2016 (7) TMI 976 - HC - Companies Law

Validity of Bid - credibility and capability of the bidding parties - Held that - In the instant case, SECL is the proposed Employer. The tender was floated by RITES on behalf of SECL. The object of a tender process in respect of work projects is not only to ascertain the lowest price at which the work can be got executed but also to assess the credibility and capability of the bidding parties who are interested to perform the job. The lowest tenderer need not always be awarded the work if it is found that he has a dubious or unsatisfactory track record or if on an overall assessment the authority concerned is of the opinion that his capability is doubtful. It is settled law that the Government and public authorities must have freedom of contract. In the present case, SECL found the financial bid of Jhajharia to be the lowest. It was about 7 crores less than the second lowest bid that was of the appellant. It is not in dispute that Jhajharia carried out work satisfactorily for KSK Mahanadi and this has been verified from KSK Mahanadi by RITES. Being satisfied by the capability of Jhajharia, SECL directed RITES to consider Jhajharia s financial bid along with the financial bids of others including that of the appellants. We see absolutely nothing illegal or irregular with such action of SECL. In any event, in ascertaining whether a condition in a NIT has been complied with, one has to take a commercial point of view. It is not in dispute that KSK Mahanadi which issued the credential certificate to Jhajharia is a subsidiary of KSK Energy Ventures. In fact, KSK Energy Ventures holds approximately 84 per cent of the shares in KSK Mahanadi. KSK Energy Ventures in its annual report referred to itself and its subsidiaries as a Group i.e. a single economic entity. KSK Energy Ventures appears to be in complete control of the management and administration of the affairs of KSK Mahanadi and this is a commercial reality which cannot be lost sight of. Although KSK Ventures and KSK Mahanadi may be separate legal entities in the eye of law, from a practical and pragmatic point of view KSK Energy Ventures operates through KSK Mahanadi being 84 per cent shareholder thereof. The Directors of the two companies are also common. Hence, in our opinion, there is substantial compliance of Note 5 under Clause 2(a) of the NIT since KSK Energy Ventures is undisputedly a listed company. SECL s decision to consider Jhajharia s financial bid is an administrative decision made qualitatively by experts in the field. If the writ court interferes with such decision lightly without having the necessary expertise such action is likely to be fallible. It is trite law that the writ court is not concerned with the decision but with the decision making process. We decline to interfere is that the decision of SECL to consider the financial bid of Jhajharia and T & T has not been challenged by the writ petitioners. The Learned Judge reserved liberty to the writ petitioners to challenge such decision of SECL before the appropriate forum. Instead of doing so, the writ petitioners preferred the instant appeal. Prayers in the instant appeal are beyond the scope of the writ petition. Learned Counsel for the appellants argument that SECL and RITES are acting in tandem and collusion with Jhajharia has no substance in such contention and the materials on record also do not support such allegation. Out of the bidders who were initially technically disqualified by RITES, it was not only Jhajharia s financial bid that SECL directed RITES to consider but also the financial bid of T & T. It was for SECL to finally decide whether those two bidders were technically eligible and no inference of collusion or of SECL or RITES acting hand in glove with Jhajharia can be drawn merely from the decision of SECL to consider the financial bids of Jhajharia and T & T. On the contrary, we are inclined to agree with the submission of Learned Counsel for SECL and Jhajharia that the present litigation is an attempt on the part of the appellant company to scuttle and/or eliminate competition.

Summary

Issues Involved:
1. Legitimacy of SECL's instruction to RITES to consider the financial bid of Jhajharia.
2. Compliance with the essential terms of the NIT, particularly Note No. 5 under Clause 2(a).
3. Jurisdiction of the High Court to entertain the writ petition.
4. Allegations of collusion between SECL, RITES, and Jhajharia.
5. Locus standi of the appellants to challenge the qualification of Jhajharia.

Detailed Analysis:

1. Legitimacy of SECL's Instruction to RITES to Consider the Financial Bid of Jhajharia:
The Court held that RITES, acting as an agent of SECL, was bound by SECL’s instructions. SECL, as the principal authority, had the right to direct RITES to consider Jhajharia’s financial bid. The Court found no illegality or irregularity in SECL’s instruction, noting that SECL could ascertain the credibility and past record of a bidder and consider the lowest bid even if the credential certificate was not issued by a listed public limited company. The decision to include Jhajharia was deemed an administrative decision made by experts and was not arbitrary.

2. Compliance with the Essential Terms of the NIT:
The Court determined that the requirement for a credential certificate from a listed public limited company was not an essential term of the NIT. The purpose of such a certificate was to assess the past performance and credibility of the bidder. SECL’s decision to consider Jhajharia’s financial bid, despite the credential certificate being issued by an unlisted subsidiary of a listed company, was seen as a minor technical irregularity that did not warrant strict compliance. The Court emphasized that SECL’s decision was pragmatic and commercially reasonable, thus upholding it.

3. Jurisdiction of the High Court to Entertain the Writ Petition:
Although the Court refrained from expressing a final opinion on jurisdiction, it noted that significant parts of the cause of action arose within the jurisdiction of the Calcutta High Court. These included the issuance and clarification of tender documents, the pre-bid meeting, and the opening of tender applications, all of which took place at RITES' Kolkata office. The Court also referenced a decision that forum selection clauses do not apply to writ petitions, suggesting that the jurisdiction clause in NIT could not bar the writ petition.

4. Allegations of Collusion between SECL, RITES, and Jhajharia:
The Court found no substance in the appellants' allegations of collusion. It noted that SECL had directed RITES to consider not only Jhajharia’s bid but also T&T’s, indicating a fair and comprehensive review process. The Court concluded that the appellants’ litigation appeared to be an attempt to eliminate competition rather than address genuine grievances.

5. Locus Standi of the Appellants to Challenge the Qualification of Jhajharia:
The Court questioned the appellants' locus standi, noting that they were not prejudiced by SECL’s decision to consider Jhajharia’s bid. The appellants' financial bid would still be considered, and they could not claim a vested right to be awarded the contract. The Court emphasized that the appellants were not aggrieved parties and their challenge seemed aimed at reducing competition.

Conclusion:
The appeal was dismissed, with the Court upholding SECL's decision to consider Jhajharia's financial bid. The Court found no merit in the appellants' contentions regarding the essential terms of the NIT, allegations of collusion, or their locus standi. The decision reinforced the principle that administrative decisions in tender processes, made by experts, should not be interfered with lightly by courts unless they are arbitrary or unreasonable.