Delhi High Court
M/S Mohandas V Rajani vs National Highways Authority Of ... on 2 November, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 11.09.2017
Pronounced on: 02.11.2017
+ W.P.(C) 6719/2017, C.M. APPL.27989/2017
M/S MOHANDAS V RAJANI ..... Petitioner
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Respondent
+ W.P.(C) 6720/2017, C.M. APPL.27991/2017
M/S MOHANDAS V RAJANI ..... Petitioner
versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA
..... Respondent
Appearance: Mr. Varun Pathak and Ms. Sowmya Saikumar,
Advocates for petitioner.
Mr. Sudhir Nandrajog, Sr. Advocate with Ms. Madhu Sweta and
Ms. Kanika Tandon, Advocates for NHAI.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE SUNIL GAUR
MR. JUSTICE S. RAVINDRA BHAT
1. The petitioner (hereafter referred to as "Mohandas") is aggrieved that
its bid in response to the Notice Inviting Tender ("NIT") inviting two
separate bids for Short Term Improvements & Routine Maintenance Work
of sections of Porbandar-Bhiladi-Jetpur; (Km. 0.000 to Km.117.600) of
NH-8B in the State of Gujarat (hereafter "the works") issued by the National
Highways Authority of India ("NHAI") was not accepted. The NITs were
issued on 15.12.2016 and 22.02.2017 (both are subject matter of two
separate writ petitions, WP 6719/2017 and WP 6720/2017).
2. The petitioner is a works contractor; it claims to have gained
experience in construction and maintenance of roads and highways. It
responded to the two NITS, issued on separate dates. The scope of the
project included routine maintenance of all the assets, facilities and services
created within Right of Way (hereinafter "ROW") on the specified sections
of national highways including maintenance of carriageway, shoulders,
median etc., providing incident management by way of route patrol and
surveillance, value addition to the road by way of providing crash barriers,
median fencing, road signage and road marking etc, wherever required, road
property management, horticulture maintenance etc. for a period of 36
months. The petitioner was issued two separate rejection letters - dated
19.07.2017 and 24.07.2017. NHAI expressed the opinion that Mohandas did
not fulfill the eligibility conditions stipulated in the NIT.
3. The relevant eligibility condition (in WP 6719/2017, which is
identical to the other NIT, except that in WP 6720/2017 it is numbered as
Clause 4.5A) reads as follows:
"4.4 A. To qualify for award of the contract, each bidder in its
name should have the following:-
(a) achieved an average annual financial turnover (In all
classes of civil engineering construction works only) equal to
the amount Indicated In NIT during last three years ending 31st
March of the previous financial year duly certified by
Chartered Accountant (Notwithstanding anything to the
contrary contained herein. In the event that the bid due date
falls within three months of the closing of the latest financial
years. It shall ignore such financial year for the purpose of the
bid and furnish annual financial turnover w.r.t. 3 years
preceding In last financial year).
(b) satisfactorily completed (not less than 90% of contract
value), as a prime contractor (or as a nominated/approved
subcontractor, provided further that all other qualification
criteria are satisfied) similar works during last seven years
ending last day of month previous to the one in which bids are
invited, either of the following;
i. three similar completed works costing not less than amount
equal to Rs, 876 lakhs,
ii. two similar completed works costing not less than amount
equal to Rs. 1095 lakhs.
ill. one similar completed work costing not less than amount
equals to Rs. 1752 lakhs.
(The similar work constitutes experience in operation and
maintenance/construction of four/six laned highway for O&M
contracts whereas for special repairs /renewal work contracts,
similar work constitutes experience of bituminous work on
2/4/6 lane highways)
(Escalation factor as under shall be used to bring the value of
such completed works to the level of current financial year i.e.
2017-18)
Escalation factor (for the cost of works completed during the
last 7 years & financial figures required for the calculation of
bid capacity) may be taken as follows:
Year before Multiplying Factor
One 1.10
Two 1.21
Three 1.33
Four 1.46
Five 1.61
Six 1.77
Seven 1.95"
4. NHAI by its letters dated 19.07.2017 and 24.07.2017 determined the
Petitioner's technical bid to be non-responsive in terms of clause 4.4 A (b)
(and clause 4.5A(b)) of tender documents/NITs issued by it. The petitioner
alleges that the rejection of its bids is arbitrary and without application of
mind as it had completed various projects for NHAI in the past few years.
