Delhi High Court
Tolani Projects Pvt. Ltd. & Anr vs Union Of India & Ors on 11 April, 2019
$~65
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 08.04.2019
% Pronounced on : 11.04.2019
+ W.P.(C)No.2319/2019 & CM No.10773/2019
TOLANI PROJECTS PVT. LTD. & ANR. ..... Petitioners
Through : Mr. Barun Kumar Sinha, Mr. Abhishek,
Ms. Pratibha Sinha and Mr. Swatantra
Rai, Advs.
versus
UNION OF INDIA & ORS. ..... Respondents
Through : Ms. Maninder Acharya, ASG and
Mr.Kirtiman Singh, CGSC with
Mr.Waize Ali Noor, Mr. Sahil Sood,
Ms.Shruti, Mr. Harshul Choudhary and
Mr. Parth, Advs. for R-1.
Dr. R.M. Sharma, Adv. for R-2.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE PRATEEK JALAN
S. RAVINDRA BHAT, J.
1. The writ petitioner, in these proceedings under Article 226 of the
Constitution, is aggrieved by the rejection of its technical bid for two
contract areas in respect of discovered oil fields [being Contract Area - CB/
ONDSF/Vadtal/2018 ("Vadtal") and contract KG/ONDSF/Gokarnapuram
("Gokarnapuram")]. These were pursuant to a notice, inviting interested
parties to bid (issued by Directorate General of Hydrocarbons-the second
respondent, hereafter referred to as "DG"). These were pursuant to the DG
formulated policy for the development and monetization of the discovered
small oilfields. The petitioner complains that the rejection of its bid was
arbitrary.
2. The facts briefly are that sometime in January, 2018, the DG issued
the notice inviting offers (NIO) in question. This is apparently pursuant to
the Central Government driven policy reforms in the Upstream
Hydrocarbon Energy and Petroleum sector to optimize and increase
domestic production of oil and gas. The Marginal Field Policy (MFP) was
notified on 14th October, 2015 to monetize marginal fields of Oil and
Natural Gas Corporation (ONGC) and Oil India Limited (OIL) under
nomination regime which remained undeveloped for a long period of time.
The policy was subsequently renamed as Discovered Small Field (DSF).
The Central Government was of the view that the DSF needed extension for
fast-track monetization of unmonetized small fields / discoveries of ONGC
& OIL under the nomination regime and the relinquished discoveries under
the PSC regime which remained un-monetized. The NIO called for offers
from eligible parties.
3. The NIO contained the eligibility and evaluation criteria, the material
parts of which are reproduced below:
''IV. BID QUALIFYING CRITERIA
1. Payment of Tender Fees must be made, by bidding company or
any member of the consortium, by way of purchase of the
requisite Information Docket for Onshore and/or Offshore
Contract Areas to be bid as the case may be on or before bid
closing date.(Please refer Price List).
2. The bidder must be a company singly or in association with
other companies, through an unincorporated or incorporated
venture.
3. The net worth of the bidding company(s) should be equal to or
more than its Participating interest value of the Work
Programme commitment, provided that every company should
have a minimum net worth of US $ 1 million. The net worth will
be calculated in accordance with the method given in the
'FORMAT FOR SUBMISSION OF BIDS'. If a bidding company
either bidding alone or in a consortium is a domestic company
and does not have adequate net worth as mentioned above or its
net worth is negative, it may submit a bank guarantee (BG) to
fulfill its net worth requirement as above, along with the bid in
the format prescribed in Annexure-I. The validity of BG shall be
One (01) year from date of bid closing. The BG can be
submitted for the whole net worth requirement or in partial
fulfillment of the same. In such cases, the negative net worth
will not be considered. The bank guarantee of unsuccessful
bidders will be released on signing of contract worth the
successful bidder for the Contract Area. The BG for successful
bidders will be released upon submission of the BG against
Liquidated Damages (LD) as per Article 27ofMRC.
4. The annual report including the audited annual accounts for the
latest completed year and a Certificate of net worth from
company's statutory auditor(s) based on the audited annual
accounts for the latest completed year certifying the net-worth
of the bidding company should be submitted. In case the parent
company provides financial and performance guarantee, the
annual report, annual accounts and net-worth certificate in
respect of parent company should be submitted and the
financial capability of the parent company shall be considered
for evaluating the financial capability of a bidding company. In
such cases, the parent company of the successful bidder will be
required to provide the financial and performance guarantee as
per the provisions of MRSC."
