Delhi High Court
Vaishnav Transformer vs Union Of India & Anr on 10 January, 2017
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Delivered on: 10th January, 2017
+ WP(C) 1672/2016 & CM NO.7189/2016 (STAY)
Vaishnav Transformer ..... Petitioner
Versus
Union of India & Anr .....Respondents
+ WP(C) 1950/2016 & CM NO.8414/2016 (STAY)
Vijay Kumar Jain, Proprietor Purity Cables ..... Petitioner
Versus
Union of India & Anr .....Respondents
Advocates who appeared in this case:
For the Petitioner: Mr Sandeep Sethi, Sr Advocate with Mr Vikram Mehta, Mr Siddhartha
Jain, Mr Varun Tikmani and Mr Gaurav Choudhary, Advocates.
For the Respondents: Mr Sanjay Jain, ASG with Mr Atul Batra, Ms Pallavi Shali, Mr Kundan
Mishra and Mr Akash Nagar, Advocates for respondent No.1.
Mr Parag P. Tripathi, Sr. Adv. with Mr Pranay Kishore Mishra and Mr
Sriniwasan Ramaswamy, Advocates for Respondent No.2
CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
JUDGMENT
SANJEEV SACHDEVA, J
1. These petitions seek quashing of the Request for Proposal
(hereinafter referred to as the RfP) dated 28.01.2016, read with
Request for Empanelment (hereinafter referred to as the RfE) dated
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16.10.2015 and a further direction to the respondents to consider the
petitioner for empanelment under the RfE dated 16.10.2015 and
thereafter to permit the petitioner to bid under the RfP dated
28.01.2016.
2. On 12.10.2015, the Power Grid Corporation of India Ltd.,
respondent No.2 issued an advertisement inviting interested parties to
empanel themselves with respondent No.2 for the purposes of
supplying cables, transformers, etc. Pursuant to the said
advertisement, the respondent No.2 issued RfE on 16.10.2015.
3. It is contended that the purpose of RfE clearly indicated that the
objective of empanelment was to obtain most competitive prices from
the empanelled parties to enable Power Grid Corporation of India Ltd.
to finalize a Rate Contract with them for supply of various
equipments/items.
4. In furtherance of the advertisement and RfE, it is contended that
in the pre-RfE Conference held on 30.10.2015, only about 60
manufacturers participated though there are approximately 2500
manufacturers in India.
5. On 28.01.2016, RfP was issued. Under the said RfP only the
empanelled manufacturers under the RfE could participate. It is
contended that a material change has been made in the RfP in as much
as the basis of placing orders has been changed from rate contract
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basis to e-reverse auction basis.
6. It is contended that since the petitioners were not interested in
supplying on rate contract basis, the petitioners did not apply for
empanelment under the RfE, which specifically stated that the
procurement shall be on rate contract basis.
7. It is contended that the respondent Power Grid Corporation of
India Ltd. has, subsequent to the empanelment of venders, in the RfP
changed the rules of the game. The changed condition deviates from
the concepts of the rate contract. Multiple rates for the same item are
now envisaged. Since the rules of the game have changed, the RfP is
liable to be quashed, as the same is restricted only to empanelled
venders, who were empanelled pursuant to the RfE, which specifies
procurement on rate contract basis.
8. Per contra, the respondent Power Grid Corporation of India Ltd.
has contended that the petitioners have has no locus standi to maintain
the respective writ petitions impugning the RfP as the petitioners did
not apply under the RfE for empanelment. If there was an issue, the
petitioners should have raised the same at the time of RfE.
9. It is contended that the RfP is restricted to those who have been
empanelled pursuant to the RfE and since the petitioners are not
empanelled, the petitioner have no locus standi to challenge the
conditions of RfP.
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10. It is further contended that e-reverse auction is only a bidding
process to arrive at a rate contract. It is contended that no changes
have been introduced in the RfP contrary to the RfE.
11. It is contended that the expression "rate contract" is a generic
term and represents Procurement Cost Reduction Strategy (PCRS),
which aims at standardizing the procurement prices for commonly
procured homogeneous and price varying inputs. The rate contract is
a standardization of the inputs and the predictability of the
procurement spends. The purpose of the rate contract is to discover a
price, which reduces the procurement cost.
