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TMI Blog2016 (10) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... ngency. They have referred to the Term Sheet and what is put up by Industrial and Commercial Bank of China Limited. At this juncture we are obliged to say that in a complex fiscal evaluation the Court has to apply the doctrine of restraint. Several aspects, clauses, contingencies, etc. have to be factored. These calculations are best left to experts and those who have knowledge and skills in the field. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. The courts cannot really enter into the said realm in exercise of power of judicial review. We cannot sit in appeal over the financial consultant's assessment. Suffice it to say, it is neither ex facie erroneous nor can we perceive as flawed for being perverse or absurd. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently. But the present case is not a one of such nature. Once the price bid was opened, a bidder could not have submitted representations on his own and seek a mandamus from the Court to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r short, the TTIT Act ). An undertaking was given before the learned Single Judge by the learned Advocate General that post-bid representations submitted by the Respondent No. 1 will be duly considered while finalizing the tenders and appropriate orders will be passed in accordance with the tender specifications and the TTIT Act and Rules framed thereunder and in terms of the said undertaking, learned Single Judge vide order dated 31.07.2014 directed the Appellant to consider and pass orders on the representations of the Respondent No. 1 herein after affording them an opportunity of personal hearing and directed that till such orders are passed, the tender should not be finalised. 4. Being aggrieved by the said order, the Appellant filed writ appeal W.A. No. 1065 of 2014 before the Division Bench which, by judgment and order dated 19.08.2014, disposed of the writ appeal by modifying the order of the learned Single Judge only to the extent that affording of opportunity of personal hearing to the person was impermissible having not contemplated under the Rules (for short, the rules ) and further permitted the Respondent No. 1 to submit additional documents raising all its object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically hinged on the Consultant's Report that had determined that the Respondent No. 2 herein was L1 and, therefore, the decision of the Corporation in treating BHEL as L1 and awarding the contract was neither arbitrary nor malafide. 8. Aggrieved by the order of the learned Single Judge, the Respondent No. 1 preferred writ appeals before the Division Bench. The Division Bench took note of the various pleas raised by the Respondent No. 1 including violation of the statutory provisions, arbitrariness, adoption of unfair and non-transparent procedure, erroneous delineation of the consultant's report by the learned Single Judge and non-consideration of public interest. 9. The Corporation, in its turn, contended before the Division Bench that there was no violation of procedure and the award of the contract was not amenable to judicial review in the obtaining factual matrix and any interference would only delay the execution of the work. It was also urged that Tender Accepting Authority (TAA) had accepted the lowest tender and negotiations were held only with lowest bidder; that Clause 25.4 of the Instruction to Bidders did not permit the bidder to change the substance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion thereon was in clear violation of the requirements of Section 6(1) read with Section 10 of the TTIT Act and Rule 30(3) of the TTIT Rules. On the interest component and commitment fee, the Division Bench held that the approach was wholly arbitrary and the intention was to oust the Respondent No. 1, for the evaluation process adopted was meant to suit one and reject the other. It further held that the process adopted and the decision taken by the owner was arbitrary, unfair, irrational, biased and mala fide and did not serve the larger public interest. In view of the said analysis, the Division Bench allowed the appeals and directed the Corporation to evaluate the price bid of the Respondents in the light of its findings and taking into consideration all relevant parameters including the representations/documents submitted by Respondent No. 1 and to record detailed reasons for the decision and communicate the same to the Respondent No. 1 so as to comply with the requirement of the provisions of the TTIT Act and TTIT Rules and various decisions of this Court. 