which the same was printed i.e. 12th August
2010, believing that the said would be executed on the same
day. However, the Power of Attorney was not executed on the
same day i.e. 12th August, 2010, on which it was printed. The
Power of Attorney was executed on 19th August, 2010 before a
notary. The attorney also appended his signatures and while
executing the same, in acceptance, and put the date of 19th
August, 2010 by hand under his signatures and that too on both
pages of the said Power of Attorney. The Notary also put the
date of his signature as 19th August, 2010. Thus, clearly, in
terms of Section 85 of the Evidence Act, there was a mandatory
requirement of presuming that the Power of Attorney had been
so executed....."
27. In the aforesaid context while referring to the certificate issued on
16.11.2010 by the Notary it is submitted that the same does not state
that the executant executed the Power of Attorney in the presence of
the Notary. On the register also only initials were placed and that too
in a manner which were casting some doubts on the same.
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28. Thus, it was submitted that the explanation was clearly an
afterthought and the Power of Attorney was executed by Mr. N.
Seethaiah on 12.8.2010 as the printed date shows though no date was
put below the signatures appended by Mr. N. Seethaiah. The date of
acceptance by Mr. S.V. Patwardhan is 19.8.2010 and it was attested
on 19.8.2010. Thus, the document was executed on 12.8.2010,
accepted on 19.8.2010 and notarized on 19.8.2010. We may note
that there is no dispute that the stamp paper is of Delhi. The address
given of Mr. N. Seethaiah below his signatures was of Hyderbad and
the Power of Attorney did not state that it was executed at Delhi.
(Incidentally, the format does not require it to state so.) Thus, there
was no proper authentication. Learned counsel submitted that the
pre-requisite for the presumption to be drawn under Section 85 of the
Evidence At is that it has to be executed before and authenticated by
a Notary Public which criteria has not been satisfied in the present
case and thus no presumption could be drawn in the present case. In
this behalf learned counsel referred to the Division Bench judgement
of this Court in M/s. Electric Construction & Equipment Co. Ltd. Vs.
M/s. Jagjit Electric Works, Sirsa (Haryana) AIR 1984 Delhi 363. It
was emphasized that the presumption under Section 85 of the
Evidence Act could be raised only if the twin conditions of execution
before the Notary and authenticated by the notary were satisfied.
29. Learned counsel referred to Clause 3.3 of the RFP which deals with
Test of Responsiveness and requires the Power of Attorney to be
executed as per Clause 2.1.9. In terms of Clause 3.2.2, respondent
No.1 had the right to reject any bid which was non-responsive and no
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request for alteration, modification, substitution or withdrawal was to
be entertained in respect of such bid. We may notice that the plea
raised on the basis of this clause is sought to be repelled by the
petitioner by relying on sub clause (b) of Clause 6.2 of the RFP,
which gives the discretion to respondent No.1 to consult with any
bidder in order to receive clarification or further information. It was,
thus, submitted that if at all there was some doubt in the mind of
respondent No.1 a clarification or information could have been
sought in that behalf from the petitioner.
30. Respondent No.4, who as a consequence of the petitioner‟s bid being
declared non-responsive has become L-1, has naturally canvassed
strongly in support of the decision taken by respondent No.1 to
declare the bid of the petitioner as non-responsive. We may notice
that a detailed and elaborate synopsis was filed but a number of
aspects raised in the same, in our considered view, are not germane to
the matter in issue.
31. The first aspect is about the scope and judicial review in tender
matters, i.e. the conditions of tender should be strictly enforced. The
objective standard should not be diluted by exercise of subjective
discretion, the court should not compel the authority to waive or relax
or alter any standard and the court does not sit in appeal in
substituting its decision with that of the authority, an authority in a
given case may choose to waive in its wisdom and discretion a non-
essential condition but even in such an eventuality a writ should not
be issued to compel the authority to do so, the lowest bid should not
necessarily be the deciding factor.
