Delhi High Court
National Oilfield Equipment & ... vs Oil And Natural Gas Corporation ... on 6 July, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
DECIDED ON : JULY 06, 2017
+ W.P.(C) 3592/2017 & CM Nos.15800-802/2017
NATIONAL OILFIELD EQUIPMENT & SERVICES (W.L.L)
..... Petitioner
Through : Mr.Balbir Singh, Sr.Advocate,
with Mr.Sandeep Bajaj,
Mr.Soayb Qureshi, Ms.Rubal
Maini and Ms.Aakanksha,
Advocates.
versus
OIL AND NATURAL GAS CORPORATION LIMITED &
ANR
..... Respondents
Through : Mr.Varun Mishra, Advocate, for
R-1.
Mr.Anil Airi, Sr.Advocate, with
Ms.Sukanya Lal and Mr.B.Singh,
Advocates for R-2.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE S.P.GARG
S. RAVINDRA BHAT, J. (OPEN COURT)
W.P.(C) 3592/2017 P age 1 of 18
1. The petitioner questions rejection of its bid, for supply of 12863
MT of Potassium Chloride (tender value to be `103 crores). The tender
(NIT) was issued by Oil and Natural Gas Corporation (ONGC) on
4.10.16, inviting bids for the supply of Potassium Chloride for the
requirement of various ports/basins of ONGC.
2. The petitioner is a Jordian incorporated company; it provides
oilfield chemicals and equipments. It claims to have experience for at
least twenty years as a regular supplier of Potassium Chloride to
ONGC. Furthermore, it has the reputation of supplying Potassium
Chloride to major oil drilling companies across the world and has been
awarded the tender, in the subject tender itself for two ports for Chennai
and Kolkata. Its main contention in these proceedings is with respect of
rejection of this tender for supply of the tendered articles at Mumbai
port. For Mumbai port, its bid was US$ 503.95 per MT; the successful
bidder i.e. RNA International Marketing (M.E.) (FZE) offered US$
500.92 per MT. On the basis of this price comparison, RNA
International Marketing (M.E.) (FZE) (hereinafter 'RNA') was treated
L-1 and declared successful.
3. As required under the contract, the petitioner raised its grievance
with the Independent External Monitor i.e. IEM. It was contended
firstly that RNA (the bidder) did not exist at the time when samples
were given for testing, and that the manufacturer's letter of
authorization being Dead Sea Works Limited, an Israeli based
company. It was submitted that in these circumstances the bid ought to
have been rejected. The other contention made was that change of
name by RNA (as previously known as M/s Flawless Trading) was
W.P.(C) 3592/2017 P age 2 of 18
deceptive and a device to bid for the contract. The petitioner contended
that M/s Flawless Trading essentially was a jewellery manufacturer and
exporter owned by a single shareholder. Its metamorphosis into RNA,
was shrouded in suspicion and dubious. The petitioner sought to
highlight that RNA, the successful bidder, did not have the ability or
financial strength to execute the contract and that the rejection of its bid,
was arbitrary.
4. The IEM on the basis of submissions made before it, recorded its
conclusions, the material part of which is reproduced below:
"From the documents before us, it is clear that RNA came into
existence on 15.11.2016. RNA could not produce before us any
document that theirrequest for name change from Flawless to
RNA has been approved by SAIF zone authorities on or before
08.11.2016. Thus on 08.11.2016 i.e the date of submission of
sample by RNA to lDT, RNA had not come into existence. Also
the manufacturer of KCL i.e Dead Sea Works Ltd. on whose
behalf of RNA has quoted in the instant tender had issued the
letter of authority to RNA on 09.11.2016 but on this date RNA
had not come into existence. Thus, on 08.11.2016, when the
sample was submitted by RNA for testing in ONGC lab neither
the company RNA had came into existence nor had the
con1pany been authorized by the manufacturer to quote on its
behalf. In such circumstances, the validity of the test report
issued to the bidder on the basis of wrong representation made
by RNA needs to be considered by the Competent Authority.
ii. With respect to RNA meeting the turnover parameter of the
Financial criteria clause, we have noted ONGC has relied
upon the Balance Sheet of Flawless for evaluation purposes.
