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TMI Blog2005 (2) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad. It entered into Joint Venture Agreement (JV) some time in 1999, with LG C E, a company incorporated under the laws of South Korea. The shares of LG and Patel Engineering, respectively, in the JV, were 75%:25%. 3. The JV bid and was awarded a work known as The SURAT-MANOR TOLLWAY PROJECT , by the NHAI. The JV entered into an agreement on 16.10.2000 with the NHAI, for the purpose of executing the contract namely, the Surat-Manor Toll-way Project (hereinafter called the Surat Contract ). One of the terms in the Surat Contract/Agreement was that both partners of the JV were jointly and severally liable for execution of the contract awarded. Contrary to the commitment made in the JV, it is alleged that LG did not measure up to the performance levels held out, leading to the Patel Engineering eventually taking over the execution of the project entirely. A document, styled as Supplementary Joint Venture Agreement was executed on 2.9.2002. Nomenclature apart, the document recorded the parting of ways between LG and Patel Engineering. Clause 1 of that Supplementary Agreement reads as follows :- Patel shall take over, execute and complete the remaining work of L,G,E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the one dated 19th March, 2004 (except as regards the quantities and the amount), are reproduced below :- 13.5.2004 TO WHOM IT MAY CONCERN This is to certify that M/s Patel Engineering Ltd., Patel Estate, S.V. Road, Jogeshwari (West) Mumbai have executing (SIC) the work of Rehabilitation and Upgrading of Surat-MANOR Section of NH-8 (KM. 343.0002 to KM 381.600) SURAT-MANOR TOLWAY PROJECT; Package-II) wide agreement with National Highway Authority of India dated 16.10.2000 for ₹ 1620.51 millions. The work is substantially completed by 07.02.2004 and the total value of work done including additional works and escalation is ₹ 2550.00 millions. 8. The relevant criteria dealing with qualification and experience is contained in Section (1)(B) of the Section called Instructions to Bidders which forms part of the bid document. The condition dealing with experience and turnover is clause 3. The relevant portion of that clause is extracted below :- Experience (a) The Applicant shall provide a list of the works with documentary evidence that it has worked on at least one highway construction project during the last 7 years in the role of prime contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in para 3.2 shall be applied on the cost of completion. (C) Additional experience in Bridges (Applicable to projects involving construction of a bridge having length equal to or more than 200 meter) The applicant (in case of sole applicant) or at least one of the partners (in case of joint venture) shall meet the following additional criteria in respect of their experience in construction of bridges : Should have completed/substantially completed as civil work contractor within the last seven years at least one bridge of length equal to 50% of the proposed bridge length. 9. The petitioners aver that according to their information some objections were raised with regard to their alleged lack of experience, in respect of their bid for Chittorgarh. Hence they represented to NHAI on 28.5.2004 and subsequently on 12.8.2004 pointing out that the work certificate issued by NHAI in respect of the Surat-Manor Project ought to be considered and that they were fully qualified and eligible. The NHAI was, Therefore, requested to permit the petitioners to participate further, and proceed to open their financial bid. It is also averred that since no response was forthcom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already granted. It is averred that on 7.7.2004 NHAI addressed a letter to LG seeking confirmation about the supplementary agreement which had been taken over by Patel Engineering to which LG responded on 13.7.2004 confirming execution of the supplementary agreement. 13. The petitioners also relied upon a subsequent letter written by NHAI on 16.11.2004 informing that they had been pre-qualified for tendering in respect of yet another Project namely, Chennai Bye Pass, Phase-II Project for which pre-qualification bids had been called for and where the bid had been submitted on 16.8.2004. The bid submitted in that regard enclosed a certificate where the petitioners had, like in the case of the East-West Corridor Contract, relied upon the experience as a prime contractor in respect of works falling to its share to the extent of ₹ 2050 millions. 14. The NHAI in its return has taken the position that in respect of the Chittorgarh Tender 10 bids were received, which were opened on 28.4.2004. It is averred by NHAI that as per clause 27, particularly 27.2 of the Instructions to Bidders, only those bids that conformed to all terms and conditions and specifications of bidding docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the petitioners' application; but different qualification claims have been made. Therefore, the petitioner is willfully misrepresenting the facts, and its conduct disentitles it to relief under Article 226 of the Constitution of India. 