2020 (2) TMI 1391 - SC - Indian Laws

Grant of authorisation for laying, building, operating or expanding CGD networks - Geographical Area 51-Puducherry District - Geographical Area 61-Kanchipuram District - Geographical Area 62-Chennai Tiruvallur Districts - relevance of the 2011 Census data in the bidding process - Appellants contend that the 2011 Census data was relevant to the bidding process was the reference to population/household figures derived from 2011 Census data in the map annexed to the Bid Document - present batch of appeals arises from two divergent opinions of the Chairperson and the Member Technical (Petroleum and Natural Gas) of the APTEL - HELD THAT - The procedure specified in Regulation PNGRB Act applies to an invitation by the Board for laying, building, operating or expanding a CDG network. Regulation 5(6) requires the fulfilment of minimum eligibility criteria. For a technical bid to pass muster, the minimum eligibility criteria require the bidder to be qualified both with reference to technical and financial parameters. This is evident from Regulation 5(6) under which the Board is to scrutinise the bids of only those entities which fulfil the minimum eligibility criteria. The minimum eligibility criteria include the technical capability of the bidding entity to (i) lay and build; and (ii) operate and maintain a CGD network. Both of them are defined with reference to qualifying criteria. Besides the technical criteria, the minimum eligibility requirements under Regulation 5(6)(e) incorporate the financial ability to execute the project and to operate and maintain it in the authorised area. The financial criteria are defined with reference to the minimum net-worth of the bidding entity. The net-worth required is dependent on the population of the GA under the 2011 Census. The minimum net-worth required is specifically defined with reference to the 2011 census figures of population for the GA. The bidding entity is also required to submit a bid bond in the form of a performance bond guarantee. The quantum of the guarantee is dependent on the population of the GA. Regulation 7 (1)(b) requires the successful bidder to achieve the target in terms of an annual work programme within eight contract years. The programme is distributed between the first and eighth years for PNG connections', CNG stations' and Inch-kilometres of steel pipelines. For PNG connections, the successful bidder must complete 10 per cent of the work programme at the end of the second year, 20 per cent at the end of the third year, 30 per cent at the end of fourth year, 40 per cent at the end of the fifth year, 60 per cent at the end of the sixth year, 80 per cent at the end of the seventh year and 100 per cent at the end of the eighth year. Under Regulation 7(3), a bidding entity with the highest composite score in terms of the criteria specified in Sub-regulation (1) of Regulation 7 is to be declared as the successful bidder - The provisions contained in the 2008 CGD Authorisation Regulations, as amended on 6 April 2018, indicate that where a specific linkage was sought with reference to the 2011 Census data, a clear and categorical provision was made to that effect. Such provisions are found in regard to the financial capability of a bidder as part of the minimum eligibility criteria in Regulation 5(6)(e) and the extent of the performance bond in Regulation 5(6)(h). The bidder was required to carefully study the GA and the charge area before submitting the bid. In other words, bidders were on notice of the actions required to be taken to implement the Regulations. The Bid Document necessarily had to be in conformity with the CGD Authorisation Regulations. The map, at best was a compendium of the latest official record of the GA. The map did not dictate how the number of domestic PNG connections was to be calculated. There is no such indication particularly in Clause 1 of the Bid Document where the map is referenced. The mere attachment of a map to the Bid Document would not result in the imposition of conditions of eligibility or qualification. These have been provided in the Regulations which have a statutory character. The depiction of the GA in a map attached to the bid document does not over-ride the specific requirements of the bidding criteria as defined in Regulation 7. Our analysis of the CGD Authorisation Regulations, as amended on 6 April 2018, reveals that the Regulations did not contain any stipulation determining a range of 2 to 100 per cent of the number of households under the 2011 Census as the criterion to evaluate bids. The Regulations in fact do not link the 'highness' factor of domestic PNG connections to the 2011 Census data. In Clause 4.4.1 of the Bid Document, the Board reserved to itself the right to reject any unreasonably high or low bid. In Addendum-1 to the Bid Document, the Board clarified to all prospective bidders that the evaluation of whether a bid was unreasonably low or high would be conducted on a case to case basis at the time of bid evaluation. There is no merit in the submission that there was a breach of the principles of natural justice in calling only the bidders with the highest composite score to explain the reasonableness of their bids. None of these bidders was being called upon to revise or improve their bids. In terms of the CGD Authorisation Regulations, the bidder with the highest composite score has to be declared as the successful bidder. If despite having the highest composite score, a bidder was being considered for rejection by the Board, it was that bidder who was justifiably called to explain the reasonableness of the bid. The other bidders had no locus to participate in the process. It is a settled principle of law that the Rules of natural justice are attracted where a decision affects a right of a party against whom the decision has to be made - In the present situation, when the Board decided to call the bidders with the highest composite score in order to allow them an opportunity to explain reasonableness of their bid, the administrative decision taken by the Board cannot be faulted as being in violation of the principles of natural justice. We disagree with the opinion of the Chairperson and concur with the view which was taken by the Member Technical (Petroleum and Natural Gas) to dismiss the appeals - Appeal dismissed.