12. It is contended that the reverse auction methodology is one of
the ways of discovering the competitive price for an assured supply at
a predictable cost. It is submitted that rules of the game have not been
changed and approximately 101 manufacturers have been empanelled.
It is submitted that even under rate contract there could be multiple
rates for the same item.
13. For the purpose of resolution of the disputes that have arisen in
the present petition, one would need to examine the clauses of RfE
and the RfP.
14. The relevant terms and condition of the RfE, read as under:-
"1.0 Power Grid Corporation of India Limited (A
Government of India Enterprise) incorporated under the
Companies Act, 1956, having its Registered Office at B-
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9, Qutab Institutional Area, Katwaria Sarai, New Delhi -
110 016 (hereinafter referred to as 'POWERGRID') have
been entrusted to empanel the manufacturers for
procurement of various Equipments/Items for different
States/Discoms under Deen Dayal Upadhyay Gram Jyoti
Yojana (DDUGJY)/Integrated Power Development
Scheme (IPDS) on behalf of Ministry of Power,
Government of India.
2.0 Accordingly, POWERGRID hereby solicits Request
for Empanelment (RfE) from Applicants (Manufacturers)
from within India, fulfilling the Qualifying Requirements
(QR) and meeting the minimum criterial stipulated for
empanelment as brought-out in Section -4 of the RfE
Document for the following equipments:
***** ***** *****
3.0 The RfE, alternatively referred to as 'Applications',
to be submitted by the Applicants shall include
qualification data in compliance to the stipulated QR and
other information/details/data/documentary evidences as
sought through this RfE Document. The Applicants must
meet the QR, which is a pass and fail criteria to be
considered for empanelment. In addition to the QR, the
empanelment also includes criteria for evaluating the
applications (referred to as „Marking Criteria‟) on
different attributes on a total score of 100 out of which
an Applicant must score minimum 60 marks to be
considered for empanelment. The Applicants who meet
the stipulated Qualification Requirements and obtain the
minimum score against the „Marking Criteria‟ shall be
empanelled for different equipments. Thereafter Request
for Proposal (RfP) shall be invited from the empanelled
parties to finalize a Rate Contract. For procurement of
the equipment, against which various States/Discoms
may place orders for procurement of the equipment as
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per their requirements from time to time. However, prior
to empanelment, POWERGRID reserves the right to
carry out the assessment of Applicants as per the
provisions of Section-4 of the RfE document.
***** ***** *****
1.2.1 POWERGRID, therefore, intends to empanel the
manufacturers for procurement of various
equipments/items under DDUGJY/IPDS Schemes. The
objective of this empanelment is to obtain most
competitive prices from the empanelled parties to enable
POWERGRID to finalize a Rate Contract with them for
supply of various equipments/items. Against the Rate
Contract different States/DISCOMs may choose to place
orders for procurement based on their requirement of
equipments/items from time to time, as per their choice."
15. The objective of issuance of RfE has been stated to be to
empanel the manufacturers for procurement of various
Equipments/Items for different States/Discoms under Deen Dayal
Upadhyay Gram Jyoti Yojana (DDUGJY)/Integrated Power
Development Scheme (IPDS) on behalf of Ministry of Power,
Government of India. The RfE stipulates that RfP shall be invited
from the empanelled parties to finalize a Rate Contract, for
procurement of the equipment, against which various States/Discoms
may place orders for procurement of the equipment as per their
requirements from time to time. Further, it is to obtain most
competitive prices from the empanelled parties to enable
POWERGRID to finalize a Rate Contract with them for supply of
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various equipments/items.
16. The relevant clauses of the RfP read as under:-
"8. Bid Prices
8.1 Unless otherwise specified in the Technical
Specifications, bidders shall quote for the entire
goods and related services on a "single
responsibility" basis such that the total bid price
covers all the Supplier‟s obligations mentioned in
or to be reasonably inferred from the Bidding
Documents in respect of the design, manufacture,
including procurement and subcontracting (if any)
and delivery of the goods. This includes all
requirements under the Supplier‟s responsibilities
for testing of the goods, where so required by the
Bidding Documents, the acquisition of all permits,
approvals and licenses, etc. and such other items
and services as may be specified in the Bidding
Documents, all in accordance with the
requirements of the General Conditions of
Contract. Items against which no price is entered
by the Bidder will not be paid for by the Purchaser
when executed and shall be deemed to be covered
by the prices for other items.
