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TMI Blog2010 (1) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... e remaining selected bidders in each group in direct ratio of their Vendor Rating. Thus the quantity for which a purchase order was to be placed by BSNL on a bidder depended upon the 'Vendor Rating' of such a bidder. The first round of litigation 3. There were several bidders including the respondent and NICCO Corporation Ltd. BSNL awarded the highest vendor rating (V-1), to NICCO. The respondent claimed that on a proper evaluation of bidders, it should have been given the highest Vendor Rating (V-1) in regard to 10P x 0.5 (UA) size cable instead of NICCO; that if it had been adjudged as V-1, it would have secured a Purchase Order for a quantity of 5.842 LCKM from BSNL; that as NICCO was adjudged as V-1, the appellant treated the respondent as one of the 'other bidders' and consequently placed an order only for a quantity of 0.536 LCKM; and that resulted in a shortfall of 5.306 LCKM in the order placed on it. The respondent therefore filed Writ Petition [C] No.5808/2001 in the Delhi High Court on 18.9.2001 alleging that BSNL had arbitrarily adjudged NICCO as the person with the highest Vendor Rating thereby pushing it down to the category of 'other bidders' which adversely affect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no balance quantity was available and no order for any further quantity could be placed with the respondent, even if the respondent was to be given V-1 rating on a re-evaluation. The respondent was aggrieved that the BSNL did not adjudge it as V-1 and did not place orders for further quantities, as per the direction of the High Court. According to the respondent, on account of the failure on the part of BSNL to adjudge it with V-1 rating, and consequential failure to place a purchase order for 30% tendered quantity, it was denied the opportunity to manufacture and supply a quantity of 5.306 LCKM of cables, resulting in a loss of profit at the rate of Rs. 200/- per CKM (or Rs. 2 crores per LCKM) on the quantities for which it did not get an order; and therefore it was entitled to Rs. 10,61,20,000/- as damages from BSNL. 6. The respondent issued a notice dated 26.10.2005 calling upon the appellant to pay the said amount as compensation. The demand was reiterated on 28.4.2006. BSNL rejected the claim by its reply dated 10.7.2006. The respondent therefore filed a second writ petition (WP [C] No.18393/2006) on 27.9.2006 seeking a direction to the appellant to comply with the decision r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Table. Sections VIII, IX, X and XII contained formats of Bid Security form, Performance security bond, Bidder's Authorization Letter and Declaration. 10. Definition clause 1(f) of Instructions to Bidders defined 'Purchase Order' as meaning "the order placed by the Purchaser on the Supplier, signed by the Purchaser including all attachments and appendices thereto and all documents incorporated by reference therein. The purchase order shall be deemed as 'Contract' appearing in the document." Clause 28 of Instructions to Bidders clarified that the issue of purchase order shall constitute the award of contract on the bidder. Clause 26 of Instructions to bidders made it clear that BSNL could reject any or all bids. The said clause is extracted below: "The Purchaser reserves the right to accept or reject any bid, and to annul the bidding process and reject all bids, at any time prior to award of contract without assigning any reason whatsoever and without thereby incurring any liability to the affected bidder or bidders on the grounds of purchaser's action." Clause 30 of the Instructions to bidders related to jurisdiction and the same is extracted below : "COURT JURISDICTION: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections of bid documents contained provisions which would govern the contracts, when purchase orders were placed by BSNL by accepting the bid. For example, Section I (Notice Inviting Tenders) and Section II (Instructions to bidders) had nothing to do with the performance of the contract. They relate to the pre-contract process of bidding, that is who would be eligible to make bids and how the bids should be made. On the other hand, Section III had nothing to do with the bidding process or selection of suppliers, but contained provisions which would govern the performance - that is the terms and conditions of the contract - if and when contracts were entered by placing purchase orders. The arbitration clause (clause 20) is a part of Section III of the Bid documents. 