Richa Industries Limited vs Delhi Metro Rail Corporation And ...
2017 Latest Caselaw 1001 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Judgment Reserved on: 28.07.2016
                                    Judgment delivered on: 21.02.2017

+       W.P(C) 5996/2016

RICHA INDUSTRIES LIMITED                                   ..... Petitioner

                           versus

DELHI METRO RAIL
CORPORATION AND ANR.                                 ..... Respondents
Advocates who appeared in this case:
For the Petitioner        : Mr Krishnendu Datta with Ms Sanjana Saddy.
For the Respondents       : Mr Dinesh Malik, Adv. for R-2.

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE ASHUTOSH KUMAR

                               JUDGMENT

ASHUTOSH KUMAR, J

1. The petitioner, a limited company, engaged in the business of

textiles and manufacturing of prefabricated steel structures for erection of

warehouses, factories, workshops, railway station sheds, etc. participated

in a bid issued by respondent no.1, for supply, fabrication and erection of

pre-engineered roof structures of 8 elevated stations. In the aforesaid bid,

the respondent no.2 had also submitted a bid and was declared to be the

L-1 bidder (lowest bidder) whereas the petitioner was placed at L-2.

2. The petitioner has challenged the decision of the respondent no.1

of opening the cost bid of respondent no.2 on the ground of it's bid not

being compliant with the requirements set out in "Instructions To

Tenderers" (ITT).

3. The petitioner, therefore, has prayed for the following reliefs:

(a) "Issue a writ, order or direction in the nature of certiorari and/ or any other writ, order or direction quashing the impugned action/ decision of the Respondent No. 1 in opening and/ or accepting the financial bid of Respondent No. 2 on 16.06.2016 and/or awarding the tender to Respondent no.2;

(b) Issue a writ, order or direction in the nature of certiorari and/ or any other writ directing the Respondent No.1 to disqualify the Respondent No.2 for placing a materially defective bid and providing false information in its bid document;

(c) Issue a writ, order or direction in the nature of mandamus and/ or any other writ, order or direction directing the Respondent No.1 to disqualify the Respondent No.2 and grant the tender to the Petitioner who is the lowest bidder in terms of the Tender rules.

(d) pass an order in respect of the costs of litigation in favour of the Petitioner and against the Respondents.

(e) pass such other and further orders as this Hon'ble Court may deem fit and proper in the interests of justice and equity.

(f) pass such other and further orders as this Hon'ble Court may deem fit and proper in the facts of the instant case."

4. The learned counsel for the petitioner has drawn the attention of

this Court to tender conditions especially clause B 1.1 of ITT which

provides that the tender documents submitted by the tenderers should

include bill of quantities/pricing documents and clause B 1.2 of ITT,

requiring the tenderers to submit bids which are responsive to the

requirements of the tender documents.

5. Attention has also been drawn to clause 2.5 of the ITT which

requires a tenderer to quote prices as per clauses 11.1.1 of the General

Conditions of Contract (GCC) and clause 17 of the Special Conditions of

Contract (SCC).

6. For the sake of completeness, the aforesaid provisions of ITT,

GCC and SCC are extracted below:

Clause B 1.1 and B 1.2 of ITT:

"B1.1 The Tender Documents, as listed below, have been prepared for the purpose of inviting tenders for construction of all Permanent and Temporary Works in connection with Contract: CC-111: Supply, Fabrication, and Erection of Pre-Engineered Roof Structure of 8 elevated Stations viz Shahid Nagar, Raj Bagh, Rajendra Nagar, Shyam Park, Mohan Nagar, Arthla, Hindon River and New Bus Adda (GZB) on Oils had Garden to New Bus Adda Corridor and as more particularly described in these documents.

(a) Notice of Invitation to Tender;

(b) Instructions to renderers including annexures;

(c) Form of Tender Including appendices;

(d) Special Conditions of Contract Including Schedules;

(e) General Conditions of Contract;

(f) Condition of Contracts on Safety, Health & Environment (SHE);

(g) Employer's Requirements including Appendices;

(h) Technical Specifications;

(i) Tender Drawings;

(j) Bill of Quantities I Pricing Document

B1.2 The Tenderer is expected to examine carefully the contents of all the above documents. Failure to comply with the requirements of the Tender documents will be at the Tenderer's own risk. Tenders that are not substantially responsive to the requirements of the Tender documents will be rejected."

