2011 (10) TMI 775 - HC - Indian Laws

Summary

Issues Involved:
1. Challenge to the award of contract by ONGC to a foreign company.
2. Claim for price preference by a domestic bidder.
3. Compliance with Bid Evaluation Criteria.
4. Validity and sufficiency of the statutory auditor's certificate.
5. Procedural fairness and arbitrariness in the decision-making process.

Issue-wise Detailed Analysis:

1. Challenge to the Award of Contract by ONGC to a Foreign Company:
The petitioner challenged the award of a contract by ONGC to a foreign company under Article 226 of the Constitution. The petitioner claimed entitlement to a price preference as a domestic bidder. ONGC contended that the petitioner failed to establish its claim to a price preference, as the statutory auditor's certificate did not meet the Bid Evaluation Criteria and was not submitted with the unpriced bid.

2. Claim for Price Preference by a Domestic Bidder:
The petitioner sought a price preference of 10% over the lowest acceptable foreign bid, as stipulated in Clause C-5 of the Bid Evaluation Criteria. The criteria required the bidder to be registered in India, have majority Indian ownership, and not subcontract more than 50% of the work to foreign contractors. The statutory auditor's certificate was essential to prove compliance with these conditions.

3. Compliance with Bid Evaluation Criteria:
The Bid Evaluation Criteria mandated that all documents, including the statutory auditor's certificate, be submitted in the C-Folder through ONGC's e-bidding portal. The petitioner's certificate was found to be non-compliant as it did not clearly indicate the extent of subcontracting and was not submitted with the unpriced bid. The Tender Committee initially recommended awarding the contract to the petitioner, subject to matching the lowest bid and providing an explicit conformity certificate of subcontracting.

4. Validity and Sufficiency of the Statutory Auditor's Certificate:
The Supreme Court remanded the case to the High Court to decide on the validity and sufficiency of the statutory auditor's certificate. The certificate submitted by the petitioner was based on a bifurcation of costs between local and foreign components, which did not meet the requirement of indicating that no more than 50% of the work was subcontracted to foreign contractors. The certificate lacked application of mind and details as required by Clause C-5 of the Bid Evaluation Criteria.

5. Procedural Fairness and Arbitrariness in the Decision-Making Process:
The High Court examined whether the decision-making process was arbitrary or suffered from procedural impropriety. The court held that the petitioner failed to comply with the essential conditions of the tender, particularly the submission of the statutory auditor's certificate with the unpriced bid. The decision-making process by ONGC was found to be fair and in accordance with the Bid Evaluation Criteria. The court emphasized that judicial review in matters of contract awards is limited to examining the legality and rationality of the decision-making process, not the merits of the decision itself.

Conclusion:
The High Court dismissed the petition, holding that the petitioner did not establish entitlement to the price preference due to non-compliance with the Bid Evaluation Criteria. The decision to award the contract to the foreign company was found to be fair and not arbitrary. The court reiterated the principles of judicial review in contract awards, emphasizing the need for strict compliance with tender conditions and the limited scope of judicial intervention in commercial decisions.