8.2 Bidders are required to quote the price for the
commercial, contractual and technical obligations
outlined in the Bidding Documents.
8.3. Bidders shall give a breakdown of the prices in the
manner and detail called for in the Price
Schedules.
8.3.1 Set/Lot/Lumpsum shall be governed as per
the requirement of the corresponding item
description read in conjunction with
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relevant provisions of Technical
Specifications.
8.3.2 It shall be the responsibility of the bidders to
pay all statutory taxes, duties and levies to
the concerned authorities for such surplus
material, which would otherwise have been,
lawfully payable. The bidders shall submit
an indemnity bond to keep Purchaser
harmless from any liability, before release
of such material to the bidder by Purchaser.
8.4 In the schedules, Bidder shall give the required
details and a break down of their price as follows:
(a) Goods to be supplied, shall be quoted on an EXW
(ex-factory, ex-works, ex-warehouse or off-the-self,
as applicable) basis. EXW price shall be inclusive
of all cost as well as duties and taxes (viz., custom
duties & levies, duties, sales tax/VAT etc.) paid or
payable on components, raw materials and any
other items used for their consumption
incorporated or to be incorporated in the Goods.
Sales tax/VAT, Excise duty and Entry tax as
applicable for destination site/state shall not be
included in the EXW price but shall be indicated
wherever applicable in respective column of Price
Schedule.
Whenever EXW price is quoted exclusive of excise
duty and/or VAT, then the due credit under the
CENVAT (Central Value Added Tax)/VAT scheme
as per the relevant Government policies wherever
applicable shall be taken into account by the
Bidder while quoting bid price. All other taxes,
duties and levies shall be included in the quoted
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EXW price. The name of states/Discoms who shall
issue requisite Sales Tax Declaration forms for the
goods to be supplied, is attached at Annexure-II to
Section-II. The bidders are, however, advised to
ascertain the status of issuance of requisite Sales
Tax Declaration forms by a particular
state/Discom arid quote their prices accordingly.
(b) Local Transportation, insurance and other
Services incidental to delivery of the Goods to be
supplied shall be quoted separately.
(d) The Bidders shall include Service Tax and
surcharge/cess etc. on it as applicable in their
quoted bid price and Purchaser would not bear
any liability whatsoever on this account.
Purchaser (or the Purchaser on behalf of the
Owner) shall, however, deduct such tax at source
as per the rules and issue necessary Certificate to
the Supplier.
(e) The Bidder shall include insurance charges in its
bid prices as per insurance requirement mentioned
in Section - III: General Conditions of Contract
(GCC) and Appendix-3: Insurance Requirements
to Form of Contract Agreement as contained in
Section III: Sample Forms and Procedures
(FORMS) of the Bidding Documents.
8.5 The prices shall be in accordance with the
following:
Adjustable Price: Prices quoted by the Bidder
shall be subject to adjustment during performance
of the contract to reflect changes in the cost
elements such as labor, material etc. in
accordance with the procedures specified in the
corresponding Appendix - 2 to the Form of
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Contract Agreement. A bid submitted with a fixed
price quotation will not be rejected, but the price
adjustment will be treated as zero. The price
adjustment provision will not be taken into
consideration in bid evaluation. Bidders are
required to indicate the source of labour &
materials indices in Attachment of the Price
Schedule."
17. The bidding process has been described as under:-
"14.2 Description of the Bidding Process
14.2.1 The Bidding would be conducted through a
two stage process comprising of:
a) Techno-commercial Bid in which Bidders
would be required to furnish requisite Bid
Security pursuant to ITB Clause 10 and
confirmation of compliance to the provisions
of the Bidding Documents; and
b) Financial Bid comprising of: (i) the Initial
Price Offer; and (ii) the Final Price Offer.
The Initial Price Offer is required to be
submitted along with the Techno-
commercial Bid. It is hereby clarified that
the Financial Bid will comprise of two
rounds. In the First round the Initial Price
Offer of the Technically Qualified Bidders
would be opened and ranked on the basis of
ascending order for determination of the
Qualified Bidders as provided in Clause
14.2.2 (b) below. The Qualified Bidders
shall be eligible to participate in the
electronic Reverse auction and submit their
Final Price Offer.