This includes the present project itself and has complied with similar
conditions for the purposes of qualification in Uttar Pradesh and has already
been issued the letter of award there. The rejection of the petitioner's
technical bid, it is alleged, is for ulterior motives to benefit others and
further, the introduction of narrower qualification clauses makes competition
thinner and as such results in the windfall of a few private players and thus,
is contrary to public interest.
5. To establish that the petitioner has the requisite experience, fulfilling
the criteria specified in the eligibility conditions, reliance is placed on the
following chart (for which copies of the relevant certificates have been
produced with the two writ petitions):
S. Name Descrip Contra Valu Mult Value Date Stipula Actua Brief Remar
No of tion of ct No. e of iplyi as of tion l Date Scope ks
Emplo Work Cont ng per Issue Period of of
yer ract fact Multi of of Comp Work
(Rs. or plyin Work Compl letion
in g Order etion
Cror factor
es)
1. NHAI Short NHAI/C 4.89 1.95 9.536 16.01. 15.01. 10.09. Lane Work
PIU, Term M/S- 0 0 2010 2011 2010 Road Comple
Palan Improv G/O& & ted
pur ement M/2009 Items within
& /940 as per time
Routine Shown limit.
Mainte in Routine
nance Form mainte
of 4 3A & nance
lane BOQ of 4
road both lane
Samakh were highwa
iyaliGa attach y was
ndhidh ed complet
am ed
Section satisfac
Km. torily.
306.00
0 to
Km.
362.16
0 of
NH-8A
in the
state of
Gujarat
2. NHAI Renewa NHAI/P 29.1 1.21 35.27 11.12. 14.06. 10.06. 4 Lane Work
PIU, l Work IU/GD 52 0 4 2014 2015 2015 Road Comple
Adipur of M(PLN & ted
Garam )/Gara- Items within
oreSam Samakh as per time
akhiyal iyali/20 Shown limit.
i 14/SO- in Routine
Section 2394 Form mainte
from 3A & nance
Km. BOQ of 4
254.00 both lane
0 to were highwa
Km. attach y was
306.00 ed complet
0 of ed
NH-8A satisfac
in the torily.
state of
Gujarat
3. Ex. Constr SBD-07 17.8 1.21 21.53 05.03. 04.09. 31.03. Work
Engin uction of 00 0 8 2015 2016 2016 Comple
eer, of 2014- ted
NH Single 15 within
Divisi Lane to time
on, Two limit.
Adipur Lane Constr
by 1.5m uction
wide of
paved single
side lane to
shoulde two
r lane
betwee work
n Km. complet
104/20 ed
0 to satisfac
134/00 torily
on NH- with
8A mainte
(Extn.) nance
(New guarant
NH-41) ee of 6
except months.
widenin
g of
major
bridge
at Km.
0 &
0 in the
State of
Gujarat
(Job
No. 8A
(Extn)/
GJ/201
4-
15/567)
(Mandv
i-
Naliya
Road)
4. Ex. Strengt SBD-01 12.5 1.21 15.21 10.04. 09.03. 09.03. 4 Lane Work
Engin hening of 78 0 9 2015 2016 2016 Road Comple
eer, of 2015- & ted
NH existing 16 Items within
Divisi four as per time
on, lane Shown limit.
Adipur carriag in Routine
eway Form mainte
betwee 3A & nance
n Km. BOQ of 4
362.16 both lane
0 to were highwa
371.13 attach y was
5 of ed complet
NH-8A ed
(Sectio satisfac
n KFTZ torily
to with
Kandla mainte
) in the nance
state of guarant
Gujarat ee of 3
(Job years.
No.8A/
GJ/201
4-
15/570)
6. Mr. Varun Pathak, learned counsel for Mohandas, urged that
arbitrariness is writ large in the rejection of the petitioner's bids. It is pointed
out that for the project in the state of U.P., Mohandas' experience was duly
accepted by NHAI, therefore, the decision of NHAI declaring the bids in
question as non responsive was completely arbitrary and without application
of mind. It is argued that Clause 4.4 A (b) (or Clause 4.5A(b)) has been
introduced subsequently and earlier for similar projects, the clauses were
widely worded. In a condition, which was widely worded, the Petitioner was
awarded a contract for short-term improvement and routine maintenance of
Lakhanpur- Jammu section including Jammu bye-pass (km 16.350 to km
97.200 and km 0.000 to 15.000 of Jammu bye-pass) of NH-IA (New NH-44)
in the state of J&K. The letters intimating the grant of the contract, dated
28.10.2015 and 26.11.2015 were issued by NHAI. Reliance is placed on
copies of letters dated 28.10.2015 and 26.11.2015 along with the relevant
portions of the tender document, which were annexed to the writ petitions.
