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TMI Blog2016 (7) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... ity 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 subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the judgment and order dated 19 February, 2016 passed by the learned First Court in W.P. No. 146 of 2016 (Triveni Engicons Private Limited and Another vs. RITES Limited and Others). The facts of the case relevant for the present appeal are as follows:- (2) A Memorandum of Understanding (MOU) dated 28 June, 2010 was entered into by and between Coal India Limited (in short CIL ) and RITES Limited (in short RITES ) where under RITES was appointed as the project management consultant of CIL. Subsequently the said MOU was modified and a communication was issued by CIL to all its subsidiaries including South Eastern Coal Field Limited ( in short SECL ) with the instruction that in respect of engineering and project management consultancy and approval of tenders, the subsidiary of CIL would be the final authority. (3) On 17 July, 2015 RITES issued a tender notice on behalf of SECL inviting bids from interested parties in connection with construction of Railway infrastructure for Kusmunda Railway Siding. Estimated cost of the project was approximately ₹ 116.42 crores. By a corrigendum, the total value of the tender was reduced to ₹ 107.05 crores and the last d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, as per the direction of the learned Judge, they were added as parties. By the impugned judgment and order the said writ petition was disposed of. (9) The learned Judge recorded that upon consideration of the bids of the respondent Nos. 4 and 5 being Jhajharia Nirman Limited (in short Jhajharia) and Track Tower Infratech (P) Limited (in short T T), SECL found the same to be technically qualified and informed RITES accordingly by a communication dated 30 January, 2016, with a request to open their financial bids. The learned Counsel for the writ petitioners/appellants contended before the learned Judge that Jhajharia and T T could not have been declared to be technically qualified and that the learned Judge should direct RITES to proceed with the tender process without opening the financial bids of Jhajharia and T T. The learned Judge held that it would not be proper to give any such direction in view of the limited scope of relief claimed in the writ petition. The operative portion of the impugned judgment and order is as follows:- The decision of South Eastern Coal Fields Limited declaring Track Tower Infratech (P) Ltd. and Jhajharia Nirman Limited as qualified is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualifying / eligibility condition as would appear from minutes of the meetings of the Tendering Committee held on 23 September, 2013 and 24 September, 2015. This is also the finding of the Tender Evaluation Committee constituted by SECL as would appear from its recommendation dated 29 January, 2016. Mr. Mitra submitted that it is not the case of either RITES or SECL that the Credential Certificate Clause, even though a part of the qualifying criteria is of a general nature, distinct from a pre-qualification criterion. Had it been of a general nature, provision of the same could have been deviated from. Mr. Mitra then referred to Clause 6(b) of the NIT which provides that if the bidder is a wholly owned subsidiary of a Company, the experience and resources of the owner/parent Company or its other subsidiaries will not be taken into account. However, if the bidder is a Company, the experience and resources of its subsidiaries will be taken into consideration. Thus, According to Mr. Mitra, the holding Company and the subsidiary Company are to be treated as separate entities save and except only where the holding Company itself is a bidder. (13) Learned Counsel then submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alification criteria. Had Jhajharia participated in the tender without the qualification criteria in the modified form then and in that case, there would have been others similarly placed as Jhajharia who would have participated. This would have changed the entire character of the tender with much more competitive bidding. It is an old and well settled principle of law that the rules of the game cannot be altered after the game has started. SECL and RITES in connivance with Jhajharia has flouted these principles of law relaxing the eligibility criteria after the intending parties submitted their bids. The Courts would not countenance such action. In this connection Mr. Mitra relied on a decision of the Hon ble Supreme Court in the case of Sorath Builders Vs. Shreejikrupa Buildcon Limited Another reported in (2009)11 SCC 9. Learned Counsel relied on paragraphs 25 and 26 of the said judgment which are set out hereunder:- 25. The prime consideration on which the High Court set aside the award of contract in favour of the appellant is that if the bid of Respondent 1 was considered in the tender process there would have been saving of public money. However, that would not in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation was free to alter the conditions, fresh process of tender was the only alternative permissible. Therefore, we find that the course adopted by the High Court in the circumstances is justified because by reason of deletion of a particular condition wider net will be permissible and a larger participation or more attractive bids could be offered. The aforesaid principle applied with full force to the facts of the case