Delhi High Court
Delhi Waste Management Limited ... vs Sdmc And Ors. on 3 July, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 26.04.2017
Pronounced on: 03.07.2017
+ W.P.(C) 9728/2016 & C.M. APPL.38891/2016
DELHI WASTE MANAGEMENT LIMITED AND ANR
..... Petitioners
Through : Sh. Sandeep Sethi, Sr. Advocate and
Sh. Sanjeev Sen, Sr. Advocate with Sh. Rakesh
Sinha, Sh. Samrat Sengupta and Sh. Soumyajit
Nath, Advocates.
versus
SOUTH DELHI MUNICIPAL CORPORATION AND ORS.
..... Respondents
Through : Sh. Gourab Banerji, Sr. Advocate with
Sri Harsha Peechara, ASC and Sh. Ashish Tiwari,
Advocate, for SDMC.
Sh. Parag Tripathi, Sr. Advocate with Sh. Piyush
Joshi, Ms. Sumiti Yadava and Ms. Preksha Dugar,
Advocates, for Respondent No.2.
Ms. Manmeet Arora with Ms. Nidhi. M. Parashar
and Ms. Sanam Tripathi, Advocates, for
Respondent No.6.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE YOGESH KHANNA
MR. JUSTICE S. RAVINDRA BHAT
%
1. The petitioner is aggrieved by the rejection of its tender/bid for
collection and transportation of municipal solid waste and street sweeping
waste for the two zones of the respondent Municipal Corporation (hereafter
W.P.(C) 9728/2016 Page 1 of 16
called "the SDMC"), i.e. South and West Zone for eight years. The petitioner
seeks a direction for the quashing of the tender process and a declaration that
SDMC's decision that it was ineligible is contrary to law.
2. The brief facts are that the SDMC, a Corporation set-up under the
Delhi Municipal Corporation Act, 1957 issued a notice inviting tenders
(NIT) eliciting bids from interested parties for proposal to collect and
transport municipal solid wastes and related services for two of its zones, i.e.
South and West. The duration of the contract to be awarded was eight years.
In terms of clause 2.10.4 of the NIT, the bid was in three parts - i.e. the bids
had to furnish Envelope A comprising Part-I, i.e. qualifying documents;
Envelope B comprising Part-II Technical Bid and Envelope C, comprising
Part-III Financial Bid. The last date of bid submission was 29.09.2016.
Envelope A, i.e. the part containing qualifying documents was to be done on
29.09.2016. The due date for submission of bids was extended to 13.10.2016
by an addendum, dated 02.09.2016. Envelope A, including Part-I of the
qualifying documents relating to bids was opened on 13.10.2016 at 12.30
PM. The petitioner relies upon its work accounts, including work done for
the erstwhile unified municipal corporation on 31.01.2005 for the South and
City Zones and in this regard relied upon a certificate dated 22.09.2016
issued by the SDMC stating that it handled 434 waste storage depots by
utilizing its waste management fleet. As scheduled on 13.10.2016, Envelope
A comprising Part I was opened. It is contended that certain observations
were made regarding incomplete particulars of a few bidders. However, no
observations were made with respect to the petitioner and the contesting
Respondent nos. 2 to 7.
W.P.(C) 9728/2016 Page 2 of 16
3. It is alleged that on 18.10.2016, unbeknown to the petitioner,
Envelopes B and C which comprised the other parts of the two bids were
opened by SDMC without intimation and the petitioner's bid was
categorized as unresponsive under Clause 4.2.2. Later, the second and third
respondents were declared as successful bidders for South and West Zones
of SDMC respectively.
4. The petitioner alleges that though clause 2.14 of the NIT authorizes
SDMC to reject the bid without assigning reasons, the Corporation cannot
take unilateral action without any cause as that would be arbitrary and
violative of Articles 14 and 19(1)(g) of the Constitution. The petitioner relies
upon the previous instance of an NIT issued earlier but cancelled and
discharged by the SDMC and submits that in that particular case, the SDMC
evaluated all the bids to determine which was the best through a grading
process. In the present case, however, the SDMC did not adopt any grading
process and proceeded to reject the petitioner's bid.
5. The SDMC, in response to this Court's notice, filed an affidavit on
03.11.2016. Its justification for treating the petitioner's bid as non-
responsive is based upon clauses 2.1.13 to 2.1.15 of the NIT. It is urged that
the NIT prescribed the procedure for opening bids and their evaluation.