4. The NIO prescribed the Bid Evaluation Criteria, which reads as
under:
"VI.BID EVALUATION CRITERIA
The following mean parameters will be considered while evaluating
the
bids:
1. The bidding companies should have adequate net worth. The net
worth will be calculated in accordance with the method given in the
"FORMAT FOR SUBMISSION OF BIDS". The net worth of every
participating company should be equal to or more than every
company‟s participating interest in the Biddable Work Programme,
provided that every company should have a minimum net worth of
US $ 1 million. In case the parent company's financial and
performance guarantee is provided, the annual report, audited
accounts and certificate of net worth should be furnished in respect
of the parent company. If a bidding company either bidding alone or
in a consortium is a domestic company and does not have adequate
net worth as mentioned above or its net worth is negative, it may
submit a bank guarantee (BG) to fulfill its net worth requirement as
above, along with the bid in the format prescribed in Annexure-I.
The BG can be submitted for the whole net worth requirement or in
partial fulfillment of the same. In such cases, the negative net worth
will not be considered. The bank guarantee of unsuccessful bidders
will be released on signing of contract with the successful bidder for
the Contract Area.
2. In case a bidding company, either bidding alone or as a
consortium, happens to be the has ranked bidder for two or more
contract area, the net worth of the company shall be required to be
equal to or more than its Participating Interest (PI) in the value of
Biddable Work Programme for all such Contract Area. In case of
'Nil' Biddable Work Programme, while evaluating the bids, where a
bidding company or a consortium happen to be best ranked bidder
for two or more Contract Area, the net worth of the company/ each
company of the consortium shall he in proportion to their
Participating Interest, which in aggregate, for each Contract Area,
will be equal to an amount of US $ 0.15 million and US $0.23
million for Onland blocks and Shallow water Contract Areas
respectively. In case, the company's net worth is less than its
Participating Interest in the value of Biddable Work Programme for
all such Contract Areas, the bids will he considered in order of
priority given by that company in their bids.
3. The bids will be evaluated on the basis of Biddable Work
Programme and Biddable share of Government Revenue. The bids
will be evaluated and ranked in accordance with the evaluation
criteria provided herein. The points for each criterion shall he as
under:"
5. The first petitioner applied for allotment of discovered oil fields by
way of purchasing the NIO by paying the requisite amount; it submitted the
Technical Bid for the two contract areas i.e. Vadtal and Gokarnapuram on
17-01-2019. The DG sent an email to the petitioner on 28.01.2019 inviting
the petitioner to participate in opening of the Technical Bid on 30.01.2019.
Accordingly, the petitioner participated in the opening of the Technical Bid
for both contracts, on 30.01.2019 along with the DGH Team. The petitioner
submits that it became aware from other participants regarding the receipt
of email informing (them) to participate in the in the Price Opening Bid
(second envelop), on 12.02.2019 for Gokarnapuram; for the Vadtal
contract, it was 14-02-2019. It is alleged that the petitioner's representative
sought to approach the DG, who refused to meet him. In these
circumstances, the petitioner addressed an email informing them about the
receipt of an email for invitation of the price opening bid (to others) and
further requesting that it should be allowed to participate similarly.
6. The petitioner complains that the bid evaluation criteria, and the bid
rejection criteria are clear and specific. Once the bidders are asked to attend
technical bid opening, as in this case, (for both the contracts) and the
petitioner was similarly invited, the question of not proceeding further
could not have arisen. It is contended by Mr. Barun Kumar Sinha, learned
counsel that there was no indication by the DG of the petitioner's
ineligibility or disqualification. In these circumstances the further stage of
opening the price bid of other bidders, after excluding the petitioner
(without informing it of the reason) was irregular and indefensible. It is
contended that given the revenue-sharing nature of the ultimate contract to
be awarded, the exclusion of any potential party possessing the requisite
technical qualification would be entirely unreasonable.
7. Mr. Sinha, responding to the Union's reply (in these proceedings)
urged that the reason disclosed to the court, i.e. with respect to
discrepancies in the technical bid, as far as the net worth of the company is
concerned, is inconsequential. It was argued that the variance between the
online bid submitted by the petitioner and the hard copy (along with
documents) filed with the respondent was not a fatal one. It was submitted
in this context that while disclosing the paid-up capital of the petitioner, in
the online bid, the total paid-up capital, including "quasi capital" was
disclosed as a total sum, whereas the same total amount was disclosed in the
manual copy provided, but with a break up of paid-up capital and quasi
capital.