and the only course possible for the Council was to go for fresh tender after altering the terms of the tender in its meeting on 16.05.2013. It has also been argued vehemently that the purported points of consideration noted on 16.05.2013 is a manufactured document. Reliance has been placed on the note dated 28.05.2013 of the Secretary of the Council wherein he claimed he was not present at the meeting and had signed the document without enough scrutiny. It has also been argued that other contemporaneous documents do not reflect the points of consideration. CONTENTION OF RITES:- (14) Learned Counsel for RITES submitted that under the MOU executed by and between CIL and RITES, the latter was to provide Project Management Consultancy Services f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical bids had been accepted or rejected. A letter dated 8 December, 2015 was issued to Jhajharia by RITES. (16) RITES decided to open the financial bids on 14 December, 2015 and accordingly issued letters to the technically qualified bidders. However, due to the non-availability of the concerned representative of SECL to witness the price bid opening program, the date was rescheduled to 18 December, 2015 and later on was postponed till further advise. (17) By a letter dated 1 January, 2016 SECL called upon RITES to take a final logical decision in the matter and send all the files to SECL. Under cover of letter dated 1 January, 2016, RITES sent all the files to SECL. (18) Thereafter, by a letter dated 30 January, 2016, SECL directed RITES to consider the bids of 8 bidders including Jhajharia. RITES is bound to abide by such direction and had proceeded on that basis subject to orders which have been passed by this Court. CONTENTION OF SECL:- (19) Appearing on behalf of SECL Mr. Bose, learned Senior Counsel, submitted that in the notice inviting tender, SECL has been mentioned as the Employer. The bids were to be opened by SECL as the Employer. It was SECL who was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the scope of the prayers in the representation and the communication dated 30 January, 2016, learned single Judge passed the impugned order and granted liberty to the writ petitioners to challenge such decision before the appropriate forum. Instead of challenging the decision made on 30 January, 2016, the writ petitioners have preferred the instant appeal. (22) Learned Senior Counsel then submitted that apart from the appeal being not maintainable, the challenge with regard to the technical qualification of Jhajharia at the instance of the appellants is not justiciable and not maintainable for the following reasons:- (A) The appellant Company which was allowed to participate in the bidding process does not have any locus standi to challenge the qualification of Jhajharia. (B) It is not the case of the writ petitioners/appellants that they were disqualified on the same ground at the technical stage. No prejudice has been caused to the writ petitioners at the technical stage. (C) It does not lie in the mouth of the writ petitioners to allege that the course adopted by SECL may have caused prejudice to the other parties. Such other parties have not applied before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the rule was likely to be relaxed. But neither of these situations is present here. Sri Vaidhyanathan says that in this case one of the applicants was excluded at the preliminary stage. But it is not known on what grounds that application was rejected nor has that party come to Court with any such grievance. The question, then, is whether the course adopted by the K.P.C. has caused any real prejudice to the appellant and other parties who had already supplied all the documents in time and sought no extension at all? It is true that the relaxations of the time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramana's case (supra) will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RITES merely communicates such decision. Initially the earnest money was to be paid and the Bank guarantee was to be furnished to RITES at its Gurgaon Office (Clause 9.1 of the tender). This was subsequently changed in the corrigendum to the effect that payment has to be made directly to SECL. Three previous writ petitions have been filed in the Bilashpur High Court and in the decision of SECL, reference has been made to the order passed by Bilashpur High Court. It is Bilashpur High Court which is the natural forum, if not the only forum for adjudication of any dispute which may arise in respect of processing of the tender. (24) It was finally submitted by learned Counsel for SECL that the stand of the writ petitioners/appellants is also not bona fide. At the technical stage, it was not possible for the writ petitioners to know the details of bids submitted by other bidders. The writ petition was filed before opening of the financial bids. From the financial bids, it would appear that Jhajharia is L-1 bidder and the writ petitioner Company is the L-2 bidder. The bid of Jhajharia is about ₹ 7 crores less than that of the writ petitioner company. The writ petitioner Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in the NIT. It was further submitted that no part of the cause of action has arisen within the jurisdiction of this Court since:- (i) The works are to be carried out in Chattisgarh. (ii) SECL, who is the Employer is to take all decisions in the matter of grant or rejection of the bids. SECL s office is in Bilashpur, Chattishgarh. (iii) The letters dated 9 December, 2015, 10 December, 2015 and 16 