Clause 2.5 ITT"

"C2.5 Tenderers shall quote all prices as per Clause 11.1.1 of GCC and clause 17 of S.C.C."

Clause 11.1.1 of GCC:

"11.1.1 Inclusions / Exclusions

i) Unless otherwise stated In the Special Conditions of Contract the Contract Price, subject any to any adjustment thereto in accordance with the Contract shall be all inclusive (including all taxes, duties. royalties etc.) except :Value Added Tax (VAT} paid under Delhi VAT act 2005 where work is done in Delhi Value added tax(VAT) paid under other State Govt VAT act if work is done in that state.

ii) Nothing extra shall be payable over the quoted rates, notwithstanding any provision to the contrary in any

law for the time being in force, save and except what is specifically provided in General or Special Conditions of Contract.

iii) The reimbursement (as per this Sub-clause) of whatsoever nature shall be provided only for Permanent Works. No reimbursement {as per this Sub- clause) shall be provided for Temporary Works and fuel."

(Emphasis provided) Clause 17 of SCC:

"17 Sub-Clause 11.1.1: The Contract Price

(a) The contract price, subject any to any adjustment thereto in accordance with the contract shall be all inclusive (including all taxes, duties, royalties etc.) including value Added tax (VAT) paid under Delhi VAT act 2005 where work is done in Delhi and Value Added Tax (VAT) paid under other State Govt VAT act work is done in that state.

(b) The contract price in Schedule 'A' may be quoted either in Indian Rupees or partly in any freely convertible Foreign Currency."

7. Clause 2.6 of the ITT makes it compulsory for a bidder to quote

prices as per tender conditions and also show separately the amount of

service tax included in the bid prices. This is required for the reason that

exemption of construction, erection, commissioning or installation of

original works pertaining to monorail or metro in respect of contracts

entered into on or after 01.03.2016 has been withdrawn and therefore, the

DMRC (respondent no.1) would be required to reimburse the payments

made by the contractors on account of service tax on actuals based on

submission of documentary proof of payment, subject to the ceiling limit.

8. Relevant part of Clause 2.6 of ITT reads as hereunder:

"C 2.6 The tenderers must note the following:

a) Service Tax:

Exemption on construction, erection, commissioning or installation of original works pertaining to monorail or metro as per notification No. 25/2012 Service Tax dated 20.06.2012, in respect of contracts entered into on or after 01st March 2016 has been withdrawn vide notification No. 09/2016 dated 01.03.2016. The bidder shall quote price as per tender conditions and show separately the amount of service tax included in the bid price. DMRC will reimburse the payments made by contractors on account of service tax on actual based on submission of documentary proof of payment, subject to the ceiling limit indicated by the bidder as above.

The employer has approached the Government of India for restoration of service tax exemption notification No. 25/2012 dated 20.06.2012. In case Government of India restores the exemption to metro rail projects, the amount included by the bidder towards service tax will not be payable and adjustment will be made accordingly."

(Emphasis provided)

9. Clause 15.1 of the tender document reads as hereunder:

"C15. Pricing Document

C15.1 The Pricing Document is included in Bill of Quantities / Pricing Document; Volume 6. However, an excel file is provided in the bid documents and the

rates shall be quoted in that excel file only. The tenderer shall download the excel file and after quoting their rates upload the same accordingly. The rates shall not be offered/quoted elsewhere in the technical submission/ tender submission. The Tenderer shall complete the Pricing Document /quote their rates in accordance with the instructions given in Bill of Quantity/Pricing Document. The completed Pricing Document including price of minor deviations in Appendix13A for such deviation as mentioned in Appendix 13 of FOT shall be submitted. The rates shall be quoted in excel file provided in the bid documents."

(Emphasis provided)

10. A bare reading of the aforementioned clauses make it clear that it

was incumbent upon the tenderers to strictly adhere to the terms and

conditions of the tender documents and the ITT. In case of a minor

deviation from the requirements mentioned in the tender, the same was

required to be brought to the notice of the employer by way of a

disclosure in Appendix 13A to the tender document.