16. The NHAI has also stated that as on the date of the supplementary agreement between LG and the Petitioner, approximately 35% of the Project was completed. On the assumption that the supplementary agreement was correct, it is pleaded that the share of Patel Engineering, would at best work out to 9% of that quantum and its subsequent completion of the entire 65% enabled it at the highest to claim experience in respect of 74% of the entire Surat Contract and that its claim to have completed 100% of the Project, was not tenable. This conduct too, it is submitted, disentitles it to relief. 17. The NHAI has also averred that after considering all pros and cons after acceptance of the certificate relied upon by the petitioners it was decided not to accept it in the larger interest of the organization as it would result in unfair advantage to Patel Engineering over other contractors who were similarly situated as the petitioner in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the final noting/decision taken by the Chairman of NHAI on 9.8.2004. That decision/noting was to the following effect :- 1. This was in a weekly meeting held on 21.07.2004 which Member (A), Member (F) and Member (T) were present. It was felt that experience issued to M/s Patel Engineering should be in accordance with the original JV agreement, which formed the basis of PQ of the JV. 2. It was also felt that action should be initiated, after taking legal advice against M/s LGE C for contravention of the JV agreement. It was also felt that action should be initiated after taking legal advice against M/s LG, E C for contravention of the JV agreement. 20. The files in respect of the East-West Corridor tender similarly show that the Evaluation committee, which met on 16th September, 2004 decided that Patel Engineering could not be said to have fulfilled the eligibility criteria, and determined its bid to be non-responsive. The petitioners thereafter represented, and by its meeting dated 1-12-04, the Committee decided that it would not review its decision, since they could correctly lay claim to experience to the extent of ₹ 70 crores, in proportion to their s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of NHAI in insisting that the petitioners are entitled to claim experience only in respect of their original share in the JV Agreement with LG (i.e. 25%) is arbitrary; it defeats the purpose of the condition. The relevant condition (for experience) was incorporated in the tender Conditions for examining the levels of actual experience and performance of contracts of such magnitude. 24. Learned counsel submits that the certificate relied upon by the petitioners was correctly issued as it reflected the reality of their having performed the entire obligations under the Surat contract, the responsibility of the execution of which had been shouldered by them exclusively since 2002. It is submitted that the respondents were bound to act on the basis of that certificate and the NHAI could not go back from its representations made and certificates issued. Mr. Desai submits that NHAI neither disputes the certificate nor ever rejected it, as it is seeking to do in these proceedings. For this purpose reliance is placed upon the judgment of the Supreme Court reported as B.L. Sreedhar v. K.M. Muni Redy AIR2003SC578 . 25. Mr. Desai further submits that during the course of proceedings the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted and participation in relation to the work. It is submitted that this condition or stipulation would come into play only if the Joint Venture completes the performance of works in its entirety. The respective JV partners would be treated as having executed their concerned share in the contract, in such eventuality alone. In any other eventuality where the JV does not for some reason complete the project and it is left to one or the other partner to do so, the actual completion of work, by the party who performs it, would be the determinative factor. So viewed, it is submitted that the certificates reflect the correct reality and ought to have been considered in which event the petitioners were eligible, as having the requisite experience for the works of the magnitude indicated in the Clause 3.3.1. 27. The decision of the NHAI in not proceeding further and treating the bids of the petitioners as not responsive is also questioned on the ground that it is based upon irrelevant considerations, has ignored relevant considerations and acted contrary to the terms of the tender documents. Reliance has been placed upon the decision of the Supreme Court in Union of India v. Tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance upon the internal discussion within NHAI that took place after the evaluation of their bid and after submission of the representation by them. The reference of the issues for legal opinion, consideration of such opinion at different quarters and levels of NHAI; the views expressed in the files of NHAI in that duration all reflected the thinking in that regard. It could not in any way alter the decision of the Evaluation Committee to treat the Chittorgarh tender as non-responsive due to the petitioners own showing. Reliance has been placed upon the decision of the Supreme Court in West Bengal State Electricity Board v. Patel Engineering Ltd., [2001]1SCR352 . 