December, 2015 which were referred to in the writ petition were also issued to and received by the appellants at their office in Jamshedpur. (iv) No communication was issued to the appellants by RITES or any other respondent authority from the office of the appellants in West Bengal. The appellants had initially sought to make SECL a party to the writ petition as would appear from the contents of the writ petition and realizing that in such event, there would be an objection as to jurisdiction, the appellants made RITES, who have an office in Calcutta, and an officer of RITES parties to the writ petition, so that the jurisdiction of this Court could be attracted not on the basis of cause of action but on the basis that RITES has its office in Kolkata. This the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o both RITES and SECL, the annual report of KSK Energy Ventures Limited for the year 2014-2015 from which the following would appear: i) KSK Energy Ventures Limited holds 84.71 per cent shares in KSK Mahanadi Power Company Limited and hence exercises complete control over its managements and affairs. ii)The assets, liabilities and business of KSK Mahanadi Power Company Limited is treated by KSK Energy Ventures Limited as a part of its own assets, liabilities and business. iii) The holding Company carries on business through its subsidiaries. Therefore, the annual report of KSK Energy Ventures Limited refers to itself and its subsidiaries as a Group i.e. single economic entity. iv) KSK Mahanadi Power Company Limited is the highest profit making subsidiary of KSK Energy Ventures Limited and therefore it contributes substantially to the assets and income of KSK Energy Ventures Limited. The turnover and profit of KSK Mahanadi Power Company Limited is far more than its holding Company KSK Energy Ventures Limited. v) Both KSK Mahanadi Power Company Limited and KSK Energy Ventures Limited have common directors. vi) All necessary statutory disclosures which are required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Certificate as issued by KSK Mahanadi Power Company Limited can therefore be treated as compliance of the relevant qualifying criteria as contained in the NIT. (32) Learned Counsel then submitted that the scope of judicial review of a decision taken in a tender process is extremely limited. Unless it can be demonstrated that the decision making process is arbitrary or violative of Article 14 of the Constitution of India, the Courts should not exercises their writ jurisdiction to interfere with such decision. In this connection, learned Counsel relied on a decision of the Hon ble Supreme Court in the case of TATA Cellular Vs. Union of India reported in (1994)6 SCC 651. Reliance was placed on paragraphs 94 and 137 of the Judgment which are set out hereunder:- 94. The principles deducible from the above are : (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential Certificate is issued by a Company which is not listed. In the present case, none of the conditions which would call for interference by the writ Court has been fulfilled. It cannot be said that the respondent authorities have acted in a manner in which no authority reasonably instructed would have acted or that the interpretation given to the tender conditions by the respondent authorities is absolutely illegal. Such interpretation in fact finds support from the Supreme Court decision in the case of New Horizons Limited (supra). (34) Learned Counsel for Jhajharia finally submitted that there has been suppression of material facts on the part of the appellants. The technical bid of Jhajharia was also disqualified with regard to an issue as to submission of earnest money deposit. Subsequently, pursuant to an order dated 27 August, 2015 passed by the Bilashpur High Court such EMD was accepted by the respondent authorities. By a letter dated 3 September, 2015 RITES communicated to the appellants that the technical bid of Jhajharia was to be opened on 9 September, 2015. This letter was also forwarded to the other bidders including the writ petitioners. In the writ petition, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el relied on a decision of the Madras High Court in the case of Amalgamations Limited Vs. Shankar Sundaram reported in (2012) 1 Company Law Journal 568. Learned Counsel submitted that in the said decision of the Madras High Court reasons have been given as to why the affairs of a Company cannot include the affairs of a subsidiary Company and its holding company as if they were a part of one entity. A wholly owned subsidiary Company is distinct from its holding company even if all the shares of the subsidiary Company are held by the holding Company. In this connection, learned Counsel relied on a decision of the Hon ble Supreme Court in the case of Electronics Corporate of India Limited Vs. Secretary Revenue Department, Government of Andhra Pradesh reported in (1999) 4 SCC 458. Reliance was also placed on a decision of the Supreme Court in the case of Vodafone International Holdings Vs. union of India reported in (2012) 6 SCC 613. Learned Counsel relied on paragraphs 258 to 260 of the said Judgment which are set out hereunder:- 258. Holding company, of course, if the subsidiary is a WOS, may appoint or remove any director if it so desires by a resolution in the General Body Meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that it is an admitted position that as per the tender terms the following parts of the cause of action have arisen within the jurisdiction of this Court:- (i) The tender documents were