Under clause 4.1.3, the proposal is to be checked for responsiveness and only
those deemed responsive could be evaluated for qualification. The SDMC
contends that under clause 4.2.1 a bid is considered responsive if it meets
certain conditions. One of them, i.e. clause 4.2.1(h) prescribes that the
proposal is to be accompanied by a non-collusion and anti-bribery,
corruption certificate and declaration with respect to litigation contained in
W.P.(C) 9728/2016 Page 3 of 16
clause 2.1.11, 2.1.12 and 2.1.13 in accordance with format provided in
Appendix 4(A)(B), as well as Integrity Pact in terms of the format provided
in Appendix 4(C) on stamp paper duly endorsed. In the event of material
representation, the SDMC is empowered by clause 2.5.3 to disqualify the
bidder.
6. SDMC urges that 7 bidders participated in the tender process,
including the petitioner. The petitioner submitted a declaration under
Appendix 4(B) as required by para 2.1.14 and stated that neither the entity
nor any person relating to it was involved in any activity described in para
2.1.11-2.1.13 that could result in its disqualification. SDMC states that in
respect of some work, the NIT had been earlier invited on 04.07.2016,
including that of the petitioner. After opening of the technical bids on that
occasion on 09.08.2016, the Corporation received complaints against all
competitors including the petitioner. The complaint disclosed that in another
tender called by the Rajasthan Urban Drinking Water Sewerage and
Infrastructure Corporation Limited (RUDSICO) [hereafter referred to as "the
Rajasthan Water Corporation"], letters of acceptance for the sum of ` 1275
crores issued to M/s. SPML Infra Limited [hereafter referred to as "SPML"[
and Tata JV, an associate of the first petitioner was cancelled due to breach
of code of integrity. The previous tender process was annulled and fresh
process was called for by the present NIT.
7. SDMC urges that the first petitioner is a subsidiary of SPML and it
submits that a further clarification was sought from the Rajasthan Water
Corporation by e-mail dated 12.08.2016 to which a reply was received
clarifying that LOAs for ` 1275 crores were withdrawn on account of breach
W.P.(C) 9728/2016 Page 4 of 16
of code of integrity by the competitor, i.e. SPML. SDMC has produced a
copy of the certificate. Apparently, SDMC also sought further clarification
from the petitioner in response to that letter as to the rationale for the
cancellation. The petitioner, however, according to the SDMC,
misrepresented that the Rajasthan Water Corporation was empowered to
accept or reject the bid without assigning any reasons and that the underlying
reason for cancellation of the bid in favor of SPML-Tata JV was not on
account of breach of code of integrity. SDMC contends that both the
conditions relied upon by the Rajasthan Water Corporation established that
the letters of acceptance to the tune of ` 1275 crores were
withdrawn/cancelled on account of breach of integrity code. It is submitted
that for these reasons, the petitioner's bid was deemed unresponsive and
consequently rejected.
8. Learned senior counsel for the petitioner urged that the rejection of the
bid was arbitrary. Considerable reliance was placed upon the SDMC
certificate saying that the petitioner had performed its task satisfactorily. It
was contended that the petitioner's bid for the very same work was neither
deemed non-responsive nor rejected on an earlier occasion when the NIT
was issued in July 2016. In the circumstances, there being no change in the
material facts, the SDMC could not have determined that the petitioner's bid
was ineligible. In other words, the Rajasthan Water Corporation's response
and documents were available with SDMC even in July-August 2016.
Significantly, the petitioner's bid was not cancelled. A different view,
therefore, could not be taken against the petitioner with respect to the same
material. It was consequently contended that the construction placed upon
W.P.(C) 9728/2016 Page 5 of 16
the terms and conditions of the NIT together with the materials furnished by
Rajasthan Water Corporation and the NIT concerning that bid nowhere
justified the cancellation of the bid in this case. It is urged that the breach of
code of integrity alleged was merely a unilateral assumption and not based
upon any finding. Furthermore and more importantly, the petitioner was not
adjudged as culpable but some other entity or body. In the circumstances, the
SDMC could not have held or decided that the petitioner was guilty of
breach of contract or integrity thereby leading to cancellation of its bids.
9. SDMC as well as the private respondents rely upon the documents on
record, including the documents furnished by Rajasthan Water Corporation.
They urge that the decision of SDMC not to treat the petitioner's bid as
responsive is reasonable and just in the circumstances. The petitioner clearly
furnished a false declaration by not disclosing that the bidder concerned -
and in fact its parent company were determined to be in breach of integrity
code that led to the cancellation of a bid by another public agency. That bid
too was for an extent of ` 1275 crores. Admittedly, the rejection of that bid
and cancellation of letter of acceptance had not been set aside. In the
circumstances, the petitioner cannot claim the relief that it seeks in this case.