31. Learned counsel has invited attention of the contents of the relevant documents namely, Form 3-A pertaining to the Chittorgarh tender, which show that the petitioners themselves understood that they were entitled to claim only 25% of the work experience in respect of the Surat contract and said as much. That form, indicates that the petitioners viewed their experience under the Surat contracts as Joint Venture entitled to claim 25% of the work experience to the extent of ₹ 512.5 millions. On the face of such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to invite the tenders in respect of the Chittorgarh contract was in fact taken on 9.3.2004 by which time the certificate of February 2004, reflecting the correct position had been issued. Hence the manner-in-which the certificate of 19.3.2004 was issued (the advertisement calling for bids in respect of Chittorgarh tender also being made known on the same date) raises suspicion about the credibility of the certificate. In any case, it is submitted that the issuance of the certificate cannot be a strangle hold on the decision making process of the NHAI which has to be based on the correct interpretation of the eligibility clause. 34. Mr. A.S. Chandiok, learned senior counsel appearing for respondent Nos. 4 5 submits that the petitioners were aware of the decision taken by NHAI that their bid was rejected as non-responsive. This he submits is evident from their representations made to the NHAI on 28.5.2004 and 12.8.2004. In spite of this they chose not to approach the Court. Hence, it is submitted that the tendering process having been completed and respondent No. s4 5 having been successful, the petitioners cannot be heard to complain. In short, he submits that the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of this it is submitted that no rights said to have accrued to the petitioner. 37. Lastly, it was submitted by Mr. Tripathi that the grievances of the petitioners pertained to the realm of decision making in the course of commercial contracts. It is submitted that in the absence of any pleading or proof regarding mala fides, discrimination, illegality or manifest arbitrariness, the mere exercise of discretion by opting for a course of action among a range of choices, does not a lend itself to interference under Article 226 of the Constitution. He submits that in judicial review, the Court does not act as an appellate Body, reviewing the correctness or otherwise of a decision; its role is restricted. The Court is concerned with the fairness of the decision-making process rather than the decision itself. Analysis of facts emerging from the pleadings and the records of the case. 38. The facts noticed above may be briefly summarized as follows :- i) A JV was formed in 1999 between LG and Patel Engineering which was awarded the Surat contract in 2000. The ratio in that JV as between LG and Patel Engineering was 75% is 25%; respectively; ii) The performance levels of LG i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2004. In this the claim put forth was that they were contractors with 100% involvement and they had performed the entire works, quantified at ₹ 2050 millions; ix) on 28.3.2004 the petitioners tendered for the Chittorgarh contract claiming to be JV partner to the extent of 25% in respect of the Surat contract and represented that the work of such experience was to the extent of ₹ 512.5 million or ₹ 51.25 crores; x) the Evaluation Committee of NHAI determined/decided on 25.05.2004, in the Chittorgarh tender that the petitioners bid was non-responsive due to want of requisite experience. Petitioners apparently knew the senior officials and represented on 28.5.2004; xi) legal opinion was sought in the first week of June 2004, by NHAI about the correct stand to be taken vis-a-vis the eligibility certificates. The opinion given was that experience based upon the certificate ought to be reckoned or granted while considering the bid of the petitioners; xii) The experience certificates issued to M/s Patel Engineering were not formally withdrawn. The petitioners' bid for the Chennai Bye-pass contract (in which they had made a claim identical to that ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndon Borough Council, exp Chetnik Developments Ltd.1988 (1) All ER 961 dealt with the scope of that principle, and indicated as follows: The Court is entitled to investigate the action of the local authority with a view to seeing whether or not they have taken into account matters which they ought not to have taken into account, or, conversely, have refused to take into account or neglected to take into account matter which they ought to take into account. Once that question is answered in favor of the local authority, it may still be possible to say that, although the local authority had kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere? 41. This formulation about Wednesbury unreasonableness was approved in Tata Cellular. The Supreme Court, and other courts, have been consistently following the decision in Tata Cellular, in cases involving award of tenders, policy formulation by the State or public agencies, etc. The effect of certain subsequent decisions may, be summarized as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness. Re Point No. 1: 43. The relevant clause in question, viz 3.3.1(a) prescribes that the bidder/ applicant has to provide proof that it has the requisite qualification, i.e worked on at least one highway construction project during the last 7 years in the role of prime contractor/ partner in a joint venture. Clause (b) stipulates the applicant/ bidder shall provide evidence that it