8. Learned counsel relied on the ruling of the Supreme Court in Poddar
Steel Corporation v Ganesh Engineering Works & Others, (1991) 3 SCC
273; and Tata Cellular v Union of India (1994) 6 SCC 651 in support of the
submission that mere irregularities which do not affect the bid
consideration, as long as the tenderer is otherwise eligible in accordance of
the terms of the contract, cannot be a ground for its rejection. It is submitted
in this context, that the respondent's answer that the petitioner's bid was
discrepant and liable to be rejected in terms of the bid rejection criteria, is
misplaced and arbitrary. It was submitted, besides that, the petitioner had
been dealt with in a discriminatory manner, inasmuch as the other bidders
were asked specific queries before their invitation to participate in the price
bid opening. This clearly indicated procedural irregularity and unfairness.
9. The Additional Solicitor General, Ms. Maninder Acharya, for the
respondent, on the other hand, urges that the petitioner's bid had to be
rejected at the technical evaluation stage because of the discrepancy in the
figures disclosed with respect to paid-up capital. It is submitted that firstly,
when the concept of paid-up capital is fairly clear, the question of including
amounts which are not a part of the company's capital does not arise. The
petitioner's bid was therefore not reflective of the correct position; the
figure of net worth varied. It was submitted that besides, there was a clear
variation or discrepancy between the online bid figures of paid-up capital
and what was furnished offline- the latter sought to split the capital, by
showing paid-up capital and quasi-capital, separately. It is argued that quasi
capital could not be shown as part of capital at all.
10. It is argued that the petitioner's contentions with respect to
arbitrariness is without basis, because its bid was clearly not in compliance
with the NIO terms and there was no option for the respondents, but to
reject it. It is also argued, besides, the petitioner did not give any clear or
unambiguous picture, so that the respondent could evaluate its bid.
Furthermore, the learned ASG argued that the discrepancy with respect to
the petitioner's bid (i.e. regarding inclusion of quasi capital) was deliberated
upon and opinion of two experts was sought; they were unanimously
decided that such amount could not be included in the "Paid- up capital"
head. The learned ASG argued that these aspects were considered in an
interim report, and later the Bid Evaluation Committee, which comprised of
several members, were of the view that the petitioner's bid had to be
rejected on the ground of the discrepancy.
11. The learned ASG submitted that post tender, materials were received
from three bidders. All these were considered. Only the offer of one bidder
(whose additional material by way of documents) established that what was
written with respect to shareholding, i.e. 99 % was inaccurate, whereas the
actual figure from the record and the tender documents was that the
shareholding was 99.9%. The bid of this entity was processed for financial
evaluation. It was submitted that the discrepancy was not a material one,
and was extensively considered and the documents were verified, before the
tender was allowed to proceed towards the next stage, i.e opening of
financial bids. In the case of the petitioner, however, the bid was clearly
discrepant because the online document included quasi capital (without
breakup) and the hard copy version showed the break-up. The basic fallacy
was in the inclusion of an amount, which could not be considered as part of
paid-up capital at all. The respondents also made available the original
tender files for consideration and perusal of the court.
Analysis and conclusions
12. The relevant tender condition- apart from the bid evaluation and bid
rejection criteria, extracted earlier, dealing with the format to be used by
bidders, to calculate the net worth of the company/ entity reads as follows:
"NET-WORTH CALCULATION
The Net-worth of the bidding company /parent company shall be
calculated in accordance with the method given below based on
the latest completed year's audited annual account and annual
report:
NAME OF THE COMPANY
Sl.No. Sub-criteria Amount*(US $ MM)
(a) Paid-up capital
(b) Reserve and surplus
(c) Misc. expenditure to the extent not
written off
(d) Net-worth = (a)+(b)+(c)
Note;
1. Net-worth figure filled online in the e-bidding portal by the
bidder should match with the figure appearing in the documentary
proof submitted in Hard copy in Bid documents to DGH office;
otherwise the bid would be rejected.
2. For the purpose of assessing the net-worth in US $the cut-off of
date shall be the date of Balance sheet of the audited annual
accounts for the latest completed year, submitted in the bid
3. For conversion to US $from other currencies, the currency
exchange rate prevailing as on the date of Balance Sheet or if not
available, the latest currency exchange rate prevailing prior to the
date of Balance sheet shall be used. The bidder may provide in the
bid a copy of the document showing RBI (Reserve Bank of India)
reference rate on rate quoted by any other bank, used by him for
currency conversion.
•*The above information should be provided for the year for which
the latest audited annual account and annual reports are
furnished.