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32. We may note that a number of these pleas flow from the
consequences which may arise on account of consideration of the bid
of the petitioner. This is so as the petitioner at the outset, as noticed
in our order dated 20.12.2010, had stated that their offer was for
`133.20 crore while the bid of respondent No.4 was for `135.7 crore.
The differential was, thus, `2.5 crore. This is the differential amount
over a period of six (6) months and for the total period of fifteen (15)
years the financial impact, thus, would be `75.00 crore, i.e. if the bid
of the petitioner was to be accepted, the cash flow impact on
respondent No.1 as compared to the bid of respondent No.4 was
`75.00 crore. This is an undisputed position which has emerged. We
may observe that in view of the leave granted by the Supreme Court
vide its order dated 20.1.2011 the tender documents of the petitioner
were produced in a sealed cover, were opened to verify the bid
amount and were thereafter sealed. These are produced by
respondent No.1 and the figures aforesaid stand verified. We may,
however, hasten to add that the fact that the bid of the petitioner was
financially more competitive would not, of course, entitle the
petitioner to convert a non-responsive bid into a responsive one.
33. Learned senior counsel for respondent No.4 sought to submit that no
presumption could be drawn in respect of the validity of the Power of
Attorney in view of Section 85 of the Evidence Act which is the
bedrock of the claim of the petitioner. The purpose of the Power of
Attorney is to commit the bid and the manner in which such
commitment takes place as provided as per the clauses. No
modification/substitution or withdrawal can take place and thus the
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petitioner cannot place added material before respondent No.1 to
justify the validity of the Power of Attorney.
34. Learned counsel also emphasized that there is a fundamental
difference between authentication and attestation. For the purposes
of authentication the person should have appeared before the Notary,
identified himself and executed the documents whereafter the Notary
would attest the documents. The mere use of the word „attested‟ by
the Notary in the present case is not actually an authentication.
35. Learned counsel referred to the Advanced Law Lexicon of P.
Ramanatha Aiyar, where the word „Notarize‟ is defined as under:
"Notarize. To take acknowledgements, affidavits or
depositions, authenticate documents, as a notary public; to
swear or affirm to, before a notary.
To attest to the authenticity of (a signature, mark, etc.)"
36. Learned counsel also referred to the functions of the Notaries as
specified in Section 8 of the Notaries Act, 1952 where clause (a)
reads as under:
"8. Functions of notaries.- (1) A notary may do all or any
of the following acts by virtue of his office, namely:-
(a) verify, authenticate, certify or attest the execution of
any instrument;"
37. It was, thus, submitted that the distinction between „authentication‟
and „execution‟ which are two different phrases must be kept in
mind.
38. Learned counsel then turned to the definition of „authentication‟
under the Advanced Law Lexicon of P. Ramanatha Aiyar, which
reads as under:
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"Authentication. 1. Broadly, the act of proving that something
(as a document) is true or genuine, esp. so that it may be
admitted as evidence; the condition of being so proved
(authentication of the handwriting).
2. Specific., the assent to or adoption of a writing as one‟s own.
(Black, 7th Edn., 1999)
Authentication is the process of validating the identity of
someone or something (Information Technology)
The act of authenticating.
A process used to confirm the identity of a person or to prove
the integrity of the specific information. (Information
Technology)
Statement that something is true, such as an auditor‟s signature
on a company‟s accounts (Business Term)"
39. Learned counsel referred to the judgement of the Allahabad High
Court in Wali Mohammad Chaudhari & Ors. Vs. Jamal Uddin
Chaudhari AIR (37) 1950 Allahabad 524, which analyzed Section 85
of the Evidence Act. It was observed that authentication is not
merely attestation but something more. Authentication would require
a person to have assured himself of the identity of the person who has
signed the instrument as well as the fact of execution. It is for this
reason that a Power of Attorney bearing the authentication of a
Notary Public or an authority mentioned in Section 85 of the
Evidence Act is taken as sufficient evidence of the execution of the
instrument by the person who appears to be the executant.
