2017 (10) TMI 1062 - HC - Indian Laws

Bidding procedures - directions in respect of the award of a tender by the Union Ministry of Defence (hereafter MoD ) for the acquisition of 606 Material Handing Cranes (MHC) - Whether the bid is to be evaluated on the basis of Cost to User or Cost to State ? - Held that - Vectra refutes this logic of the MoD, and in defence has relied on the Defence Procurement Policy 2013. The DPP 2013 stipulates that bids should be evaluated as per the Cost to State basis wherein Taxes and Duties are excluded in the bid. As to this aspect, the court notices that the RFP was silent on this aspect. This meant that the MoD had the discretion to adopt either method. Vectra s logic is merited; however, this Court has to be alive to the fact that it is not called upon to decide which method to adopt, but to merely decide, whether the method adopted by the MoD was illegal or unreasonable. That the MoD had used the Cost to User in the past, per se is no ground to brand as unjustified the choice exercised in the facts of this case. The MoD s citing Clause 77 of DPP 2013 shows that it was clearly inapplicable to the present matter since the RFP acquisitions and the commercial bid was made prior to implementation of the DPP 2013. Whether the custom duty amount, could be reevaluated after Vectra s explanations and clarifications? - Held that - Judicial precedents as well as contractual clauses clearly and affirmatively suggest that State Authorities have considerable latitude in evaluating tenders on their own basis. In the present matter, the customs duty mentioned by Vectra is to be taken on the face of it, as part of bid, and the Court cannot scrutinize its correctness, or the accuracy of the second respondent s bid, quoting different rates of duty. The clarification issued by the MOD gives further credence to its submissions. It is evident that Customs Duty is included as part of the bid and the exemption is on a fixed amount. The selection of Respondent No.2 as L1, is prima facie on the basis, that it submitted a lower bid (inclusive taxes and duties) and this fact was admitted by Vectra. Therefore, even if the bid was to be reevaluated in arguendo, Vectra s submissions are unsustainable. Whether the result of the bid evaluation and the declaration of Respondent No.2 as L1 is arbitrary? - Held that - Since the Cost to User evaluation has not been held to be arbitrary, along with the premise that Custom Duty could be evaluated as part of the bid, it is established that declaring the second Respondent L1 was not arbitrary or unfair.

Summary

Issues Involved:
1. Evaluation Basis: "Cost to User" vs. "Cost to State"
2. Re-evaluation of Custom Duty Amount Post-Bid Clarifications
3. Arbitrariness in Declaring Respondent No.2 as L1

Issue-wise Detailed Analysis:

1. Evaluation Basis: "Cost to User" vs. "Cost to State"

The core issue was whether the bid evaluation should be based on the "Cost to User" or "Cost to State." The court noted that the MoD is liable to pay customs duty to the Government of India, making the "Cost to User" evaluation appropriate. The MoD's decision to use this basis was supported by the Defence Procurement Manual (DPM) 2009 and the DGS&D manual, which advocate for including all taxes and duties in the evaluation. The court found no illegality or unreasonableness in the MoD's approach, as it was consistent with past practices and internal guidelines. The court emphasized that the MoD had the discretion to adopt either method, and its choice was not arbitrary or unjustified.

2. Re-evaluation of Custom Duty Amount Post-Bid Clarifications

Vectra's bid included a custom duty amount of ?10.24 Crore, which it later sought to clarify and potentially reduce. The MoD argued that under DPM 2009, the Custom Duty Exemption Certificate (CDEC) is granted for a fixed amount to avoid variability. The court found that Vectra had consistently indicated this amount in its bid and did not raise the issue during multiple meetings. The court concluded that it could not re-evaluate the bid amount post hoc, as it would undermine the integrity of the bidding process and set a precedent for endless litigation. The court upheld the MoD's interpretation of the contract, finding it reasonable and not arbitrary.

3. Arbitrariness in Declaring Respondent No.2 as L1

The court examined whether the declaration of Respondent No.2 as L1 was arbitrary. It found that the MoD's decision to evaluate bids based on the "Cost to User" was not arbitrary. The court also noted that Vectra's bid included a higher custom duty rate than Respondent No.2, which affected the overall bid evaluation. The MoD's approach to including customs duty in the bid and granting exemptions on a fixed amount was deemed reasonable. The court concluded that the declaration of Respondent No.2 as L1 was neither arbitrary nor unfair.

Conclusion:

The court dismissed the writ petition, finding no merit in Vectra's claims. It upheld the MoD's decision to evaluate bids based on the "Cost to User," include customs duty in the bid, and declare Respondent No.2 as L1. The court emphasized the principles of judicial restraint in tender matters, allowing the MoD considerable latitude in its decision-making process.