Delhi High Court

M/S. Himalaya Communications ... vs Northern Railways on 4 May, 2016

Author: Badar Durrez Ahmed

$~28
*       IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                     Judgment delivered on: 04.05.2016

+       W.P.(C) 542/2015 & CM No.921/2015 (stay)

M/S. HIMALAYA COMMUNICATIONS LTD.                              ..... Petitioner
                             versus

NORTHERN RAILWAYS                                                ..... Respondent

Advocates who appeared in this case:
For the Petitioner           : Mr Sakal Bhushan, Advocate.
For the Respondent           : Ms Nupur Choudhary, Advocate.

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA

                                 JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

W.P.(C) 542/2015 & CM No.921/2015 (stay)

1. This writ petition relates to tender No.4108130361 dated 18.11.2013

which was taken out by the Northern Railways. The petitioner had bid for jelly

cables for Ferozepur as well as Jalandhar consignees. The petitioner was L-1

in both and had been initially offered 35.062 Km for Ferozepur and 95.2 Km

for Jalandhar. The petitioner was L-1 in the category of Part II approved

sources. The petitioner was, however, given a counter offer by letter dated

18.09.2014 for the said quantity but @ of Rs 2,19,257.75 per km in respect of

Jalandhar consignees and @ Rs 2,18,257.75 per km for Ferozepur.

2. There is no dispute with regard to the quantity offered. The dispute that

has been raised by the petitioner is that the petitioner, being a Part II approved

source and the petitioner's price being less than the L-1 price in Part I approved

sources, no counter offer could have been made to the petitioner and the

respondent was bound to accept the prices quoted by the petitioner for

Ferozepur and Jalandhar inasmuch as the petitioner was clearly L-1 in the Part

II category.

3. The learned counsel for the petitioner places reliance on a

communication issued by the Railway Board on 27.06.2008 on the subject of

Award of Contract and the Procedure for Conducting Negotiations. The said

document is as under:-

"ANNEXURE R-3 RBS NO.17/2008

Government of India

Ministry of Railways

(Railway Board)

No.99/RS(G)/779/2 New Delhi, dated 27-06-2008

The General Manager, All Indian Railways & Pus including NF (Const.)

The General Manager, CORE, Allahbad

The General Manager, Metro Railway, Kolkata.

The Director General, RDSO, Lucknow and Railway Staff College, Vadodra.

The MD, RITES, RITES Bhavan, Sector - 29 Gurgaon.

The MD, Konkan Railways Corporation Ltd., Raigad Bhavan, 8th Floor, Sector -11, CBD, Belapur, Navi Mumbai.

The MD, Mumbai Rail Vikas Corporation, 2nd Floor, Church Gate Station Building, Mumbai.

MD, CRIS, Chanakayapuri, New Delhi.

CAO/DCW, Patiala and COFMOW, New Delhi

CAO/MTP, Mumbai & Chennai,

CAO/MTP, NBCC Place, Bhimsha Pitamah Marg, Pragati Vihar, New Delhi.

Sub: Award of contract - procedure for conducting negotiations.

Ref: Rly. Board's letter no.99/RS(G)/779/2 dated 01-03-2000

1. Vide above mentioned letter of Railway Board dated 01.03.2000, it was directed, inter alia, that negotiations shall be held only with the lowest acceptable tenderer (L1) who is technically cleared/approved for supply of bulk quantity and on whom the contract would have been placed but for the decision to negotiate.

2. Based on certain tender cases which came to the notice of Board, it has been considered necessary that further instructions are issued on the subject of holding negotiations so that equity, fair play and transparency are maintained uniformly while dealing with offers from both Pt. I and Pt. II approved sources.