To decide the dispute and controversy, it is essential to set out some of the
essential conditions, particularly those relating to qualification of bidders and
evaluation of the bids in that regard. Section A of the NIT, inter alia through
clauses 2.1.12 to 2.1.15, set-out certain disqualifications, that read as
follows:
Clause 2.1.12 to 2.1.15
W.P.(C) 9728/2016 Page 6 of 16
2.1.12 Any applicant/bidder including a consortium member or
associate either himself or its director, who has been convicted
in any criminal activity or in any criminal breach of trust or
malpractice or unfair trade activity in any form shall not be
eligible to bid. The conviction by court of law in respect of any
of the activities mentioned above will debar the
entity/consortium from bidding in the tender unless the same
has been stayed/suspended by the court.
2.1.13 Any applicant/bidder including consortium member or
associate, if found by any of its employing agency, lacking
integrity or having engaged or indulged in any corrupt
practice/fraudulent practice/coercive practice/undesirable
practice/restrictive practice in any form shall not be eligible to
bid.
2.1.14 The applicant/bidder shall submit an affidavit in respect of
clauses 2.1.11 to 2.1.13 in the format prescribed in appendix
IV(B). In case any applicant/bidder conceals any such
information or gives any wrong information, then he shall be
liable to be disqualified.
2.1.15 For purposes of this RFP, the applicant/associate means, in
relation to the Bidder/ consortium Member, a person who
controls, is controlled by or is under the common control with
such Bidder/ consortium Member (the "Associate") in respect
of the business of Solid Waste Management. As used in this
definition, the expression "control" means, the ownership,
directly or indirectly, of more than 50% (fifty per cent) of the
voting share of such person.
10. Clause 4.2.1 which sets out the various factors for determining the test
of responsiveness and qualification, by acting through the requirements of
the NIT and the request for proposal (RFP) inter alia provides as follows:
Clause 4.2.1
W.P.(C) 9728/2016 Page 7 of 16
4.2.1 Test of Responsiveness and Qualification- As part of the
evaluation, the Proposals shall first be checked for
responsiveness with the requirements of the RFP and only those
Proposals which are found to be responsive would be further
evaluated for qualification in accordance with the criteria set
out in this RFP document in Clause 3. The Proposal would be
considered to be responsive if it meets the following conditions:
XXXXXX
h. It is accompanied by the Non-Collusion and Anti-Bribery,
Corruption Certificate and Declaration of Litigation as
stipulated in Clauses 2.1.11, 2.1.12 and 2.1.13 and as per
format provided in Appendix IV(A)(B) & Integrity Pact as per
format provided in Appendix IV(C) on a Stamp paper duly
notarized.
11. It is, therefore, evident that the integrity condition was deemed
essential by SDMC. Every bidder had to furnish a separate Anti-Collusion
Certificate as provided in Appendix 4(A). That document inter alia reads as
follows:
"ANTI-COLLUSION CERTIFICATE
We hereby certify and confirm that in the preparation
and submission of our Proposal for the Project titled [Project
Name] we have not acted in concert or in collusion with any
other Bidder or other person(s) and also not done any act, deed
or thing which is or could be regarded as anti-competitive.
We further confirm that we have not offered nor will
offer any illegal gratification in cash or kind to any person or
agency in connection with the instant Proposal.
Dated this......................Day of........20**
W.P.(C) 9728/2016 Page 8 of 16
...........................
(Name of the Bidder1)
..........................."
Appendix 4(B) is an undertaking that reads inter alia as follows:
"UNDERTAKING
We hereby certify and confirm that the entity/all the
members of the consortium is/are carrying out business fairly,
honestly and openly. The entity/any person related to the entity
has never offer/pay promise or authorize to pay money, gifts or
anything of value, including but not limited to bribes,
entertainment, facilitation payments, kickbacks or any benefit,
directly or indirectly, to any person or company whether a
public official or private person or company, in order to
improperly secure or retain any business or to obtain, retain or
secure an improper advantage in the conduct of any business.
We also conform that neither the entity nor any personal
related to the entity is black listed/debarred/suspended for
business for any similar work by the Central/any State
Government, any Urban Local Bodies, or any entity controlled
by them from participating in any project as on date of opening
of the bids.
We also confirm that neither the entity nor any person
related to the entity is involved in any such activity as per
clause 2.1.11, 2.1.12 & 2.1.13 which can lead to
termination/disqualification from this bidding process.