12. Being aggrieved by the aforesaid judgment, the corporation and the successful bidder, by way of special leave, have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o finance 75% of the total cost as debt at an interest rate of 12.25% p.a. Attached Annexures 1 to 5 indicate the methodology adopted in calculating the various components required for evaluation like IDC-Debt, IDC-Equity, IDC-UF Fess, Debt Repayment Schedule etc. 4.2 CSEPDI-TRISHE CSEPDI-TRISHE has arranged finance from M/s. ICBC, China. They have arranged a finance 85% of the total cost as debt at an interest rate of 7.2% p.a. Attached Annexures 6 to 12 indicate the methodology adopted in calculating the various components required for evaluation like IDC-Debt, IDC-Equity, IDC-UF Fess, Debt Repayment Schedule etc. 5.0 Evaluated Lower Cost BHEL CSEPDI-TR ISHE All figures in Rs. (Crores) All figures in Rs. (Crores) Capacity 1320 MW 1320 MW A Total EPC cost excluding VAT 7762.977 9207.264 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced rate namely 12.15, subsequently offered by BHEL, for arriving at the conclusion that the Evaluated Bid Price of BHEL was the lowest. 16. There is no dispute that as per the Price Evaluation Report by the Consultant, the EPC price of the Respondent No. 1 was ₹ 9207.264 crores and Respondent No. 2 to whom the contract was awarded was ₹ 7762.977 crores. Thus, the difference between the two EPC price is ₹ 1444.287 crores. The 1st Respondent disputed the Price Evaluation Report by the Consultant on the ground that it wrongly loaded the sum towards (a) the commitment fee, (b) interest on management fee during IDC period; and (c) interest of guarantee fee during IDC period in its bid amount which had led to the evaluation of quoted financial charges with interest to ₹ 801.18 crores. 17. As regards the commitment fee, learned Counsel for the Appellant submits that the contention of the Respondent No. 1 that since commitment fee was the fee to be charged on the unutilised amount of the loan meaning thereby if the Appellant failed to draw the loan amount as undertaken, then only the commitment fee would be charged and, therefore, the determination after ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall be responsible for arranging the required financing and achieving Financial Closure of the project within 4 (Four months) from the date of Letter of Intent (LoI). a. The Bidder and Lender shall furnish a joint undertaking to fulfill the commitment made in the offer for Debt Financing arrangement from the Lender subject to due diligence. TANGEDCO will furnish the following documents to the lender for processing of Debt Financing to the successful bidder. 1. Profile of TANGEDCO 2. Audited Balance Sheet of TANGEDCO for the last three financial years 3. MOU entered between TANGEDCO MMTC for long term supply of coal of this project. 4. Tariff order for sale of power. 5. Copy of DPR b. It shall be understood that the Financing Term Sheet shall be based on preliminary appraisal of the project jointly by the Bidder and the Lender satisfying themselves on the project financial viability. c. It shall be understood that the Award of Contract to the Bidder is contingent upon successful Financial Closure based on the Terms and Conditions provided in the Financing Term Sheet and in the event of the Financial Closure does not materialize due to reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for evaluating the bid to determine L1 and no commitment fee can be loaded for such evaluation. It is also put forth that there can be no question of loading interest on commitment fee. 21. As has been stated earlier, the issue pertaining to correctness of Consultant's report has to be adjudged and scrutinized within the scope of limited power of judicial review in the obtaining factual score. The Division Bench in the impugned judgment has taken exception to the process adopted in the identification of L1. It has referred to its order dated 19.8.2014 wherein the 1st Respondent was granted the time to submit additional documents. The impugned order takes note of the fact that at that point of time, the Corporation had never averred that tender had been finalized. It has referred to the earlier order of the Division Bench that representations were to be considered and till then the bid should not be finalized. It has referred to the letter of the Chairman-cum-Managing Director of the Corporation dated 20.7.2014 and opined that it appears to be a misstatement of fact. 22. Be it stated that the Division Bench has posed two questions: (i) Whether interest offered by Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to change, and since the interest quoted is variable, it is not possible to evaluate the bid. 31.4 It is seen from the records, that subsequently, based on a query from the first Respondent, the Appellant had confirmed that it would be fixed rate of interest at 7.2%. the same was also confirmed in the Repayment Schedule and the same rate of interest was taken into consideration by the Consultant in his report dated 30.5.2014. He did not find fault with the rate of interest. It is to be noted that the Term Sheet was submitted during July, 2013 and tender was evaluated in the year 2014. The contention of vagueness in rate of interest does not appeal to us. When the Consultant's report dated 30.5.2014 is accepted by TANGEDCO for the purpose of evaluation, it has to be accepted for all purposes, though we have reservation on the Consultant's report dated 30.5.2014. There is, therefore, no vagueness in the rate of interest quoted at 7.2%. 