3. After due examination of the matter, it has been decided to issue following instructions:

(a) In the cases where rates of Pt. II approved vendors were lower than the original rate of the L1 Pt. I approved source, eligible and suitable for bulk ordering with whom

a price negotiation is held and if, after price negotiation with the L1 Pt. I approved tenderer, their rate becomes lower than that of the lowest Pt. II approved tenderer, then another price negotiation should be held with the lowest Pt. II approved tenderer subject to the condition that the firm's offer is otherwise suitable and eligible for placement of an order as per extant procedure. If the L1 or any other higher offer from Pt. II approved sources gets passed over due to valid reasons then the next higher tenderer(s) in the Pt. II category should be extended the same treatment, provided their rate was lower than the lowest rate from Pt. I approved tenderers, as per the original inter-se ranking of the rates.

(b) In any case, the rate at which the PO on a Pt. II approved tenderer may be placed must not be higher than the lowest rate at which the PO on a Pt. I approved tenderer will be placed.

4. This issues with the concurrence of the Finance Directorate of Ministry of Railways.

                                                           (Trilok Kothari)
                                               Director Railway Stores (IC)
                                                            Railway Board
        No.99/RS(G)/779/2                          New Delhi, dated
        27.06.2008

        Copy to:

1. FA&CAO, All Indian Railways and Production Units.

2. PCEs, All Indian Railways and Production Units.

3. The ADAI (Rlys.), New Delhi (with 10 spare copies).

4. The Director of Audit, All Indian Railways.



                                       For Financial Commission/Railways
        No.99/RS(G)/779/2                         New Delhi, dated
        27.06.2008





         Copy to:

1. The COS, All Indian Railways & Pus including NF (Const.)

2. The COS, Metro Railway Kolkata.

3. The COS, COFMOW, New Delhi.

4. The COS, CORE/Allahbad

5. The COS, Konkan Railways Corporation Ltd., Raigad Bhavan, 8th Floor, Sector-11, CBD, Belapur, Navi Mumbai

6. The COS/Mumbai Rail Vikas Corporation, 2nd Floor, Church Gate Station Building, Mumbai.

7. The Directors,

a. Indian Railway Institute of Sig. Engg. & Telecom, Securenderabad,

b. Indian Railway Institute of Mech. & Elec. Engg., Jamalpur.

c. Indian Railway Institute of Elect. Engg. Nasik."

(underlining added)

5. On going through the above document and, in particular, paragraph 3(a),

it is evident that negotiations can be held with the L-1 bidder in Part II only if

the negotiated price with the L-1 bidder in Part I approved sources becomes

lower than the L-1 price of Part II approved sources.

6. It is an admitted position that the Railway Board's letter dated

27.06.2008, which has been extracted above, is the extant policy of the Railway

Board and has not been superseded. It is also an admitted fact that the L-1 bid

out of the Part I approved sources was higher than the price offered by the

petitioner, who was L-1 in Part II approved sources. It is also admitted that

negotiations were held with the L-1 bidder in Part I approved sources and even

after negotiations, the L-1 prices of the Part I sources was still higher than the

original rate which was quoted by the petitioner, being a Part II approved

source. This is evident from the discussion note handed over by the learned

counsel for the respondent. An extract from the minutes of the meeting of the

High Level Committee held on 15.09.2014 to the extent relevant is set out

herein below:-

"Part II

3.5 The lowest eligible offer from a Part II firm is of M/s Himalaya Communications Limited, which is the lowest eligible for Sig/C/JUC, Tele/JUC and Tele/FZR Consignees. The rates quoted by this firm and those of the lowest eligible Part I firms for these consignees are tabulated below. The ED applicable at the time of opening of tender on 31.12.2013 was @ 12.36% which has been revised to 10.30% as per negotiated offers of Part I firms. Accordingly, rates tabulated below for all the three firms are with ED @ 10.30%.

