2017 (10) TMI 917 - HC - Companies Law

Bid determination - formulation of tender conditions - whether the BSNL s decision that the petitioner did not possess the necessary eligibility is arbitrary? - Held that - This court is of opinion that there is no infirmity with the BSNL s approach and stand. Besides, clause 4.1.1 which emphasizes that bidders must be companies, special information to Bidders, Clause 1.3 (which says Bidder shall mean Bidding Company submitting the Bid. Any reference to the Bidder includes Bidding Company. ) and Clause 1.4 (which says Bidding Company shall mean the single registered corporate entity that has submitted a Bid in response to this document. ), have to all be read as a part of the eligibility criteria. In the present case, it is not one, but several conditions, that emphasize and reiterate that the bidder company should possess the essential experience and fulfill the turnover criteria, in its own right. The only exception carved out, is with respect to subsidiaries. That ipso facto sheds light on BSNL s clear intent that the bidder and the bidder alone- save if it were a subsidiary- had to fulfill the turnover and essential experience criteria. The other conditions (reproduced earlier) substantiate this intention. Therefore, this court holds that the rejection of the petitioner s tender conditions cannot be interfered with; it holds that BSNL s position is neither arbitrary nor a misinterpretation of the tender terms. The court is also of the opinion that the materials brought on record, nowhere indicate that the sole proprietorship s business was entirely subsumed or taken over by the petitioner company. There is no document establishing that goodwill was parted; nor was a separate consideration paid. Furthermore, the sole proprietorship continued to function for a while, even after incorporation of the petitioner company. The latter did not reflect any provident fund contributions and appears to have registered early in 2016 and shown its first contributions thereafter. On the other hand, Pratap Technocrats, the sole proprietorship, with its different registration number, continued to make contributions even in June and July 2016. These facts show that the assertion by the petitioner that the sole proprietorship s business ceased after its incorporation, is not free from doubt; in any case, it cannot be termed as an established fact. Courts, in exercise of judicial review jurisdiction are in a sense second guessing decisions made by the executive, which is tasked by the Constitution to make those decisions, in the first instance. The lens that courts necessarily adopt is narrow rather than wide; they are to permit greater latitude to the public agencies. The determinations of such agencies are not like quasi judicial decisions but with economic and expectedly commercial objectives. Unless a constitutional value is shown to have been undermined, or a law violated, or fair procedure avoided, the outcome of processes adopted by the state agency, or its decisions should not be interdicted.

Issues Involved:
1. Arbitrariness in rejection of tender.
2. Eligibility criteria interpretation.
3. Consideration of sole proprietorship's experience for the newly formed company.
4. Judicial review of tender conditions.
5. Procedural regularity and fairness in tender evaluation.

Issue-Wise Detailed Analysis:

1. Arbitrariness in Rejection of Tender:
The petitioner complained of arbitrariness by BSNL in rejecting its tender for outsourcing operations and maintenance activities of passive infrastructure along with sales and marketing work of non-allocated BSNL tower sites. The petitioner argued that BSNL's narrow interpretation of tender conditions was contrary to Article 14 of the Constitution of India, which mandates fairness and non-arbitrariness in state actions.

2. Eligibility Criteria Interpretation:
The petitioner, originally a sole proprietorship (Pratap Technocrats), was incorporated as a private company on 27.11.2015. BSNL's tender required bidders to be Indian registered companies under the Companies Act, 1956, and to have a minimum cumulative turnover of ?100 Crores over three consecutive financial years from operations and maintenance of passive telecom infrastructure. The petitioner argued that the experience and financial credentials of the sole proprietorship should be considered for the newly formed company since the sole proprietorship's business was taken over by the company.

3. Consideration of Sole Proprietorship's Experience for the Newly Formed Company:
The petitioner contended that since the sole proprietorship's proprietor was the major shareholder in the new company, the business experience and income tax particulars of the sole proprietorship should be attributed to the company. The petitioner relied on the object clause of the new company and a chartered accountant's certificate to support this claim. However, BSNL maintained that the bidder alone must fulfill the eligibility criteria, and the petitioner's bid was non-responsive as it did not meet the financial qualification independently.

4. Judicial Review of Tender Conditions:
The court emphasized that judicial review of tender conditions is limited. The court's role is not to interpret the tender document but to review the decision-making process of the executive agency. The court should defer to the executive's interpretation unless there is clear evidence of mala fides, procedural irregularity, or illegality. The court cited precedents, including Michigan Rubber (India) Limited v. State of Karnataka and Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., to reinforce this principle.

5. Procedural Regularity and Fairness in Tender Evaluation:
BSNL's interpretation of the tender conditions was found to be neither arbitrary nor a misinterpretation. The court noted that the tender conditions explicitly required the bidder to have the necessary experience and turnover in its own right, with an exception only for subsidiaries. The court also found that the sole proprietorship continued to function even after the incorporation of the petitioner company, casting doubt on the petitioner's assertion that the sole proprietorship's business was entirely subsumed by the company.

Conclusion:
The court concluded that BSNL's rejection of the petitioner's tender was justified and not arbitrary. The petitioner's bid did not meet the eligibility criteria independently, and the sole proprietorship's experience could not be attributed to the newly formed company. The writ petition was dismissed, and the court upheld BSNL's decision.

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