Dated this......................Day of........20**
...........................
(Name of the Bidder1)
..........................."
12. Appendix 4(C) is the format of the integrity pact between the SDMC
and the bidder/contractor. Section 5 of that format prescribed as follows:
"Section 5 - Previous transgression
(1) The Bidder declares that no previous transgressions
occurred in the last 3 years with any other Company I any
country conforming to the anti corruption approach or with any
other Public Sector Enterprise in India that could justify his
exclusion from the tender process.
(2) If the Bidder makes incorrect statement on this subject,
he can be disqualified from the tender process or action can be
taken as per the procedure mentioned in "Guidelines on
Banning of business dealings."
13. It is not in dispute in the present case that the petitioner had earlier
participated in the bid which did not materialize; on account of complaints
received, the SDMC cancelled the entire tender process and instead
proceeded to issue a fresh NIT which is the subject matter of litigation.
During that abortive tender process, certain materials were made available to
SDMC from Rajasthan Water Corporation on account of contracts awarded
to the petitioner or parent company by the Rajasthan Water Corporation. The
petitioner's first argument is that since that material was not given any
importance or not made the basis for further enquiry resulting in any
disqualification, it could not have been utilized to disqualify or reject the bid
in the present process. In the opinion of this Court, there is no merit in this
contention. SDMC in its reply has clearly stated that the entire tender process
was cancelled on account of complaints received against all the bidders. This
means that the entire tender process was rendered inchoate because
complaints were received against several bidders. Instead of choosing to
make a detailed scrutiny in respect of each bidder and every complaint, the
SDMC adopted a more convenient and perhaps time-effective mode of
cancellation and resorted to retendering. This meant that the SDMC
acknowledged that several potential bidders had a problem, at the same time
this did not mean that bids furnished were deemed responsive or non-
responsive. The end result was only to ensure wider participation in a fresh
process where a detailed scrutiny or all eligible bidders was to be
undertaken. It is expected that public agencies and executive bodies have
sufficient circumstantial flexibility in these matters and need not proceed to
award or accept a bid and enter into a contract with a particular vendor or
service provider and instead, for justifiable reasons, proceed with a fresh
tender. The cancellation of the previous tender process was neither
questionable, nor could it be, in the opinion of the Court, having regard to
the materials on record, be called into question. In these circumstances, the
petitioner's argument that using a material which was received in the
previous bid process is somehow precluded, cannot be sustained. That
argument is without merit. The second and more substantial issue is whether
in the given circumstances, resort to clause 4.3 in the present case and
rejection of petitioner's bid as non-responsive, was justified. The preceding
analysis of various conditions of the NIT, such as Clauses 2.1.12 to 2.1.15,
the RFP, the nature of undertakings and declarations to be furnished and the
integrity pact that was to be entered into by the SDMC and the petitioner
leave no manner of room of doubt that integrity based performance (to the
extent of 3 years) - as stipulated in the appendix to the NIT, were vital.
SDMC had received information from the Rajasthan Water Corporation -
through email dated 12.08.2016 that the letter of acceptance issued to SPML
had been cancelled. Upon further query, clarifications were issued by the
Rajasthan Water Corporation, enclosing copies of tender/LOA cancellation
letters. The letter cancelling the LOA/award of contract to SPML-Tata JV
clearly states that the action was pursuant to clause 5.13.1 of Volume I
Section I and Clause 16.6 of Volume I Sections I and VI of General
Conditions of Contract (GCC) of the tender document. The letter issued by
the Rajasthan Water Corporation to the said tenderers SPML-Tata JV dated
22.07.2016 reads as follows:
"F-12(76)/RUDSICO/AMRUT/2015-16/7320 dated
22.07.2016
CANCELLATION OF LETTER OF ACCEPTANCE
M/s. SPML Infra Limited-M/s. TATA Projects Ltd. JV
F-27/2, Okhla Industrial Area
Phase-II, New Delhi.
Subject: Work of providing, Laying, Jointing, Testing and
Commissioning of sewer system and all ancillary works along
with Design, Construction, Supply, Installation, Testing and
Commissioning (Civil, Mechanical, Electrical & Other
necessary works) of SPS & STPs with provision for reuse of
treated waste water including one year defect liability and
thereafter 10 years O&M - at Bharatpur, Hindaun, Gangapur
City &Churu towns (Package-"A")
Reference: Letter of acceptance issued by this office vide no.F-
12(76)/RUDSICO/AMRUT/2015-16/7014-7026 dated
08.07.2016.