13. As per the scheme of Bid documents, there is a clear division of the terms that will govern the tender process, and the terms that will govern the contract, when the bids are accepted. One part regulated the tender process that led to placing of purchase orders. That part contained a provision as to what should be the forum of dispute resolution, if there was a dispute at the tender or bidding stage. The other par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. On the other hand, the Instruction to Bidders contains a specific provision that if there is a dispute or claim arising out of the tender till (issue of authorization for) placement of the purchase order, only courts will have jurisdiction. Of course, as and when appellant placed a purchase order on a bidder, the purchase order contained a term that the General conditions of contract, forming part of the bid documents would be a part of the contract documents, and consequently the arbitration clause applied to the contracts entered between BSNL and the bidders. 16. We may in this behalf usefully refer to the decision in Dresser Rand S.A. vs. Bindal Agro Chem.Ltd (2006) 1 SCC 751 wherein this Court held: "27. The tender document or the invitation to bid of BINDAL (containing the "instructions to bidders" and the "general conditions of purchase"), by itself, is neither an agreement nor a contract. The instructions to bidders informed the intending bidders how the bid should be made and laid down the procedure for consideration and acceptance of the bid. The process of bidding or submission of tenders would result in a contract when a bid or offer is made by a prospective s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity (0.536 LCKM), and as the dispute raised was whether the contract quantity should be more, the arbitration clause was in force and available. The contention has no merit. The arbitration agreement was available in regard to the contract for 0.536 LCKM. But in the absence of any purchase order in respect of 5.306 LCKM by BSNL on the respondent, respondent cannot seek recourse to the arbitration agreement contained in clause 20 of Section III of the bid document, in regard to a dispute relating to that quantity for which order was not placed. It is not sufficient to show that there was an arbitration agreement in regard to some contract between the parties. To constitute an arbitration agreement for the purpose of Sections 7 and 11 of the Act, two requirements should be satisfied. The first is that there should be an arbitration agreement between the parties to the dispute. The second is that it should relate to or be applicable to the dispute in regard to which appointment of Arbitrator is sought (See Yogi Agarwal v. Inspiration Clothes & U - 2009 (1) SCC 362). For the foregoing reasons, we hold that in the absence of an arbitration agreement, the application under section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it will be open to the respondent to pursue its remedies against the appellant for compensation/damages that may be available to it in law. 22. Where the terms of the bid documents barred any claim being made on account of the rejection or non-acceptance of any bid, the bid inviter would not incur any liability to any aggrieved bidder, and the bidder would not have any cause of action in private law. But as the bids were invited by BSNL, which is 'state' for the purpose of Article 12, a writ petition was entertained, when respondent alleged arbitrariness in the process of assigning vendor-rating. In the absence of a finding in regard to arbitrariness, bias or malafides in the decision but only a mere error in assessment, the High Court ought not to have interfered in the tender process. In fact, it did not set aside the contract awarded to NICCO. But the High Court chose to issue a direction for re-assessment of the vendor rating and if respondent was found to have V-1 rating, then place a purchase order for the quantity that remained over after all the purchase orders. This was unobjectionable as a public law remedy. Having done so, there was no justification for the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure that everyone is given a fair and equal opportunity, public undertakings are required to spend huge amounts and enormous time in elaborate tender processes. A proposal for a purchase of the value of Rupees Ten lakhs may involve a 'material procurement expenditure' of Rupees Two Lakhs in advertisements and tender evaluation cost, and a total tender process period ranging from three to six months. A competing private undertaking can go straight into market and negotiate directly and get the same material for Rupees five lakhs without any expenditure in a week. Public undertakings to avoid being accused of malafides, bias or arbitrariness spend most of their time and energy in covering their back rather than in achieving development and progress. When courts grant stay, the entire projects or business ventures stand still or get delayed. Even if ultimately the stay is vacated and the complaint is rejected as false, the damage is done as there is enormous loss to the public undertaking in terms of time and increase in costs. The private sector is not open to such scrutiny by courts. When the public sector is tied down by litigations and controls, the private sector quietly steals a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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