However, ONGC have not looked into the bank account details
of RNA. The representative of RNA in their submission before
the IEMs could not provide any information as to when RNA
had opened their Bank account in Sharjah nor any
W.P.(C) 3592/2017 P age 3 of 18
documentation to refute the allegations made by NOES
regarding financial statement of Flawless Trading despite
their being specifically informed of the allegations."
5. The Tender Evaluation Committee of ONCG considered the
report of the IEM and proceeded to reject the petitioner's claim as well
as IEM's report. Material part of the Tender Evaluation Committee, its
consideration and decision are extracted below
"2.4 Representatfon to Independent external Monitor:
Representation dated 12/02/2017 has been sent by M/s National
Oilfield Equipment and Services Jordan to Independent External
Monitors (IEMs) .The response submitted by ONGC to
IEMs is as under:
SI Representation of M/s NOES, Jordan ONGC's Reply
1 Invalid Lab Test Report: The test report
RNA International Marketing (M.E.) no.200000089
FZE, Sharjah., 'U.A.E. is a new company 99
and has only come into existence on dt.21.11.2016
November 2016 vide commercial license and
No.08476 issued by Sharjah Airport amendment
International Free Zone (SAIF). dated
As against the above the KCL sample as 8.12.2016,
per IDT test report No.20000008999 issued by IDT,
dt.21.11.2016 has been submitted in the Dehradun is
name of M/s RNA International C/O acceptable as
Anuj Gupta, Dehradun on 8th November, per tender Bid
2016. Evaluation
I.e., the sample has been submitted in the Criteria.
name of non-existing company as on date
of submission and as such should not be
used for submitting in the present tender.
The lab test report therefore submitted is
invalid and should not be considered by
the ONGC for the present tender
W.P.(C) 3592/2017 P age 4 of 18
2. R.N.A. International Marketing (M.E.) As per annual
FZE is a fictitious company that has accounts
been created to carry out this tender: submitted by
M/s. R.N.A. International Marketing the bidder,
(M.E.) FZE is a fictitious company which Turnover of
has taken over a shell company Mis M/s Flawless
Flawless trading FZE with a turnover of trading
approx .. 25 million USD just in 3 days company is
before the deadline of tender dosing date USD 25.25
with sole purpose to meet the 30% million.
turnover criteria as per the BEC
requirements of turnover of ONGC The licence
tender clause. certificate
number
Credential of M/s R.N.A. International enclosed with
marketing did not have a bank account the bid is
and was opened only in January 2017. 08476. It was
We have verified from confirmed sources noted that
that the banking transaction of Mis issued
Flawless have been less than 1 million certificate is of
dollar. dated
22.11.2016. It
License no. 0846 issued by SAIF Zone to was also noted
M/s. FlawlessTrading FZE showing from the
incorporation date as 30th August certificate that
2010.The License also shows the period the date of
of the license as 30th August 2015 to 29th validity of the
August 2016. This is the annual feature said certificate
of the license as it Is renewed every year is mentioned
for next 12 months. License no. 0846 as
referred above RE-ISSUED WITH w.e.f.30.08.20
NAME CHANGE to R.N.A. International 16 to
Marketing (M.E.) FZE showing date of 29.08.2017.
incorporation as 30th August 2010. The As such, the
License shows the period of license as date has been
30th August 2016 to 29th August considered as
2017.The license Issue date of 22nd the date of the
November 2016 is mentioned at bottom firm for
W.P.(C) 3592/2017 P age 5 of 18
of license. coming into
existence.
We wish to state that as per the GOING
CONCERN CONCEPT the date of
incorporation I.E. 30th August 2010 will
remain the same for the company I entity
with license no. 0846 irrespective of the
name Memorandum & Articles of
Association. It is therefore, the date of
the amendment to the memorandum &
articles of association of the licence no.
which brings out the change in the
structure of the company be it capital
structure, name of company, object
clause etc.
In this context, We therefore once again
emphasize, that the company name
R.N.A. International Marketing (M.E.)
FZE has come in to existence only on
15th November 2016 vide above
referred amendment to memorandum &
articles of association and as such any
sample submitted in its name prior to
15th November, 2016 is null and void.