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14.2.2 The two stage bidding process would be
conducted in the following sequence:
(a) Technical Qualification:
In the first stage, the Bidders would be
required to submit: (i) the Bid Security; (ii)
confirmation of compliance to the provisions
of the Bidding Documents; and (iii) the
Financial Bid to the extent of specifying the
Initial Price Offer.
The Techno-Commercial Bid of each Bidder,
which is duly submitted in accordance with
the Bidding Document along with the Bid
Security shall be opened by the Nodal
Authority on the date, time and places
mentioned in Bidding document and in the
presence of the Bidders who choose to
attend.
The Techno-commercial Bid shall be
evaluated against the criteria stipulated in
the Bidding Documents.
(b) Ranking and Qualification:
The initial Price Offer of the Bidders who
meet all the Eligibility Conditions (the
"Technical Qualified Bidders") shall be
ranked on the basis of the ascending initial
Price Bid submitted by each Technically
Qualified Bidder. Basis such ranking the
Technically Qualified Bidders, holding first
fifty percent of the ranks (with any fraction
rounded off to higher integer) or seven(07)
Technically Qualified Bidders, whichever is
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higher, shall be considered to be qualified
for participating in the electronic auction
(the "Qualified Bidders"). However, in
case the number of Technically Qualified
Bidders is less than 7, all the bidders shall
be considered to be qualified for
participating in the electronic auction.
Since the ranking shall be done
packagewise, the bidder in a particular
package is required to submit the prices for
all the items in a package.
(c) Final Price Offer:
The Applicable Ceiling Price for electronic
auction for bidder shall be Initial Price
Offer received from the respective
Technically Qualified Bidders. The
Qualified Bidders shall be permitted to
place their Final Price Offer on the
electronic auction platform, which shall be
lower than the Applicable Ceiling Price. The
Qualified Bidders, for respective quantity
allocated during the electronic auction
process, shall be declared as the
"Successful Bidder".
***** ***** *****
23. Award Criteria.
23.1 Subject to ITB Clause 27, the Purchaser will
award the Contract to the successful Bidders
whose bid has been determined to be
substantially responsive and to be the lowest
evaluated bid, further provided that the
Bidder is determined to have the requisite
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capacity and capability to perform the
contract satisfactorily."
18. The RfP shows that the bidders have to quote for the entire
goods and related services on a "single responsibility" basis so that
the total bid price covers all the Supplier's obligations in respect of
the design, manufacture, including procurement and subcontracting (if
any) and delivery of the goods. Prices quoted by the Bidder are
subject to adjustment during performance of the contract to reflect
changes in the cost elements such as labor, material etc. in accordance
with the procedures specified in Contract Agreement.
19. The Bidding is to be conducted through a two-stage process
comprising of a) Techno-commercial Bid and b) Financial Bid
comprising of (i) the Initial Price Offer; and (ii) the Final Price Offer.
The Initial Price Offer is to be submitted along with the Techno-
commercial Bid.
20. The Financial Bid comprise of two rounds. In the First round,
the Initial Price Offer of the Technically Qualified Bidders is to be
opened and ranked based on ascending order for determination of the
Qualified Bidders. The Qualified Bidders would be eligible to
participate in the electronic Reverse auction and submit their Final
Price Offer. Based on the ranking, the Technically Qualified Bidders,
holding first fifty percent of the ranks or seven (07) Technically
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Qualified Bidders, whichever is higher, are to be considered qualified
for participating in the electronic auction. If the Technically Qualified
Bidders is less than 7, all the bidders are to be qualified for
participating in the electronic auction. The ranking is to be done
package wise, and the bidder in a particular package is required to
submit the prices for all the items in the package.
21. The Applicable Ceiling Price for electronic auction for bidder is
the Initial Price Offer received from the respective Technically
Qualified Bidders. The Qualified Bidders are permitted to place their
Final Price Offer on the electronic auction platform, which is to be
lower than the Applicable Ceiling Price. The Qualified Bidder, for
respective quantity allocated during the electronic auction process, is
to be declared as the "Successful Bidder".
22. The award of Contract it to be to the successful Bidders whose
bid is determined to be substantially responsive and the lowest
evaluated bid, provided that the Bidder has requisite capacity and
capability to perform the contract satisfactorily.
23. It may be seen that the term "rate contract" is not defined by
either the RfE or RfP.