40. A reference was also made to the judgement of the Supreme Court in
Jugraj Singh & Anr. Vs. Jaswant Singh & Ors. 1970 (2) SCC 386. It
was noticed that there was no prescribed form of authentication but
reliance was placed in Wali Mohammad Chaudhari case (supra). In
that context it was noticed that a proper Power of Attorney duly
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authenticated as required by law had to be made before the power
could be conferred on another person to execute the document or to
present it for registration. In the facts of that case the document bore
only the signatures of the witness without anything to show that he
was a Notary Public. It was observed that in any event there was no
authentication by the Notary Public (if he was one) in the manner in
which the law would consider adequate. The authentication had
occurred in California and there was nothing to show that the
document has been subscribed or sworn before him.
41. We have given our thoughtful consideration to the vital issue about
the validity of the Power of attorney. It is not in dispute that the
Power of Attorney is in the given format. It is also not in dispute that
as per the terms & conditions of the RFP, the Power of Attorney was
required to be notarized. No prescribed manner of notarization was
specified.
42. The aforesaid aspect become material by reason of the fact that vide
letter dated 22.11.2010 a check list was issued which prescribed the
manner of notarization and the specific endorsement which was
required to be made by a Notary was set out. This was subsequent to
the contract in question and thus respondent No.1 may have become
wiser to provide for a prescribed form of notarization. However, this
was not so as observed above in respect of the tender in question.
43. There is no prescribed manner of authentication by a Notary. In the
present case the Notary has affixed his seal and signed it and put
down the seal of attestation. This is the manner in which such
notarization take place in Delhi. The judgement cited on behalf of
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the respondents are not of much assistance as they only deal with the
general principles set out in Section 85 of the Evidence Act or are in
the given facts of the case as in Jugraj Singh & Anr. case (supra)
where the very identity of the person who was supposed to be a
Notary was in doubt. There was nothing to show that the person was
a Notary Public in California. There is, of course, no doubt about the
twin principles set out aforesaid for the purposes of drawing a
presumption under Section 85 of the Evidence Act. The Advanced
Law Lexicon of P. Ramanatha Aiyar referred to in this behalf also
provides that authentication is to confirm the identity of the person
and further to test the authenticity of a signature. This has, in fact,
been done. In our considered view, the real question is whether there
is a defect in the Power of Attorney by reason of there being a typed
date of 12.8.2010 while the date of acceptance and attestation by the
Notary was 19.8.2010. This discrepancy is sought to be explained by
the petitioner by stating that the document was typed on 12.8.2010
but was presented for attestation by Mr. N. Seethaiah on 19.8.2010.
Mr. N. Seethaiah‟s signature does not bear a date below and the
specification of the address of the company at Hyderabad can hardly
draw a conclusion that it was executed at Hyderabad. The format
does not prescribe the place to be mentioned where it is executed.
The acceptance is on 19.8.2010. The question is - has the petitioner
been able to explain this discrepancy and whether it is permissible for
the petitioner to explain away this discrepancy?
44. There is no doubt about the proposition that the terms & conditions
of a tender document must be strictly adhered to. However, the legal
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position in this behalf is enunciated in Poddar Steel Corporation Vs.
Ganesh Engineering Works & Ors. (1991) 3 SCC 273. It was held
that deviations from non-essential or ancillary/subsidiary requirement
being a minor technical irregularity can be waived. The issue, thus,
arises whether the discrepancy in the present case can be stated to be
of such minor technical nature.