2.6 M/s RNA international ME FZE is evaluated as L-l for
Mumbai Port .In view of pending decision of IEMs for Mumbai
Port, It was decided in previous TC meeting held on 27.02.2017
that decision with respect to Mumbai port shall be taken upon
decision of IEMs on the matter (Minutes at Annexure-3). In view
of urgency of material, order was place on L-l bidder i.e. M/s
National Oilfield Equipment and Services Jordan on 01/03/2017
for quantities pertaining to Chennai and Kolkata Port."
W.P.(C) 3592/2017 P age 6 of 18
6. The Committee took strength from the legal opinion given to
ONGC with respect to RNA's change of name and accepted it.
According to that view, change of name, once approved (and the change
of business also likewise approved) did not result in dissolution or
winding up of an incorporated entity, and matter related back to the
point of time when the samples were given and the authorization letter,
issued by the Israeli company. This view of the committee was accepted
by the official authority in the ONGC i.e. Executive Procurement
Committee.
7. Mr.Balbir Singh, learned Senior counsel on behalf of the
petitioner reiterates the submissions and grounds urged in the pleadings.
It is stated that the RNA company did not exist and was not authorized
to procure tender, at a point when the samples were allegedly given for
testing. Furthermore, even the Israeli manufacturers' letter of
authorization was premised upon RNA's existence. As a matter of
record, M/s Flawless Trading merely exported and traded in jewellery.
Its change of name and change of business lines, to suit the
specifications of the tender, occurred under dubious circumstances as at
the time when the samples were furnished for testing, the bidder, in fact,
did not exist and was not authorized to enter into such arrangements.
The bid should have been rejected at the threshold. It was also
highlighted that being a Sharjah based enterprise, RNA was covered by
the Arab League Resolution of 1972 which banned commercial dealings
and trade between UAE and Israel and as such there was a legal bar
which prohibited RNA from procuring Israeli origin products such as
W.P.(C) 3592/2017 P age 7 of 18
Potassium Chloride. If these arguments were to be accepted, the
petitioner would be treated as L-1 instead of RNA.
8. Learned Senior counsel further submitted that the eligibility
conditions postulated that the concerned bidders should have at least
some past record. In this regard the petitioner relied upon Clause 10.1
(m) and Appendix-7 to say that past performance of the bidder, in the
same or relative field was essential and since RNA had no prior
experience, its bid should not have been accepted. Likewise, it was
submitted that RNA did not have financial strength or capability to
effect the supplies it claimed it could. In this regard, learned Senior
counsel relied upon the tender bid of the successful bidder/RNA. It was
lastly urged that the successful bidder has itself undergone a change of
shareholding and that M/s RNA Marketing Pvt.Ltd. has now become
the sole shareholder. This new shareholder is a Singaporian entity. The
change of shareholding into new entity was made to effect supplies. It
is submitted that on the face of the tender conditions, it should be
cancelled for non-compliance and for not considering all these aspects.
9. Counsel for the respondents appearing on advance notice argue
that RNA was an established and existing company although it had no
previous record of trading and supplying Potassium Chloride products.
Nevertheless, its existence is undoubted, as is evident from the analysis
of the Tender Evaluation Committee who took note of its financial
health for the past two years. Learned counsel pointed out that M/s
Flawless Trading FZE's (RNA) had an average turnover of US$ 25
million in the past and in these circumstances RNA that chose to enter
the trade by tying up with the Israeli company for procurement of
W.P.(C) 3592/2017 P age 8 of 18
Potassium Chloride; obtaining a sample and thereafter changing its
name did not violate any law. Learned counsel submitted that fact of
the matter is that the samples were found to be fit by ONGC which is an
important consideration. Consequently the company, which underwent
a change in the name and change in the object clause, was nevertheless
an existing one and not a 'fly-by-night' operator. The legality of the
opinion with respect to where the change of name or the change of
object clause relating back has no importance and certainly, that is not
an issue before the court. What matters to the purchaser is the quality
of the supply, quality of the product, the assurance of constant supply
and the financial stability or health of the supplier. The fact is that both
the petitioner and RNA are procurers and not manufacturers ONGC was
of the opinion that having regard to samples provided by both, they
fulfilled the specifications: RNA had to be preferred being the one with
a lower bid.