11. The financial bids of the tenderers were opened on 16.06.2016

wherein the respondent no.2 was shown as L-1 (the lowest bidder). Since

the bid of the successful tenderers were uploaded on the e-portal of

respondent no.1, the petitioner could learn that the bid document

submitted by respondent no.2 was not in accordance with the tender

requirements as the price quoted by respondent no.2 was firstly, not

inclusive of all taxes as required under ITT and secondly, the service tax

component in its price bid was not indicated separately.

12. The bid details and the pricing document of respondent no.2 have

been brought on record as Annexure P-5.

13. This departure from the tender conditions by respondent no.2 has

admittedly not been disclosed in the bid documents in terms of Appendix

13 of the tender document.

14. To evaluate whether the bid of a particular tenderer was compliant

with the terms and conditions of the tender, the respondent no.1 in

accordance with E4.3 of the tender document was required to see whether

each tender is substantially responsive to the requirements as set forth and

in case of any inconformity, the bid was liable to be rejected. What

would be a material deviation, leading to disqualification and rejection of

a bid has also been clarified in E4.4.

15. E4.3 and E4.4 read as hereunder:

E4.3 Evaluation of Responsiveness The employer will determine whether each tender is substantially responsive to the requirements of the Tender Documents i.e. it conforms to all terms, conditions and

specifications of the tender document. In case of any inconformity, the tender shall be disqualified and rejected.

E4.4 Evaluation of Material deviation or reservation Each tender shall be evaluated for any material deviation or reservation. Material deviation or reservation is one:

• which contains unauthorized changes to the Memorandum of Understanding from the Memorandum of Understanding accepted for Pre-qualification.

• which contains any deviation in tender security with regards to amount, validity, form and format.

• which affects in any substantial way, the scope, quality or performance of the Works;

• which limits in any substantial way, is inconsistent with the Tender Documents, the Employer's right or the Tenderer's obligations under the Contract; or

• whose rectification would affect unfairly the competitive position of other tenderers presenting responsive tenders.

Tender having any material deviation or reservation shall be disqualified and rejected."

16. The aforesaid material deviation of respondent no.2 was brought to

the notice of respondent no.1 by the petitioner but such communication

evoked a queer response by respondent no.1, viz. holding the petitioner to

be violating the terms of clause E2.1 and E2.2 of ITT thereby rendering

the bid of the petitioner liable to be rejected. A legal notice, asking for

disqualification of respondent no.2 was also served upon the respondent

no.1 by the petitioner but the same has not been heeded to.

17. The petitioner has approached this Court upon coming to know that

the award is being concluded in favour of respondent no.2.

18. In Tata Cellular vs. Union of India: 1994 (6) SCC 651, though the

Supreme Court has ruled for judicial restraint in dealing with such

matters on the ground that a court of law does not sit in appeal over such

decisions of the administrative authority but it merely reviews the same in

the absence of any expertise in the field and also because the Government

necessarily has freedom of contracting with parties, but has not excluded

the judicial review in absolute terms. The decision of an authority must

not only be tested by the application of Wednesbury principle of

reasonableness but should also be free from any arbitrariness bias or

malafides.

19. When specific instructions have been given in the tender

documents regarding pricing/cost as also the mode of evaluation for

testing whether a particular bid is compliant of the terms and conditions

of the tender, the same should be strictly enforced or else the sanctity and

purity of the entire process of tender would be at peril. The bidders as

well as the employer inviting the tender are bound by the requirements of

the tender document. In the absence of adherence to the requirements set

forth by the employer/agencies inviting tender, there would be a much

greater risk of discrimination and perhaps even favouritism which is

necessarily an anathema to the concept of fairness, rule of law and the

principle of treating everybody equally.

20. In West Bengal State Electricity vs. Patel Engineering Company

and Ors.: 2001 2 SCC 451, the Supreme Court has very succinctly held

that "The very purpose of issuing rules/instructions is to ensure their

enforcement lest the rule of law should be a casualty. Relaxation or

waiver of a rule or condition, unless so provided under the ITB, by the

State or its agencies (the appellant) in favour of one bidder would create

justifiable doubts in the minds of other bidders, would impair the rule of

transparency and fairness and provide room for manipulation to suit the

whims of the State agencies in picking and choosing a bidder for

awarding contracts as in the case of distributing bounty or charity. In

our view such approach should always be avoided.