45. We must keep in mind that the objective of execution of the Power of
Attorney is to give authority to the person to bind the bidder. It is not
a financial term nor an eligibility term but merely the authority to file
the bid. A certain amount (in the present case `3.00 lakh) has already
been charged at the stage when the RFP was issued. The bid is also
accompanied by a bank guarantee of `14.79 crore. Thus, it is not a
question of there being a non-serious bid or somebody backing out of
the bid. In order for there to be a proper authenticity of the Power of
Attorney an extra condition of notarization is provided. Peculiarly,
such notarizations are not required for the other set of Power of
Attorney in case of a bid made by a consortium. This itself shows the
seriousness attached to the issue of notarization!
46. A typographical error of a date in the Power of Attorney when it is
duly signed, accepted and notarized can at worst be a technical
defect. In fact, it is for such situations that Clause 6.2 has been
provided for respondent No.1 to consult the bidder for receiving any
clarification or information. The petitioner, thus, gave the
clarification under the cover of a letter dated 23.11.2010 and even
sent the certificate of the Notary duly certifying to the authentication.
This is not a case where there were some modification being sought
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or in that sense some additional material is sought to be incorporated
in the bid. It does appear that the decision to impose a strict
requirement in respect of the manner of Power of Attorney was taken
simultaneously when the present bid was being scrutinized and that is
the reason the check list has been subsequently drawn and circulated
vide letter dated 22.11.2010. The bid in the present case was opened
on 16.11.2010. The future bidders could be enlightened by a format
of attestation specifically required but that was not so in the case of
the petitioner.
47. We are, thus, of the considered view that the bid of the petitioner
ought not to have been treated as a non-responsive bid but the
petitioner could at best have been called to issue a clarification which
in any case was available with respondent No.1 under the cover of
the letter dated 23.11.2010 as per the certificate issued by the Notary
Public. The other documents submitted before this Court are filed to
really demonstrate in one sense that there was no falsity in the stand
taken by the petitioner [flight tickets, mobile bill (showing user from
Delhi), etc.]. We have already observed aforesaid that if the bid of
the petitioner is found to be in order undisputedly it will result in the
saving of `75.00 crore over a period of fifteen (15) years.
48. The bid of the petitioner is, thus, required to be treated as responsive,
opened and process.
Forfeiture of the Bank Guarantee:
49. The forfeiture of the bank guarantee is a direct consequence of the
bid being declared non-responsive. Once the bid is responsive there
is no question of forfeiture of the bid amount. We may, however,
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notice that submissions were advanced by the parties as to why even
if the bid of the petitioner was to be treated as non-responsive on
account of the Power of Attorney, the bid security amount was not
liable to be forfeited. Interestingly, the petitioner and respondent
No.4 were ad idem on this issue possibly because they are both
bidders who may face such situation at different stages of time.
50. Learned counsel for respondent No.1 submitted that the bid security
amount was a specific term of the RFP clause 2.1.7. Respondent
No.1 was entitled to forfeit and appropriate damages inter alia in the
event specified in Clause 2.20.7 in view of what is set out in clause
2.20.6. The said clause also provides that the bidder is deemed to
have acknowledged and confirmed that the authority will suffer loss
and damage on account of withdrawal of its bid or for any other
default by the bidder during the period of bid validity as specified in
the RFP. Clause 2.20.7 states that the amount is mutually agreed
genuine pre-estimated compensation and damages payable to the
authority for inter alia time cost and effort of the Authority. The
conditions under which it applies includes where a bid is a non-
responsive bid. However, as per the latter part of sub-clause (a) of
clause 2.20.7 if the bid is a non-responsive bid, the damages are
restricted to 5 per cent of the value of the bid security. The question,
thus, arises whether in case of a non-responsive bid could it be said
that 5 per cent of the value of the bid security was the genuine pre-
estimate of damages?
51. It must be borne in mind that the stage for submission of the RFP is
the second stage in the tendering process. There is an earlier scrutiny
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in pursuance of the RFQ submitted by the parties in terms whereof
certain parties are enlisted for submitting the RFP. At the stage of
the RFP a sum of `3.00 lakh is paid to procure the documents. This
amount cannot be the cost of the form but is really a pre-estimated
cost of processing the RFP. A non-responsive bid is one where at the
threshold on the opening of the bid it is found to be defective on one
account or the other and is, thus, shut out from the process of
scrutiny. This can have no co-relation with the value of the bid
which would be the eventuality even if 5 per cent of the bid amount
is encashed.