issued from the office of RITES at Kolkata (clauses 5.1 and 5.2 of NIT). (ii) For clarification of any term of the tender documents queries were addressed to RITES at Kolkata (clause 5.5 of NIT). (iii) The pre-bid meeting was held at the office of RITES at Kolkata (clause 6.0 of NIT). (iv) The receipt and opening of tender applications were to be made at the office of RITES at Kolkata (Clause 12.1 of NIT). (v) In fact, the tender bids were opened on 9 September, 2015 at the office of RITES at Kolkata. (vi) Notices dated 9 September, 2015 were issued by RITES for opening of the price bid at its office at Kolkata. (vii) SECL s letter dated 30 January, 2016 is addressed to RITES at its office at Kolkata. (39) Learned Counsel then submitted that in so far as a writ petition is concerned, forum selection Clause does not apply. In this connection, learned Counsel relied on a decision of this Court in the case of Ashok Kr. Saboo(HUF) Vs. Hindustan Paper corporation Limited r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court. Moreover, the learned Single Judge s observation in paragraph 5 that the provision of Article 226 can be contracted out under the provision of Section 28 of the Contract Act is not sustainable in law as we have observed that the provision of Article 226 is a Constitutional provision and it cannot be contracted out by the act of the parties. The said Judgment is not a good law as far as contracting out the provision of Article 226 of the Constitution of India is concerned. It is now firmly settled that this provision is one part of basic structure of the Constitution and it is inviolable even by the Parliament, not to speak of private individual. (40) Learned Counsel finally submitted that in any event the jurisdiction clause contained in NIT is a term which was to be incorporated in the contract that would be entered into with the successful bidder. The jurisdiction clause would apply to future disputes that may arise in course of performance of the contract between the employer and the contractor. Such Clause cannot stand in the way of this Court entertaining the instant writ petition. Court s View:- (41) Although submissions have been made by Learned Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect management consultancy and approval of tenders the subsidiary of CIL (in this case SECL) would be the final authority. (44) RITES floated the subject tender on behalf of the SECL inviting bids from interested parties and in doing so, RITES was acting as an agent of SECL. Initially, out of the ten bidders, six were found to be technically qualified. Jhajharia was one of the bidders who was found not to be technically qualified for the reason that the credential certificate it had submitted was issued by a public limited company which was not listed in a Stock Exchange in India or abroad. (45) Subsequently, the committee constituted by SECL recommended that the bids of Jhajharia and T T who had been technically disqualified earlier by RITES be also considered and the L-1 bid be chosen. The Competent Authority of SECL approved such decision of the committee and by a communication dated 30 January, 2016 RITES was instructed by SECL to open the bids and award the contract. In our opinion, RITES, which was acting as an agent of SECL was bound by the instruction of SECL. It is trite law that an agent is bound by the principal s mandates and cannot act beyond or contrary to suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. (48) Learned Counsel for the appellants, relying on two decisions referred to above, urged that the decision of SECL to open the financial bid of Jhajharia even when the credential certificate was not issued by a listed public limited company, amounted to changing the rules of the game once the game has started, which is impermissible in law. We would have agreed with such contention of Learned Counsel if we were of the opinion that Note 5 to Clause 2(a) of the NIT constitutes an essential condition of the NIT. According to us, it was a non-essential condition and relaxation thereof or deviation therefrom even at the stage of consideration of financial bids did not amount to any irregularity. Further, the same did not prejudice the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that none of the bidders in a tender process has any legal right in the contract being awarded in his favour. This is so, even if he is the lowest bidder. The Government or a public authority always has a right to reject even the lowest bid for cogent reasons provided such decision is not arbitrary. In the commercial field, the Government or a public authority surely has the freedom of contract and can even amend the terms of a Notice Inviting Tender provided no undue prejudice is caused to a party who has participated in the tender process. In the instant case, the appellant company has not been able to establish as to what prejudice it would suffer by reason of the decision of the respondents to consider the financial bid of Jhajharia. In our opinion, no injustice can be said to have been done to the appellant company by the decision of SECL to consider the tender of Jhajharia side by side with that of the appellant company. The comparative merits of the appellant company viz-a-viz Jhajharia is a matter for SECL to decide and not for the courts. This view of our finds support from the decision of the Hon ble Apex Court in the case of G. J. Fernandez (supra). (52) Another rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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