10. Before proceeding to discuss the merits and the rival contentions
and the conditions in the tender, to the extent that they are relevant, are
extracted below:
"ELIGIBLE BIDDERS
1.1 The bid should be from actual manufacturers.
1.2 The bids from sole selling agents/authorised distributors/
authorised dealers/ authorised supply houses can also be
considered, provided such bids are accompanied with backup
authority letter from the concerned manufacturers who
authorised them to market their product, provided further such
an authority letter is valid at the time of bidding. Offers without
back-up authority from manufacturer will not be considered.
W.P.(C) 3592/2017 P age 9 of 18
Required warranty cover of the manufacturers for the product
will be provided by such supplier.
1.3 Bidders should not be associated, or have been associated
in the past, directly or indirectly, with a firm or any of its
affiliates which have been engaged by the Purchaser to provide
consulting services for the preparation of the design,
specifications and other documents to be used for procurement
of the goods to be purchased under this Invitation for Bids."
DOCUMENTS COMPRISING THE BID
10.1 The bid prepared by the Bidder shall comprise the
following components, duly completed:
a) Online priced bid format.
b) Documentary evidence establishing that the Bidder is eligible
to bid and is qualified to perform the contract if its bid is
accepted. The documentary evidence of the Bidder's
qualifications to perform the Contract if its bid is accepted, shall
establish to the Purchaser's satisfaction:
(i) that, in the case of a Bidder offering to supply goods
under the contract which the Bidder did not manufacture or
otherwise produce, the Bidder has been duly authorised by
the good's Manufacturer or producer to supply the goods in
India;
(ii) that the Bidder has the financial, technical and
production capability necessary to perform the Contract;
(iii) that, in the case of a Bidder not doing business within
India, the Bidder is or will be, if awarded the Contract,
represented by an Agent in India equipped and able to carry
out the Supplier's maintenance, repair and spare parts
stocking obligations prescribed in the Conditions of the
Contract and/or Technical specifications; and
W.P.(C) 3592/2017 P age 10 of 18
(iv) that the Bidder meets the qualification criteria listed in the
Bid Data Sheet.
c) Documentary evidence that the goods and ancillary services
to be supplied by the Bidder are eligible goods and services and
conform to the requirements of bidding documents.
(i) The documentary evidence of the eligibility of the goods
and services shall consist of a statement in the price
schedule on the country of origin of the goods and services
offered which shall be confirmed by certificate of origin
from the concerned Chamber of Commerce at the time of
shipment.
(ii) The documentary evidence of conformity of the goods
and services to the bidding documents may be in the form of
literature, drawings and data and shall consist of:
1) A detailed description of essential technical and
performance characteristics of the goods.
2) A list giving full particulars including available
sources and current prices of spare-parts, special tool
etc. necessary for the proper and continuing functioning
of the goods for a period of one year.
3) An item by item commentary on the Purchaser's
Technical specifications demonstrating substantial
responsiveness of the goods and services to those
specifications, or a statement of deviations and
explanation to the provisions of the technical
specifications.
(d) Bid security
(e) Deleted.
(f) Bid submitted by foreign Bidder shall include a detailed
description of the relationship between the bidder and its Local
W.P.(C) 3592/2017 P age 11 of 18
Agent/ Consultant I. representative/ retainer including specific
services to be rendered, permanent income tax account number
of agent/ consultant/ representative/ retainer, permanent income
tax account number of foreign bidder and amount of commission
or other payments.
(g) Bid must accompany necessary literature/ catalogue of the
equipment as well as of the spare parts catalogue thereof failing
which the bid will be rejected.
h) Bidding Document Acknowledgement Form (Appendix-!)
(i) Bid Submission Form (Appendix-2)
(j) Bid submission Agreement Form (Appendix-3).
(k) Check List (Appendix-5)
(l) Bidder's Response Sheet (Appendix-9)
(m) Bidder's past supplies Form (Appendix-?)
(n) Form on Information on Bidder (Appendix-8)
(o) Authorisation letter for Tender Opening (Appendix-10)
(p) Certificate on Relatives of Directors. (Appendix-11)
(q) Back-up Authority Letter alongwith warranty cover of
manufacturer in case the bid is from sole selling agent/
authorised distributor/ authorised dealer/ authorised supply
house.
r) ....-Integrity ·Pact (IP) (Annexure-VII):
Proforma of Integrity Pact (which is issued along with the
bidding document) shall be returned by the bidder along with
technical bid, duly signed by the same signatory who signs the
W.P.(C) 3592/2017 P age 12 of 18
bid, i.e. who is duly authorized to sign the bid. All the pages of
the Integrity Pact shall be duly signed by the same signatory.