21. In Michigan Rubber (India) Ltd. vs. State of Karnataka and Ors.:

(2012) 8 SCC 216, the Supreme Court suggested following questions to

be answered before exercising the powers of judicial review.

"24. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; and

(ii) Whether the public interest is affected. If the answers to the above questions are in negative, then there should be no interference under Article 226."

(emphasis provided)"

22. It is definitely in the public interest that everybody should be

treated equally and no one is allowed any latitude, which is not available

to others.

23. Now, the other important question is whether the departure from

the tender condition viz. not including the service tax component in the

cost and not indicating it separately, can be said to be such a deviation

which can render respondent no.2 disqualified. Minor deviations are

permitted if it does not put other competitors in any disadvantageous

position and can be permitted if it is at the instance of an employer. But

such permission has to be afforded to all and not only to one of the

participants.

24. Much has, by now, been said about the essential or substantial

conditions of the bid document which cannot be departed from or waived.

In the present case, the tender document itself spells out that a bidder

would quote prices as per tender conditions and would separately indicate

the amount of service tax which is included in the bid price. Therefore, it

cannot be said that the aforesaid requirement in the tender document is

not an essential condition of contract and that it could be lightly dealt

with. The wordings of the various clauses of the tender papers quoted

above re-enforce the perception that the pricing offered by the tenderers

was to be compliant with specific conditions and the evaluation of the

employer inviting the tender, would also be based on a consideration of

the fact whether the tender offered conforms to all the terms, conditions

and specifications of the tender document. The limits of the material

deviation has also been defined in the tender document.

25. In G.J. Fernandez vs. State of Karnataka: (1990) 2 SCC 448, the

aspect of deviation was dealt with and deviation was held to be

permissible as long as the level playing field was maintained and it did

not result in any arbitrariness or discrimination.

26. The financial bid of respondent no.2 was apparently not compliant

with the terms and conditions of the tender documents and this fact was

pointed out by the petitioner but to no avail. This conduct of respondent

no.1 therefore smacks of a casual and cavalier approach with regard to

the enforcement of condition of its own document. One could have

understood if the complaint of the petitioner would have been dealt with

in a different way or respondent no.1 would have taken a decision that it

was not an essential condition of the tender requirement to include the

service tax. Completely ignoring the aforesaid aspect and holding the

petitioner, for having raised objections, to be in violation of the certain

provisions of the tender document regarding its conduct, rendering its bid

liable to be rejected, discloses an unfair approach.

27. In our opinion, the format of quoting price stipulated in the tender

document in the present case is an essential condition and cannot be

permitted to be given a go-by as if such requirement were redundant or

superfluous. The approach of respondent no.1 in dealing with the

aforesaid deviation prima facie appears to be discriminatory and unfair to

other participants.

28. The respondent no.2 may have been declared as the lowest bidder

perhaps because of it not including the service tax component in the price

offered; thus rendering the petitioner as a participant exposed in an

uneven playing field. As a rule of law, it may not be necessary to award

contract to the lowest bidder. Times without number, it has been re-

confirmed that the principle of awarding a contract to a lowest tenderer is

applicable when other things are equal. A non-compliant bid even, if

lowest, is liable to be rejected.

29. During the course of the arguments, the petitioner who has been

adjudged as L-2 has undertaken to match the price quoted by respondent

no.2, thereby obviating any consideration regarding loss to the public

exchequer as well.

30. Seen in the aforesaid perspective, the decision of respondent no.1

in accepting the financial bid of respondent no.2 on 16.06.2016 is set

aside.

31. The respondent no.1 is directed to take a decision within a period

of 15 days from the date of passing of this order or intimation thereof,

keeping in mind the principles enumerated above.

32. The writ petition is allowed to the aforesaid extent.

CM 24663/2016

1. In view of the petition having been disposed of, the application has

become infructuous.

2. The application is disposed of accordingly.

ASHUTOSH KUMAR, J

BADAR DURREZ AHMED, J FEBRUARY 21, 2017/ab