Rs. Per Km All Inclusive Negotiated rates All inclusive All received from Part I Firms rates Inclusive proposes for Rates counter offer quoted by to both these the lowest Part I firms Part II firm

M/s Himalaya Communica tions Limited

Consignee M/s Vindhya M/s Birla Telelinks ltd. Ericsson Optical Limited Part I Part I Part II Sig/C/JUC 2,45,941.92 2,44,737.05 (Rs.2,05,450/- (Rs per km + 2,07,000/-

                      10.3% + 5% +                                   per km +
                      Frt. Rs8000/-                                  10.3% + 5%
                      per km)                        2,44,783.77     + Frt.
                                       -             (Rs             Rs.5000/-
                                                     2,04,450/-      per km)
          Tele/JUC    2,45,941.92                    per km +        2,44,737.05
                      (Rs 2,05,450/-                 10.3% + 5%      (Rs
                      per km +                       + Frt.          2,07,000/-
                      10.3% + 5% +                   Rs.8000/- per   per km +
                      Frt. Rs.8000/-                 km)             10.3% + 5%
                      per km)                                        + Frt.
                                       -                             Rs.5000/-
                                                                     per km)
          Tele/FZR                     2,45,999.83                   2,43,737.05
                                       (Rs                           (Rs
                                       2,05,500/-                    2,07,000/-
                                       per km +                      per km +
                                       10.3% + 5%                    10.3% + 5%
                                       + Frt.                        + Frt.
                                       Rs.8000/-                     Rs.4000/-
                                       per km)                       per km)

3.5.1 In Para 3.4 above, it has been recommended to give counter offer of basic rate of Rs.2,04,450/- per km to Part I firms including M/s Vindhya Telelinks Ltd. and M/s Birla Ericsson Optical Limited. With this basic rate, the all inclusive rates of M/s Vindhya Telelinks Ltd. and M/s Birla Ericsson Optical Limited will be Rs.2,44,783.77 per km which are still higher than the original rate (with current ED @ 10.30%) quoted by Part II firm M/s Himalaya Communications Limited.

3.5.2 In terms of Railway Board's letter No.99/RS(G)/779/2 dated 27.06.2008 (SN-437 to SN-437/1), negotiations with the lowest eligible Part-II firm are to be held if the negotiated rate offered by Part I firm becomes lower than the rate of Part II firm. Since the all inclusive rates quoted by M/s Himalaya Communications Limited are still lower than the negotiated/counter offered all inclusive rates of M/s Vindhya Telelinks Ltd. and M/s Birla Ericsson Optical Limited, negotiations have not been held with M/s Himalaya Communications Limited.

xxxx xxxx xxxxx xxxxxx

4.1.4.1To place order on M/s Himalaya Communications Limited, New Delhi (Part II) for 130.262 km for Sig/C/JUC, Tele/JUC and Tele/FZR consignees with a counter offer of basic rate of Rs.1,85,000/- per km as per terms and conditions in Para 4.2.1(a) and Para 4.2.1 (c) below."

(underlining added)

7. On going through the above minutes, it is evident that in terms of the

Railway Board's letter dated 27.06.2008 (which we have set out above),

negotiations with the lowest eligible Part II Firm is required to be held only if

the negotiated rate offered by the Part I Firm becomes lower than the L-1 rate

of the Part II firm. In the present case, since the all inclusive rates quoted by

the petitioner are lower than the negotiated/counter offered all inclusive rates of

Part I firms, negotiations have rightly not been held with the petitioner.

8. But, the matter did not stop there. The High Level Committee

recommended that as the all inclusive rates quoted by the petitioner was higher

than the rates from Part II firms in the recent orders/tenders of other railways, a

counter offer should be made to the petitioner. We are afraid that as per the

letter dated 27.06.2008, unless and until the condition stipulated in paragraph

3(a) is met, no counter offer/negotiations can be done with the L-1 bidder in the

category of Part II firms. The condition is clear that the negotiated rate of the

Part I firm must become lower than the L1's rate of the part II firm. If that

does not happen, then no negotiations/counter offer can be made to the L-1 Part

II firm. Therefore, in the facts of the present case, the counter offer dated

18.09.2014 could not have been made to the petitioner. The respondent was

liable to accept the prices quoted by the petitioner for Ferozepur and Jalandhar.