Summary

Issues Involved:
1. Relevance of the 2011 Census data in the bidding process.
2. Legality and binding nature of the Board Note dated 23 July 2018.
3. Evaluation process and criteria for determining "unreasonably high or low" bids.
4. Compliance with principles of natural justice.
5. Divergent opinions of the Chairperson and Member Technical (Petroleum and Natural Gas) of the APTEL.

Detailed Analysis:

1. Relevance of the 2011 Census Data in the Bidding Process:
The primary contention was whether the 2011 Census data was relevant to the bidding process. The Appellants argued that the map attached to the Bid Document, which included population and household figures from the 2011 Census, was intrinsically linked to the bid parameters. They contended that the authorisation was to lay the CGD network in a defined land area and service the defined households in that area. However, the Court found that the CGD Authorisation Regulations, particularly Regulation 7, did not link the projected number of domestic PNG connections to the 2011 Census data. The Regulations did not provide a ceiling or cap on the 'highness' of the number of PNG connections, and the bidding criteria were not linked to the 2011 Census figures. The Court concluded that the absence of such a linkage in Regulation 7 indicated that the 2011 Census data was not a mandatory criterion for evaluating bids.

2. Legality and Binding Nature of the Board Note Dated 23 July 2018:
The Appellants argued that the Board Note dated 23 July 2018, which stipulated a range of 2 to 100 percent of the number of households as per the 2011 Census as the minimum/maximum thresholds to judge the reasonableness of the bids, was binding. However, the Court found that the Board Note was formulated after the last date for the submission of bids and was not notified to the bidders. The terminology used in the Board Note, such as "may be," indicated that the 2-100 percent range was not an absolute or inflexible basis for disqualifying bids. The Court held that the Board Note was a guideline for the Board and not an absolute criterion for disqualification.

3. Evaluation Process and Criteria for Determining "Unreasonably High or Low" Bids:
The Court examined the evaluation process and criteria for determining "unreasonably high or low" bids. The CGD Authorisation Regulations did not contain any stipulation determining a range of 2 to 100 percent of the number of households under the 2011 Census as the criterion to evaluate bids. Clause 4.4.1 of the Bid Document reserved the right for the Board to reject any unreasonably high or low bid, and Addendum-1 clarified that this evaluation would be conducted on a case-to-case basis. The Court found that the Board's decision to call upon the bidders with the highest composite scores in GAs 51, 61, and 62 to justify their bids in terms of their reasonableness was justified and not arbitrary.

4. Compliance with Principles of Natural Justice:
The Appellants argued that there was a breach of the principles of natural justice as only the highest bidders were called to explain the reasonableness of their bids, and other bidders were not heard. The Court held that the highest bidders were called to justify their bids because they had the highest composite scores, and the other bidders had no locus to participate in the process. The Court found no breach of natural justice in calling only the highest bidders to explain the reasonableness of their bids.

5. Divergent Opinions of the Chairperson and Member Technical (Petroleum and Natural Gas) of the APTEL:
The APTEL had pronounced a split decision, with the Chairperson allowing the appeals and the Member Technical (Petroleum and Natural Gas) dismissing them. The Court disagreed with the Chairperson's opinion, which was based on the assumption that the Board Note dated 23 July 2018 was binding and that the Board was obligated to hear other bidders in the disputed GAs. The Court concurred with the Member Technical's view that the Board Note was not an absolute binding criterion and that the assessment of the reasonableness of the bid was a matter solely between the highest bidder and the Board.

Conclusion:
The Court dismissed the appeals and upheld the decisions of the Board to award authorisations in GAs 51, 61, and 62 to the highest bidders. The Court found that the Board's actions were justified and in compliance with the CGD Authorisation Regulations, and there was no breach of natural justice. The Court also concurred with the Member Technical's view that the Board's decision-making process was fair and reasonable.