7. It is submitted that as public interest is involved the public trust
doctrine is applicable and NHAI, a state entity is duty bound to act with
fairness and ensure that the maximum number of bidders participate in the
tender process. The purpose of each condition is geared at ensuring that the
best available options, having regard to the various technical criteria, enter
the zone of consideration. The object of every tendering process is to ensure
the availability of the best options, and the elimination of the ineligible or
potentially inefficient parties, who might hold up, or not be in a position to
execute the contract. It is therefore, stated that the Petitioner's price bid
should be opened by NHAI. It is argued that the narrow interpretation,
which drove NHAI to reject Mohandas' bids as technically ineligible, is
unreasonable. If such interpretation were to be upheld, the condition in fact
is required to be set aside as subversive of public interest and contrary to
Article 14 of the Constitution of India. Learned counsel also emphasized
that the NHAI's action in bid rejection amounts to ignoring relevant factors
and not examining all documents, based on a narrow understanding of its
role. Lastly, it is urged that NHAI has acted in a wholly capricious manner,
because in the previous contracts, it accepted and even awarded bids to the
petitioner, whereas now it prefers a restricted interpretation, contrary to
public policy.
8. NHAI repels the petitioners' contentions. It urges that in all it issued
three NITs; in response a total of 15 bids (five, four and six) were received
from various contractors. Of these bids, 5 (1+1+3) were found to be
compliant with and fulfilling tender eligibility criteria. NHAI explains its
position, stating the first NIT was issued on 15.12.2016 in response to which
five bids were received. Upon consideration, it was found that one bidder
qualified; the same tender was republished again, on 22.02.2017. In the first
round of tender process (which was not pursued) as well as in the second
round, the petitioner's bid was found to be non-responsive. Likewise, in
respect of the other tender, issued on 21.04.2017 (to which 6 bidders
responded), the petitioner was not one among the three found eligible.
Reliance is placed on the evaluation committee's decisions, contained in the
minutes of its meetings dated 01.06.2017, 08.06.2017, 23.06.2017 and
14.07.2017. In each of these meetings NHAI's committee decided that
Mohandas did not fulfill the eligibility criteria which it applied, in terms of
the NIT conditions:
"The committee considered similar work experience [Similar
work constitutes experience in Operation & Maintenance /
Construction of 4/6 laned Highway only as per clause 4.4 A
(b))"
It was submitted that in the latter two meetings, the committee had set out
the condition as follows:
"(The similar work constitutes experience in operation and
maintenance/construction of four/six laned highway for O&M
contracts whereas--for special repairs /renewal work
contracts, similar work constitutes experience of bituminous
work on 2/4/6 lane highways)"
It is highlighted that the relative eligibility condition of the U.P Tender,
relied upon by Mohandas, read as follows:
"4.4A(b) satisfactory completed (not less than 90% of contract
value), as a prime contractor (or as a nominated/approved
subcontractor, provide further that all other qualification
criteria are satisfied) similar works during last seven years
ending last day of month previous to the one in which bids are
invited, either of the following:
i) Three similar completed works costing not less than amount equal
to Rs. 120.732 lakhs.
ii) Two similar completed works costing not less than amount equal to
Rs.150.915 lakhs,
iii) One similar completed work costing not less than amount equals
to Rs.241.464 lakhs.
I. (The similar work constitutes experience in operation and
maintenance/construction of four/six laned highway for O&M
contracts)
(Escalation factor as under shall be used to bring the value of such
completed works to the level of current financial year i. e. 2017-18)
Escalation factor (for the cost of works completed during the last 7
years & financial figures required for the calculation of bid capacity)
may be taken as follows:
Year before Multiplying factor
One 1.10
Two 1.21
Three 1.33
Four 1.46
Five 1.61
Six 1.77
Seven 1.95"
9. Learned counsel for NHAI argued that a plain reading of the tender
conditions proves that the financial threshold of both the tenders were
drastically different and could not be considered to be similar to one another
at all. It is submitted that the Petitioner was duly eligible for the U.P. tender
as was limited only to a value of `301.83 Lakhs. The Petitioner satisfied the
eligibility criteria by meeting the threshold of "One similar completed work
costing not less than amount equals to `241.464 lakhs". However, the
present tender is based on a higher financial value of `2153.99 lakhs, and
the Petitioner miserably failed to meet even the minimum mandate of 'Three
similar completed works costing not less than amount equal to `862 lakhs'.
NHAI therefore, submits that reliance placed by the Petitioner on the tender
conditions in the UP contract is misplaced.