In pursuant to Clause No.5.13.1 of Volume-I, Section-I
(Instructions to Bidders) and Clause No.16.6 of Volume I
Section VI (General Conditions of Contract) of Tender
Document, the Letter of Acceptance issued as per details given
under reference stands cancelled with immediate effect.
Sd/-
(Dr. B.L. Jatawat)
Executive Director
RUDSICO, Jaipur"
14. The SDMC also relies upon clause 5.13.1 of Volume I Section I
containing instructions to the bidders issued by the Rajasthan Water
Corporation which reads as follows:
"
5.13 Procuring Entity's 5.13.1 The Procuring Entity reserves the
Right to Accept any right to accept or reject any Bid,
Bid, and to Reject and to annul the Bidding process
Any or all Bids and reject all Bids at any time prior
to contract award without assigning
any reasons thereof and without
there by incurring any liability to
the Bidders.
15. Reliance is also placed by SDMC upon Rajasthan Water
Corporation's Volume I Section VI of the GCC of its tender which reads as
follows:
Corrupt, 16.6 If the procuring entity determines that the Contractor,
Fraudulent, his sub-Contractors or any of their personnel has
Collusive or breached the code of integrity prescribed in the Act, the
Coercive Rules, or the Instructions to Bidders [Section I of the
Practices Bidding Document] or has engaged in corrupt,
fraudulent, collusive or coercive practices, in
competing for or in executing the contract, then the
procuring entity may, after giving 14 days notice to the
contractor:
i. terminate the contract and expel him from the
Site,
ii. forfeit or encash performance security and
any other security or bond relating to this
contract,
iii. recover the payments made under the
contract along with interest thereon at bank
rate,
iv. recover compensation for loss incurred due to
termination of the contract including excess
expenditure, if any, incurred in getting the
remaining work executed from other agency
under sub-clause 16.1
For the purposes of this sub-clause:
i. "corrupt practice" means the offering,
giving, receiving or soliciting directly or
indirectly, of anything of value to influence
the action of a public official in the
procurement process or in the contract
execution;
ii. "fraudulent practice" means a
misrepresentation or omission of facts in
order to influence a procurement process or
the execution of the contract;
iii. "collusive practice" means a scheme of
arrangement between two or more bidders,
with or without the knowledge of the
procuring entity, designed to establish bid
prices at artificial, non-competitive levels;
iv. "coercive practice" means harming or
threatening to harm, directly or indirectly,
persons or their property to influence their
participation in the procurement process or
affect the execution of a contract.
Should any employee of the contractor be
determined to have engaged in corrupt, fraudulent
or coercive practice during the execution of the
works then that employee shall be removed in
accordance with sub-clause 6.11 [contractor's
personnel]
16. A plain reading of both the provisions 15.13.1 and 16.6 reveal that the
power to cancel the contract used by the Rajasthan Water Corporation was
for non-compliance with the conditions in clause 16.6. That condition clearly
states that if the bidder or anyone connected/engaged in corrupt, fraudulent,
collusive or coercive practices in bidding for or in execution of the contract,
it would be terminable. That clause also defines fairly exhaustively what are
"corrupt", "fraudulent", "collusive" and "coercive" practices. There cannot
be any doubt in view of the letter dated 22.02.2016 that Rajasthan Water
Corporation decided to cancel and revoke its letter of acceptance issued to
SPML-Tata JV - which is concededly the petitioner's parent company, on
account of corrupt practices. It is now settled law that tender conditions and
public advertisements setting out eligibility conditions for participation in
bids invited by public agencies bind bidders as well as the concerned
executive agencies (refer Ramana Dayaram Shetty v. The International
Airport Authority 1979 AIR 1628). It is also settled law that unless there is
procedural irregularity, illegality or mala fides in the award of tenders and
entering into of the public contracts, the Courts would not exercise their
discretion under Article 226 of the Constitution to interfere with the
executive process. Equally, the Courts cannot mandate the executive
agencies to enter into contract with particular individuals or concerns unless
the facts found are so stark as to lead it to conclude that in the given
situation, the decision impugned is not one which any reasonable person
could have taken, having regard to the facts. None of those features are
present here. The cancellation of the petitioner's bid was upon an appropriate
and reasonable application of the conditions that governed the NIT. The
SDMC's decision is, therefore, unimpeachable.
17. For the foregoing reasons, the Court is of the opinion that there is no
merit in the petition. It is accordingly dismissed. There shall be no order as
to costs.
S. RAVINDRA BHAT
(JUDGE)
YOGESH KHANNA
(JUDGE)
JULY 03, 2017