X. Where company or consortium has submitted bids for more
than one contract area, priority ranking in terms of the Company /
Consortium's relative interest in different contract area including
all on land, shallow water contract areas, should be indicated as
follows:..."
13. The petitioner's complaint is that the discrepancy is not a substantial
one, and that its net worth exceeded the prescribed amount, even excluding
the quasi-capital sum reflected in its hard copy bid. It urges that the bid
rejection was arbitrary.
14. The primacy of terms of a tender, to award a public contract, have
been asserted time and again by the Supreme Court, in various judgments.
In Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016) 8
SCC 622, the court held as follows:
"In G.J. Fernandez v. State of Karnataka (1990) 2 SCC 488]
both the principles laid down in Ramana Dayaram Shetty (1979)
3 SCC 489 were reaffirmed. It was reaffirmed that the party
issuing the tender (the employer) "has the right to punctiliously
and rigidly" enforce the terms of the tender. If a party
approaches a court for an order restraining the employer from
strict enforcement of the terms of the tender, the court would
decline to do so. It was also reaffirmed that the employer could
deviate from the terms and conditions of the tender if the
"changes affected all intending applicants alike and were not
objectionable". Therefore, deviation from the terms and
conditions is permissible so long as the level playing field is
maintained and it does not result in any arbitrariness or
discrimination in Ramana Dayaram Shetty sense."
47. The result of this discussion is that the issue of the
acceptance or rejection of a bid or a bidder should be looked at
not only from the point of view of the unsuccessful party but also
from the point of view of the employer. As held in Ramana
Dayaram Shetty the terms of NIT cannot be ignored as being
redundant or superfluous. They must be given a meaning and the
necessary significance. As pointed out in Tata Cellular there
must be judicial restraint in interfering with administrative
action. Ordinarily, the soundness of the decision taken by the
employer ought not to be questioned but the decision-making
process can certainly be subject to judicial review. The
soundness of the decision may be questioned if it is irrational or
mala fide or intended to favour someone or a decision "that no
responsible authority acting reasonably and in accordance with
relevant law could have reached" as held in Jagdish Mandal
followed in Michigan Rubber."
15. The Supreme Court again underlined limited judicial interference
under Article 226 of the Constitution in Afcons Infrastructure Ltd. v.
Nagpur Metro Rail Corporation Ltd. and Ors. (2016) 16 SCC 818, and held
as follows:
"15. We may add that the owner or the employer of a project,
having authored the tender documents, is the best person to
understand and appreciate its requirements and interpret its
documents. The constitutional courts must defer to this
understanding and appreciation of the tender documents, unless
there is mala fide or perversity in the understanding or
appreciation or in the application of the terms of the tender
conditions. It is possible that the owner or employer of a project
may give an interpretation to the tender documents that is not
acceptable to the constitutional courts but that by itself is not a
reason for interfering with the interpretation given."
16. The record indicates that the Evaluation Committee - which
comprised of 11 members of the DG Hydrocarbons, submitted an interim
report on 04.02.2019, which inter alia stated that the petitioner was
ineligible. The relevant extract of that report is as follows :
S.No Contact Area Company / Deviations/Shortcomings/
Consortium Discrepancies
xxx xxxxxx
3. i) CB/ONDSF/ TOLANI Net worth certificate is not as per
Vadatal/2018 PROJECTS NIO prescribed format (Point no.
ii) KG/ONDSF/ PRIVATE IX of Part 3, page 36 of NIO) as
Gokarnapuram/20 LIMITED the Format does not provide for
18 „Quasi Capital‟.
The net Worth of USD 3.4 MM
provided at DSF II E-portal by the
bidder is not matching with the net
worth as per the annual audited
accounts of the bidding company.
An amount of INR 57.50 MM
(USD 0.88 MM) is shown as
"Quasi Capital" in Net worth
Certificate but not found in the
Balance sheet. Net worth as per
balance sheet is USD 2.515 MM
which is less than the net worth
given in e-portal.
17. The final report on bid evaluation - dated 12.02.2019, confirmed the
interim report. The same members, were part of the Evaluation Committee.