10. NHAI accuses the petitioner of acting further to its vested interests; in
this context it submits that Mohandas deliberately concealed from the court
that it was awarded the Contract of Incident Management of Jetpur-Somnath
Section of NH-3D Section i.e. the same stretch as of the present tender for a
period of 3 months from 09.03.2017 to07.06.2017. The Petitioner has sought
an extension of time from NHAI, pending which it does not want tender for
O&M to be awarded to any other agency. It is contended that the present
petition is vexatious because Mohandas is just leveraging to buy time
through the court and delay the bidding process. A copy of the Incident
Management contract dated 28.02.2017 has been produced and relied upon.
11. It is argued that unless the court finds palpable unreasonableness or
absence of fair play, or glaring procedural irregularities or discrimination,
the court cannot substitute its interpretation of the tender conditions. The
state instrumentality, it is highlighted, has the discretion and free play in the
joints to interpret tender conditions in the light of prevailing market
conditions and other surrounding commercial considerations, which cannot
be lightly upset in judicial review, upon substitution of the court's view.
Analysis and conclusions
12. NHAI's interpretation of the tender condition, leading to rejection of
both bids by Mohandas is in issue. The relevant tender condition requires the
bidder, to "qualify for award of the contract" (a) achieving an average
annual financial turnover "(In all classes of civil engineering construction
works only) equal to the amount indicated In NIT during last three years
ending 31st March of the previous financial year duly certified by Chartered
Accountant". The crucial portion, which is the focus of the controversy,
requires each bidder to (have):
"(b) satisfactorily completed (not less than 90% of contract
value), as a prime contractor (or as a nominated/approved
subcontractor, provided further that all other qualification
criteria are satisfied) similar works during last seven years
ending last day of month previous to the one in which bids are
invited, either of the following;
i. three similar completed works costing not less than amount
equal to Rs. 876 lakhs,
ii. two similar completed works costing not less than amount
equal to Rs. 1095 lakhs.
ill. one similar completed work costing not less than amount
equals to Rs. 1752 lakhs.
(The similar work constitutes experience in operation and
maintenance/construction of four/six laned highway for O&M
contracts whereas for special repairs /renewal work contracts,
similar work constitutes experience of bituminous work on
2/4/6 lane highways)"
The NHAI asserts that the contracts relied upon by Mohandas do not fulfill
the above conditions; there were no similar three completed works of not
less than `876 lakhs; or two completed works of not less than `1095 lakhs;
or one similar work of not less than `1752 lakhs. It is also highlighted that
the works relied upon are not "similar" in view of the stipulation that such
similar works constitute experience in operation and maintenance/
construction of four/six laned highway for O &M contracts and that similar
works "for special repairs /renewal work contracts, similar work constitutes
experience of bituminous work on 2/4/6 lane highways".
13. Established principles in relation to judicial review in matters
concerning tender invitations by public authorities were revisited in
Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216,
where the Supreme Court, after reviewing a number of its previous
decisions, noted as follows:
"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."
14. Later, in Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail
Corporation Ltd. & Anr 2016 SCC Online SC 940 the Supreme Court held
as follows:-
"14.....a mere disagreement with the decision making process
or the decision of the administrative authority is no reason for a
constitutional Court to interfere. The threshold of mala fides,
intention to favour someone or arbitrariness, irrationality or
perversity must be met before the constitutional Court
interferes with the decision making process or the decision.
........ ....... ........ ........
24. We respectfully concur with the aforesaid statement of law.
We have reasons to do so. In the present scenario, tenders are
floated and offers are invited for highly complex technical
subjects. It requires understanding and appreciation of the
nature of work and the purpose it is going to serve. It is
common knowledge in the competitive commercial field that
technical bids pursuant to the notice inviting tenders are
scrutinized by the technical experts and sometimes third party
assistance from those unconnected with the owner's
organization is taken. This ensures objectivity. Bidder's
expertise and technical capability and capacity must be
assessed by the experts. In the matters of financial assessment,
consultants are appointed. It is because to check and ascertain
that technical ability and the financial feasibility have
sanguinity and are workable and realistic. There is a multi-
prong complex approach; highly technical in nature. The
tenders where public largesse is put to auction stand on a
different compartment. Tender with which we are concerned, is
not comparable to any scheme for allotment. This arena which
we have referred requires technical expertise. Parameters
applied are different. Its aim is to achieve high degree of
perfection in execution and adherence to the time schedule. But,
that does not mean, these tenders will escape scrutiny of
judicial review. Exercise of power of judicial review would be
called for if the approach is arbitrary or malafide or procedure
adopted is meant to favour one. The decision making process
should clearly show that the said maladies are kept at bay. But
where a decision is taken that is manifestly in consonance with
the language of the tender document or subserves the purpose
for which the tender is floated, the court should follow the
principle of restraint. Technical evaluation or comparison by
the court would be impermissible. The principle that is applied
to scan and understand an ordinary instrument relatable to
contract in other spheres has to be treated differently than
interpreting and appreciating tender documents relating to
technical works and projects requiring special skills. The owner
should be allowed to carry out the purpose and there has to be
allowance of free play in the joints."