(s) Indigenous Bidders should submit copy of valid registration
certificate under the VAT/ Sales Tax rules. Further, wherever
the scope of supply involves rendering of any taxable service
alongwith supply of goods/materials, the Bidder (other than the
Service providers from outside India, who do not have any fixed
establishment or permanent address in India) should submit
copy of a valid registration certificate issued by concerned
authorities of Service Tax department. In case the registration
certificate for the quoted category of service is not available at
the time of submission of offer, an undertaking should be
furnished for submission of copy of requisite service tax
registration certificate alongwith the first invoice submitted for
payment against the purchase order.
(t) The bidder should submit a declaration to the effect that
neither the bidder themselves, nor any of its allied concerns,
partners or associates or directors or proprietors involved in
any capacity, are currently serving any banning orders issued
by ONGC debarring them from carrying on business dealings
with ONGC. (Appendix-14)
(u) Copy of valid Registration Certificate, if bidder is a Micro
or Small Enterprises (MSE) registered with District Industry
Centers or Khadi and Village Industries Commission or Khadi
and Village Industries Board or Coir Board or National Small
Industries Corporation or Directorate of Handicrafts and
Handloom or any other body specified by Ministry of MSME.
The Registration Certificate should clearly indicate the
monetary limit, if any and the items for which bidder are
registered with any of the aforesaid agencies.
In case bidding MSE is owned by Schedule Caste or Schedule
Tribe entrepreneur, valid documentary evidence issued by the
agency who has registered the bidder as MSE owned by SC/ST
entrepreneur should also be enclosed.
W.P.(C) 3592/2017 P age 13 of 18
REJECTION CRITERIA:
The following vital technical conditions should be
strictly complied with failing which the bid will be
rejected:
B.1.1 Bid/should be complete in all aspects covering entire
scope of supply for the items quoted and should
conform to the technical specifications indicated in the
bid document, duly supported with technical
catalogues/ literatures, wherever applicable.
Incomplete and non-conforming bids will be rejected.
B.1.2. Manufacturer's Experience:
In case the bidder is a manufacturer of the offered
item, he should satisfy the following along with
documentary evidence, which should be enclosed
along-with the techno-commercial bid:
(a) Minimum 3 (three) years of experience of
manufacturing Potassium Chloride. The period
reckoned shall be the period prior to the date of
opening of the techno commercial bid.
(b) Should have manufactured and supplied minimum
5% of the tendered quantity of Potassium Chloride to
various companies during the last 5 (five) Years.
(c) Documentary evidence in respect of the (a) and (b)
above should be submitted in the form of copies of
relevant Purchase Orders alongwith copies of any of
the documents in respect of satisfactory execution of
each of those Purchase Orders, such as-
W.P.(C) 3592/2017 P age 14 of 18
(i) Satisfactory Inspection report (OR)
(ii) Satisfactory supply completion report (OR)
(iii) Consignee Receipted Delivery Challans (OR)
(iv) Central Excise Gate Pass/ Tax Invoices issued
under relevant rules of Central Excise/VAT/Bill of
Lading (OR)
(v) any other documentary evidence that can
substantiate the satisfactory execution of each of the
purchase orders cited above.
The purchase orders generated through the SAP
system (POs having ten digit PO number) by
Corporate MM, Dehracjun I Delhi or any work center
of ONGC, a list of such purchase order reference
numbers is sufficient.
For supply orders other than those placed by ONGC
as above, all required documents in respect of 8.1.2
(a) & 8.1.2 (b) need to be submitted as specified at
B.1.2(c) above.
B.1.2.2 In case the bidder is not a manufacturer, then the
bidder is required to submit documentary evidence in
respect of the above 8.1.2 (a) & (b) from the
concerned manufacturer (having supplied such items
either by manufacturer himself or his distributor)
along with the techno-commercial bid.