The relevant extract as far as the petitioner is concerned reads as follows :
"II. The following bids do not qualify for opening of price
bids for the purpose of Second Stage Evaluation:
(a) Tolani Projects Pvt. Ltd
M/s Grant Thornton has opined that "the quasi
capital should not form part of Net Worth of the
Company A.". M/s SARC & Associates have also
opined that "quasi capital will not form part of the
computation of net worth." The Bid Evaluation
Committee is also in agreement of the said
opinions. Further, the audited accounts of the
bidder also do not show any quasi capital
description. Having regard to this, the actual Net
Worth of this bidder after removing the quasi
capital is only $2.515 million, which is less than the
Net Worth of US$ 3.4 million given in the e-portal
by the bidder. Attention in this regard is invited to
Note 1 of Net-Worth calculation on page 36 of NIO
which says that "Net-worth figure filled on line in
the e-bidding portal by the bidder should match
with the figure appearing in the documentary proof
submitted in hard copy in bid documents to DGH
office; otherwise the bid would be rejected." The
actual Net Worth of the bidder is less than the
Networth submitted by it on the e-portal. Any
change in the figure of Net Worth in the e-portal
would result in violation of the integrity of the e-
bidding system."
18. The opinion of M/s SARC and Associates, furnished to the DG, in
response to the e-mail addressed to the latter, with respect to the specific
query regarding inclusion of quasi capital (which the petitioner's bid had
quoted at 0.88 US $ million i.e. `57.5 million) was based upon
consideration of Section 2(57) of the Companies Act as well as the
Companies (Indian Accounting Standards) Rules, 2015. The opinion also
relied upon Section 2(64) of the Companies Act which defines paid-up
share capital as the "aggregate amount of money credited as paid-up as is
equivalent to the amount received as paid-up in respect of shares issued and
also includes any amount credited as paid-up in respect of shares of the
company, but does not include any other amount received in respect of such
shares, by whatever name called." The opinion therefore, was that the
inclusion of quasi capital as was sought to be done in the petitioner's case
did not comply with the terms of the NIO. A similar opinion was given by
the second Chartered Accountant's firm, i.e. Grant Thornton on 08.02.2019,
to the DG.
19. From the above discussion, it is clear that the NIO had fixed the
minimum criteria for eligibility of a bidder's offer: it was US $ 1 million net
worth. Clause IV (3) of the Bid qualifying criteria, clearly stated that the net
worth calculation had to be in accordance with the format prescribed; so did
Clause V (1), i.e. the Bid evaluation criteria. Furthermore, the note below
the Format unambiguously stated that the
"Net-worth figure filled online in the e-bidding portal by the
bidder should match with the figure appearing in the
documentary proof submitted in Hard copy in Bid documents
to DGH office; otherwise the bid would be rejected."
20. The petitioner's contention that the discrepancy is not material is not
merited in the opinion of this Court, because once the criteria was clearly
notified, and the tenderer was forewarned to follow the prescribed format-
as in this case, the attempt to include amounts that could not be considered
part of paid-up capital, was clearly sufficient to the DG to reject the bid.
Significantly also, every bidder was forewarned of the consequence of
discrepancy between the online bid and the offline copy. The petitioner
totalled the amount of paid-up capital with quasi capital and used the
consolidated sum in the bid furnished by it; however, in the offline bid, it
split the amount. Clearly, this was a discrepancy, that was pointedly
referred to in Note 1. Once, a particular consequence is highlighted in the
tender document itself, the bidder cannot complain that its adherence in its
case was inconsequential or could not have made a difference. Therefore,
the view taken by the respondents, based on the opinion of two independent
accountancy firms and duly considered by the Tender evaluation committee
(i.e. to to reject the petitioner's bid as non-compliant) is reasonable. The
agency's decision or interpretation cannot be called arbitrary.
21. As regards the complaint that the other bidders' clarifications or
documents produced later, were considered, the court is of the opinion that
there is no merit in the submission. Undoubtedly, four parties were asked to
furnish additional materials, since the tender evaluation committee was
considering their bids, for which clarifications were felt necessary. The
record shows that out of the four bidders, the clarifications of one alone
found favour; the discrepancy in the case of that bidder was with respect to
the exact shareholding of one individual: the existing documents showed
that well before the tender, he had 99.99% shares; however the bid stated
that the extent of shareholding was 99.0%. besides this, that party's board
resolution was also not the correct one. After verifying the correctness of
these details, the DG decided to accept the technical bid. These decisions to
take on record the technical bid of that party cannot be held arbitrary under
these circumstances. The court perceives no unfairness or procedural
impropriety in this regard.
22. For the above reasons, this petition has to fail; it is accordingly
dismissed, without order on costs.
S. RAVINDRA BHAT
(JUDGE)
PRATEEK JALAN
(JUDGE)
APRIL 11, 2019