24. Rate Contracts are agreement under which a seller agrees to sell
and buyer agrees to purchase specified item or items at a fixed price
during a fixed period of time. The quantity of the item may or may not
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be fixed. Within the specified period, whenever the need arises, the
buyer would issues a Purchase order based on the fixed rate on the
supplier. This system of rate contract is prevalent in Public Sector
Organisations, government departments and big corporations. In
cases, where there are several individual departments/organisations
requiring to make purchases, then following the Rate Contract system
reduces expenditure as well as internal administrative lead time.
Individual departments/organisations need not follow the process of
inviting tenders and selecting the supplier. The central agency would
enter into a rate contract with the supplier, which contract would be
valid qua specified item/items, quantity and period.
25. Wherever a department requires that particular item, within the
stipulated period of contract, it can directly place an order for supply
of the said item on the seller. Because the price is fixed, there is no
necessity of calling for tenders to determine the price. At times, the
quantity that the supplier has agreed to supply is also fixed. In case the
department requires a larger quantity than that stipulated by the seller,
then it can place orders on multiple suppliers.
26. Rate contract, could also be referred to as a standing offer by
the seller, which stipulates the period during which the seller offers to
sell a specified item at a fixed rate. The seller may or may not limit
the offer to a particular quantity. The purchase order by the buyer
amounts to and concludes the contract.
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27. In the present case, the Respondents have adopted a two-step
mechanism for entering into a rate contract. In the first step, bids are
invited from manufacturers for empanelment through the RfE. The
empanelment is for procurement of various Equipments/Items for
different States/Discoms under Deen Dayal Upadhyay Gram Jyoti
Yojana (DDUGJY)/Integrated Power Development Scheme (IPDS)
on behalf of Ministry of Power, Government of India. The RfE
stipulates that RfP shall be invited from the empanelled parties to
finalize a Rate Contract.
28. In the second step, the parties empanelled through the RfE
process have to submit bids through a two-stage process comprising
of a) Techno-commercial Bid and b) Financial Bid comprising of (i)
the Initial Price Offer; and (ii) the Final Price Offer. The Initial Price
Offer is to be submitted along with the Techno-commercial Bid.
29. The Financial Bid comprises of two rounds. In the First round,
the Initial Price Offer of the Technically Qualified Bidders is to be
opened and ranked, based on ascending order, for determination of the
Qualified Bidders. Based on the ranking, the Technically Qualified
Bidders, holding first fifty percent of the ranks or seven (07)
Technically Qualified Bidders, whichever is higher, are to be
considered qualified for participating in the electronic Reverse auction
and submit their Final Price Offer. The Qualified Bidder, for the
respective quantity allocated during the electronic auction process, is
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to be declared as the "Successful Bidder". The award of Contract it to
be to the successful Bidder for the respective quantity, whose bid is
determined to be substantially responsive and the lowest evaluated
bid, provided that the Bidder has requisite capacity and capability to
perform the contract satisfactorily.
30. The purpose of the e-reverse auction methodology devised by
the respondents is to discover the price. Instead of a single bid for
price determination, the respondents have devised the mechanism of
reverse auction, under which the price determined may even be lower
than the initial lowest bid. The contention of the petitioners that the
rules of game have been changed by prescription of reverse auction is
not sustainable. The process of reverse auction is only for determining
the price, for the purposes of entering into a rate contract.
31. The RfE clearly stipulates that only the empanelled
manufacturers would be eligible to participate in the RfP. The
petitioners did not participate in the RfE. Because the petitioners did
not participate in the RfE and are not empanelled, they cannot be
permitted to raise a challenge to the terms and conditions of the RfP,
which is restricted to empanelled suppliers.
32. Rate contract for a specified item can also be with multiple
sellers. As noted above, a rate contract need not be for supply of an
unlimited quantity. A seller may have a limited supply capability or
may agree to offer a limited quantity at a given price. Restricting the
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rate contract to only those sellers who can supply unlimited quantity
would disentitle the departments from purchasing the item
economically from a seller who is able to supply, only a limited
quantity, at a lower rate. Thus, there can be situations, under a rate
contract, where for the same item, there are multiple rates. This would
not prejudice the departments because the departments would always
be at liberty to place orders on the seller who is offering the lowest
price for the item.
33. In view of the above, we find no merit in the petitions. The writ
petitions are accordingly dismissed with no orders as to costs.
SANJEEV SACHDEVA, J.
BADAR DURREZ AHMED, J.
JANUARY 10 , 2017
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