52. Learned counsel for respondent No.1 sought to canvass that the
objective is to prevent non-serious persons from submitting the bids.
This, in our considered view, is taken care of by charging an amount
for purchase of RFP documents and in other eventualities of say a
party backing out, the bid security amount being forfeited. The
occasion for non-responsive bid would only be a defect in submission
of the RFP.
53. Learned counsel for respondent No.1 could not seriously dispute that
the amount really is in the nature of a penalty. If it is so it cannot be
said to be a reasonable pre-estimate of damages and the parties
suffering losses must prove that it is suffering damages to that extent.
We are of the view that there is hardly any quibble over the settled
legal position in this behalf. Suffice it to say that in Maula Bux Vs.
Union of India AIR 1970 SC 1955 the scope and ambit of Section 74
of the Contract Act, 1872 (hereinafter referred to as the „Contract
Act‟) was discussed. It was observed that if the forfeiture of earnest
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money is in the nature of penalty Section 74 of the Contract Act
would apply. In such a case proof of actual loss or damage would be
essential. However, if the forfeiture amount is reasonable pre-
estimate, it would not fall within Section 74 of the Contract Act. The
legal position in this behalf has not changed. Section 74 of the
Contract Act reads as under:
"74- Compensation for breach of contract where penalty
stipulated for- [When a contract has been broken, if a sum is
named in the contract as the amount to be paid in case of such
breach, or if the contract contains any other stipulation by
way of penalty, the party complaining of the breach is
entitled, whether or not actual damage or loss is proved to
have been caused thereby, to receive from the party who has
broken the contract reasonable compensation not exceeding
the amount so named or, as the case may be, the penalty
stipulated for."
54. The 5 per cent of the bid security amount would be `73.95 lakh
approx. This cannot be said to be the charges for processing the bids.
That charge, in fact, already stands recovered which had been pre-
estimated at `3.00 lakh for purchase of the RFP document.
55. We have no hesitation to hold that the aforementioned clause
permitting 5 per cent bid security amount to be forfeited in case of a
non-responsive bid is clearly penal in nature and thus provisions of
Section 74 of the Contract Act would apply. It cannot be categorized
as a reasonable pre-estimate of damages for a non-responsive bid and
thus the bank guarantee for 5 per cent of the bid amount cannot be
encashed in such an eventuality.
56. Thus, even on the second issue we are of the view that even if the bid
was non-responsive, the 5 per cent of the bid security amount could
not have been forfeited.
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Conclusion:
57. The RFP submitted by the petitioner is, thus, held to be a responsive
and the decision to declare it as a non-responsive bid on grounds of
alleged defect in the Power of Attorney is held to be illegal and
invalid. There is, thus, no question of there being any encashment of
the bid security amount to the extent of 5 per cent, which in any case
could not have been encashed as held aforesaid. The RFP submitted
by the petitioner be processed in accordance with law and the
contract should, thus, be awarded as per the result of the scrutiny of
all the bids including the bid of the petitioner.
58. The writ petition is allowed in the aforesaid terms.
59. We had called upon the parties to file their bill of fee & costs. The
amount stated by the petitioner is `24,82,538.00, by respondents 1 &
3/NHAI is `3,58,300.00 and by respondent No.4 is `23,23,750.00.
We, however, in the given facts & circumstances of the case grant
cost to the petitioner of `7,27,538.00 excluding the fee of the second
senior counsel to be paid by respondents 1 & 3/NHAI.
SANJAY KISHAN KAUL, J.
MARCH 10, 2011 RAJIV SHAKDHER, J.
b'nesh
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