2015 (10) TMI 2717 - HC - Indian Laws

Extension of time for furnishing performance bank guarantee - validity of LOI issued by PNGRB in favour of IOAGPL - disqualification of IOAGPL is sought alongwith a declaration that the petitioner (SSL) be declared as the successful bidder. Held that - A higher performance bank guarantee was in public interest as it was a much greater guarantee that the gas network for Ernakulam would get set-up in time and as per the stipulated parameters. Furthermore, the second option of cancelling the tender would set back the project in time which would also not be in public interest - the PNGRB cannot be faulted in going by the first option as it was in public interest and was also not in contravention of the tender conditions. PNGRB has the option to cancel the proposed authorization in case the Performance Bond / Bank Guarantee is not furnished within the specified time. But, the other side of the coin is that PNGRB need not cancel the proposed authorization and may extend the time for furnishing the Performance Bank Guarantee. Thus, extension of time for furnishing the Performance Bank Guarantee is not contrary to the tender terms but is, in fact, an option available to PNGRB. It chose that option in public interest and therefore the grant of extension of time cannot be faulted and the petitioner cannot claim any right to seek quashing of this action on the part of PNGRB, particularly when the petitioner lost the race at the LOI stage and there was nothing in the tender terms barring the grant of extension of time to the successful entity - IOAGPL. The PNGRB is free to accept the Performance Bank Guarantee for ₹ 4248 crores submitted by IOAGPL and to grant the authorization in its favour in terms of the 2008 Regulations and the tender conditions - petition dismissed.

Summary

Issues Involved:
1. Quashing of the extension of time granted to IOAGPL for submitting the Performance Bank Guarantee.
2. Quashing of the Letter of Intent (LOI) issued by PNGRB in favor of IOAGPL.
3. Declaration of IOAGPL as disqualified and SSL as the successful bidder.

Detailed Analysis:

Issue 1: Quashing of the Extension of Time Granted to IOAGPL
The petitioner, SSL, argued that IOAGPL did not furnish the requisite performance bank guarantee within the stipulated 15-day period following the issuance of the LOI, and thus, the extension granted by PNGRB was contrary to the tender conditions and the 2008 Regulations. SSL cited Supreme Court decisions emphasizing the importance of adhering to tender conditions to avoid arbitrariness and maintain transparency.

However, PNGRB contended that it had two options: either to grant the extension or to restart the entire tender process, which would delay the project. PNGRB chose to grant the extension, considering it in the larger public interest, as IOAGPL was to submit a significantly larger performance bank guarantee (Rs. 4248 crores) compared to SSL (Rs. 52 crores). The court found that the extension was not illegal or contrary to the tender conditions and was in public interest.

Issue 2: Quashing of the LOI Issued by PNGRB in Favor of IOAGPL
SSL did not challenge the tender process up to the issuance of the LOI. There was a tie in the highest composite scores among the bidders, and the tie-breaker rule required additional bid bonds. IOAGPL submitted the highest additional bid bond and was declared the successful bidder. SSL did not allege any arbitrary action or lack of transparency in this process. The court noted that IOAGPL had won the bid fairly and squarely, and SSL was out of the race after the LOI was issued.

Issue 3: Declaration of IOAGPL as Disqualified and SSL as the Successful Bidder
SSL sought the disqualification of IOAGPL and a declaration that SSL be considered the successful bidder. However, the court noted that the extension of time for furnishing the performance bank guarantee was an option available to PNGRB under the tender terms. Clause 4.7.3 of the Instructions to Bidders allowed PNGRB to either cancel the proposed authorization or extend the time for furnishing the performance bank guarantee. PNGRB chose the latter in public interest, and the court found no fault in this decision.

Conclusion:
The court dismissed the writ petition, allowing PNGRB to accept the performance bank guarantee of Rs. 4248 crores submitted by IOAGPL and to grant the authorization in its favor. The court emphasized that the process adopted by PNGRB was neither arbitrary nor irrational and was in public interest. The parties were directed to bear their respective costs.