has successfully completed or has substantially completed contracts in that regard, pertaining to similar highway projects during the last 7 years. The evidence required is that in respect of three similar works of the value not less than ₹ 68 crores (each); two similar completed works of the value not less than ₹ 85 crores (each), and for one similar completed work, of the value not less than ₹ 136 crores. The works can be either as a prime contractor or as a member of joint venture; experience as a sub-contractor is not counted. The last part of the clause, which has generated considerable debate, reads as follows: In c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in Tata Cellular's case ) that : the requirement regarding experience does not mean that the offer of the original company must be considered because it has experience in its name though it does not have experienced persons with it and ignore the offer of the new company because it does not have experience in its name though it has persons having experience in the field. While considering the requirement regarding experience it has to be borne in mind that the said requirement is contained in a document inviting offers for a commercial transaction. The terms and conditions of such a document have to be construed from the standpoint of a prudent businessman. When a businessman enters into a contract whereunder some work is to be performed he seeks to assure himself about the credentials of the person who is to be entrusted with the performance of the work. Such credentials are to be examined from a commercial point of view which means that if the contract is to be entered with a company he will look into the background of the company and the persons who are in control of the same and their capacity to execute the work. He would go not by the name of the company but by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, contends that these experience certificates cannot conclude the matter as far as its power to decide whether the petitioner is eligible or not. In that respect, it is submitted that the relevant part of clause 3.3.1(b) which deals with what quality and nature of experience is admissible to participants of a joint venture, alone have to be looked into. The experience certificates might have been issued at the behest of certain recommendations of NHAI; however they cannot bind it for all times to come. It has been urged that no reliance can be placed on them, and it is open to NHAI through its evaluation committees to independently determine, in the case of every bid, what would be the quantum of experience admissible to the petitioners in the case of the Surat contract. 52. The issue is whether, in the exercise of its power to enter into contracts, the NHAI can ignore these certificates. As noticed in the narration, as well as analysis of facts, the factum of LG's withdrawing from the JV, and its subsequent performance was made known to NHAI. It accepted that state of affairs, and did not threaten the petitioners with any adverse consequences, or take action in that reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No one has come forward to disclaim the legitimacy of those documents. In these circumstances, it would be unfair and arbitrary to permit NHAI to assert that the certificates are not worth anything. To the extent they record a state of affairs, to wit, the extent of performance of the petitioners in the Surat contract, they bind NHAI. No official noting or document has suggested that the contents of the certificate are wrong or incorrect. 54. There is yet another reason to conclude that the NHAI is bound by the principle of non-arbitrariness to honour its certificates, relied upon by the petitioners. In relation to the Chennai Bye-pass tender, it admittedly determined the bid of the petitioners to be responsive, at the pre-qualification stage; the bid/ application was based on the claim of being a prime contractor, having performed the Surat contract, for a value of ₹ 2050 million. The certificate dated 19th March, 2004 was relied upon for the purpose. This conduct shows that NHAI itself considered the certificates as reflecting the correct position, and more significantly, also at least while considering the pre-qualification bid, determined that the petitioners were ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. 58. The discrepant and divergent positions taken by the NHAI impels us to conclude that its insistence in ignoring the experience certificate, is not justified; it is arbitrary. Besides, no rationale for such a decision has been disclosed. 59. We now come to the relief that can be granted in these proceedings. As far as the Chittorgarh tender is concerned, we have noticed earlier that the petitioners themselves claimed that they were JV partners, to an extent of 25%; the level of experience claimed was ₹ 512.5 millions. On the basis of this representation alone, the NHAI was entitled to reject the bid, since the requirement of experience prescribed a performance of contracts of higher value. NHAI did reject the bid as non-responsive. The decision of the Evaluation Committee records as much. The petitioner cannot, in our view, take shelter under the plea that it had mistakenly filled the form, or that there was some error. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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