B.1.2.2. Domestic manufacturers who have satisfactorily
executed development orders placed by ONGC for
tendered item(s) (with old / new specifications) will be
considered as established source for supply of
tendered item and their bid shall be considered
acceptable in terms of experience, irrespective of
clause B.1.2(a) & (b) above. Documentary evidence in
respect of placement of development order (copy of
W.P.(C) 3592/2017 P age 15 of 18
PO) and its successful execution (copy of field trial
report) must be enclosed with the bid.
11. In the present case, the petitioner as well as RNA are not
manufacturers. They rely upon overseas companies and corporations
for their supplies. The petitioner's source of Potassium Chloride is from
Jordian based company, RNA on the other hand, claims that sources
the same product from the other side of the Dead Sea through an Israeli
company. The record indicates that the IEM favoured and accepted the
petitioner's contention that RNA ought to be disqualified and rejected
the bid because firstly the sample that was submitted for testing was by
an entity which was not RNA and secondly the manufacturers' letter of
authority too was given to RNA when it was not in existence. RNA,
however, was able to establish that its previous name was M/s Flawless
Trading and it has been in existence for number of years in Sharjah and
that its main line of business was jewellery export. Apparently, it
changed its line of business and, therefore, amended the objects clause
to include the business of general trading. Likewise, it decided to
change its name to RNA. The tender conditions nowhere state that in
such circumstances, when a bidder indicates name change or change of
its line of business (through amendment of object clause) prior to the
submission of the bid, would be a disqualification or constitute a bar to
the bid. What is important is that ONGC should have been satisfied
that in such circumstances, the sample furnished was by an entity which
changed the name was the one which submitted the bid as eventually
happened in this case. In these circumstances, there is no illegality or
W.P.(C) 3592/2017 P age 16 of 18
mishap of the kind that is sought to be projected by the petitioner that
vitiates the acceptance of RNA's bid as a lowest tender.
12. Now coming to the petitioner's contention with respect to RNA's
financial stability or strength, the discussion of the Tender Evaluation
Committee clearly demonstrates that RNA was into trading and had a
turnover of US$ 25 millions average annually in the past two years.
This was well above the minimum eligibility indicated i.e.1/3rd of value
of contract. The overall value of the contract in this case was `103
crores, 1/3rd would work out to about `34 crores. The petitioner's
arguments on this aspect, therefore, are not tenable and are baseless.
13. The last argument was with respect to the likelihood of the
contract being awarded to a Singaporian identity. Here Mr. Balbir Singh
urged that after the bid was lodged by RNA, it underwent change of
shareholding and that RNA International Marketing (M.E.) (FZE), a
Singaporian entity has become its sole shareholder and that the said
entity has now sought permission to effect supplies through Singapore.
The apprehension voiced by the petitioner, in the opinion of the court, is
without foundation and insubstantial. Neither is there any bar in the
tender condition or the contractual condition annexed along with the
form (of contract to be entered into with successful bidder) nor any
liability which prevents a bidder from indicating change in its
shareholding. Per se, therefore, on the basis of petitioner's apprehension
as to the likelihood of the contract being assigned to another entity,
cannot be accepted. Furthermore, the Court notices that the form of
Agreement (to be entered into between ONGC successful tenderer)
W.P.(C) 3592/2017 P age 17 of 18
itself envisages that subject to ONGC permission, the contract can be
assigned.
14. The appreciation by a public or executive agency of the facts
with respect to award of tender, and the evaluation of the rival bids, fall
within the exclusive domain of that agency. The interpretation of the
documents or even tender conditions, are primarily not a matter of
construction by the court. The public agencies's interpretation
ordinarily ought to be deferred to in judicial review. Article 226 can be
resorted and the court's intervention is legitimate where the facts
establish illegality, procedural irregularity in the decision making
process or manifest arbitrariness i.e. where the decision is so
unreasonable that no reasonable person in such circumstances would
have arrived, at such conclusion on the same facts.
15. This Court is satisfied that none of these elements have been
established by the petitioner. Consequently the petition fails and is
dismissed. All pending application(s) also stand disposed of.
S. RAVINDRA BHAT
(JUDGE)
S.P.GARG
(JUDGE)
JULY 06, 2017/sa
W.P.(C) 3592/2017 P age 18 of 18