15. While exercising judicial review, a court, under Article 226 of the
Constitution reviews the decision making process, its legality and procedural
regularity, and not the merits of the decision of the executive agency.
The principal decision maker is the administrative or public agency. That the
courts might view tender conditions- or a particular stipulation differently
(from the public agency) is insufficient reason for interference. Afcons
Infrastructure (supra) is clear on this aspect; it instructs that courts are to
defer to executive decisions, largely unless manifest mala fides or
procedural irregularity or illegality is established. Similarly, the Supreme
Court, in Montecarlo Ltd v National Thermal Power Corporation Ltd 2016
(15) SCC 272 stated that:
"Exercise of power of judicial review would be called for if the
approach is arbitrary or malafide or procedure adopted is
meant to favour one. The decision making process should
clearly show that the said maladies are kept at bay. But where a
decision is taken that is manifestly in consonance with the
language of the tender document or subserves the purpose for
which the tender is floated, the court should follow the principle
of restraint. Technical evaluation or comparison by the court
would be impermissible. The principle that is applied to scan
and understand an ordinary instrument relatable to contract in
other spheres has to be treated differently than interpreting and
appreciating tender documents relating to technical works and
projects requiring special skills. The owner should be allowed
to carry out the purpose and there has to be allowance of free
play in the joints."
Again, in JSW Infrastructure Ltd v Kakinada Seaports Ltd 2017 (4) SCC
170 and Central Coalfields Ltd v SLL-SML (JV Consortium) 2016 (8) SCC
622, it was held that tender documents and stipulations are to be construed
in the context of their background and that no condition is to be treated as
redundant or superfluous.
16. In the present case, Mohandas argues that the rejection of its two bids
is arbitrary and capricious; it also urges inconsistency in NHAI's behavior in
accepting two previous tenders containing similar eligibility conditions and
rejecting the present bids pursuant to the NITs issued. A comparison of the
two sets of tender eligibility conditions in the present case, with the tender
eligibility condition in the UP contract, awarded to the petitioner, clearly
brings out the fact that in the latter (i.e. the UP tender) the value was much
lower. As against the total tender value of `2153.99 lakhs, in the two NITs
in question, the tender value in the UP case was about `303 crores.
Furthermore, "similar works" is defined as three completed works of not
less than `876 lakhs; or two completed works of not less than `1095 lakhs;
or one similar work of not less than `1752 lakhs. The documents relied upon
by Mohandas show that NHAI awarded a contract to it on 09.02.2015 for
execution of the work of "Short Term Improvements &Routine Maintenance
Work of Porbandar - Bhiladi - Jetpur section (Km. 0.000 to Km. 117.600) of
NH-8B in the state of Gujarat". Its bid "for a contract price of
`2,30,77,100.63 (Rupees two crore thirty lakh seventy seven thousand one
hundred and sixty three paisa only) has been accepted for and on behalf of
NHAI". The eligibility condition for this work was a turnover requirement
of `198 lakhs in the last three years; experience of similar work (Single
Work `264 lacs Or Two Works `165 lacs or Three Works `132 lacs in the
last 7 years).
17. The factual background and the documents relied on by the parties, in
the opinion of the court, show that Mohandas did not fulfill the tender
eligibility conditions, published for the two contracts for Short Term
Improvements & Routine Maintenance Work of sections of Porbandar-
Bhiladi-Jetpur (Km. 0.000 to Km.117.600) of NH-8B in Gujarat. The court's
interpretation about the tender conditions, in these circumstances, cannot
prevail over that of NHAI's. Likewise, there is neither any apparent or
proven illegality nor procedural irregularity in regard to the decision making
process. The decision taken, to reject the petitioner's bid is also not arbitrary
or unreasonable, in the circumstances of the case. For these reasons, the writ
petitions have to fail; they are dismissed without order on costs.
S. RAVINDRA BHAT, J
SUNIL GAUR, J
NOVEMBER 02, 2017