31.5 The second issue relates to the reduction of rate of interest. It is not in dispute that various meetings were held between the Appellant and the TANGEDCO. The learned Advocate General states that the Consultant was appointed ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, which states that The Purchaser reserves the right to relax or waive any of the conditions of this Specification in the best interests of the TANGEDCO , the TANGEDCO could have considered such reduced rate of interest offered by the Appellant and the third Respondent. 25. With regard to commitment fee, the analysis of the Division Bench is worth referring to: It clearly states that Commitment Fee is only on the cancelled portion of the loan. That apart, even as per the Drawdown Schedule, the fee is to be paid only if the loan amount is not drawn by the 18th, 30th and 42nd month. Moreover, the Appellant in the letters dated 13.6.2014, 16.6.2014 and 17.6.2014, clarified that Commitment Fee is only on the unused credit line and that there shall be no Commitment Fee if the loan amount is fully utilized as per the Drawdown Schedule. All these representations sent by the Appellant were not considered by TANGEDCO, despite there being a specific direction by the Division Bench of this Court to consider the same. It is a clear case of arbitrariness in approach and intended to oust the Appellant. This act of the TANGEDCO is nothing but a case of malafide in evaluation process to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated in the representation, in clear terms, as to how it should be treated, in the light of the order of the Division Bench, which TANGEDCO accepted to consider the bid of the Appellant, the first Respondent ought not to have loaded this amount on the basis of the Consultant's Report. In all fairness, the Tender Accepting Authority of the first Respondent should have excluded this amount, if both the bidders are to be treated on the touchstone of fairness and on the doctrine of level-playing field. This becomes necessary because the entire tender is tested on the larger public interest, that is to say, the implementation of the project in a time bound manner where cost is another important factor to be considered in the decision making. In a Welfare State, public authority cannot decide arbitrarily to throw away such an offer which they agreed to consider in the course of judicial proceedings, which we have referred to above. These factors, namely, adding interest on Management Fee and Guarantee Fee, have to be eschewed for the purpose of considering the bid of the Appellant, otherwise, it will suffer from the vice of unreasonableness and irrationality. 28. Eventually, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is made clear by PFC (BHEL's lender) letter dated 30-04-2015 showing Commitment Fee and Upfront Fee as distinct alternatives. The Consultant has loaded BHEL with Upfront Fee. The Consultant has erroneously treated Commitment Fee as an Upfront Fee for CSEPDI and has in fact applied the label Upfront Fee in Item F. 30. With regard to the commitment fee, various financial nuances have been stated. We think it apt to reproduce some of them: 2.8.3 When the earmarked funds are drawn, the interest agreed is payable. When the earmarked funds are not drawn, the interest is not payable but instead the Commitment Fee has to be paid on the amount not drawn. 2.8.4 CSEPDI's Term Sheet clearly mentions that the Commitment Fee is payable on the cancelled portion of the loan. 2.8.5 The term 'Accrued Drawal' refers to the amount accrued and available for drawal, but not drawn. 2.8.6 Commitment Fee is therefore only a contingent fee leviable if the funds are not drawn as per the Drawdown Schedule. It is more in the nature of a penalty in the event of a default by the borrower TANGEDCO and is payable by TANGEDCO. This cannot be added to the project cost for eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CSEPDI's Price Bid. 2.9.2 The very same Repayment Schedule calculation set out above shows that no interest is being charged on Guarantee Fee and Management Fee during the construction period of 36 months and does not form part of the amount which TANGEDCO has to repay. Not a single rupee needs to be paid over and above the amounts mentioned in the Repayment Schedule. 2.9.3 The only interest payable during the construction period of 36 months is interest calculated at 7.2% p.a. on the basic loan amount (85% of the EPC cost) and not on any other amount like Guarantee Fee and Management Fee. This is made clear in the specific calculation sheet for Interest During Construction submitted by CSEPDI in its Price Bid. 2.9.4 The Term Sheet submitted by CSEPDI outlines the fees required to be paid by TANGEDCO and the circumstances in which they are payable. In the very nature of this contract, the items chargeable have to be mentioned, not the items not chargeable. The contract requires to be evaluated based on what the bidder is charging TANGEDCO. 2.9.5 In CSEPDI's Term Sheet, mention is made of Management Fee and SINOSURE Re-insurance (Guarantee Fee). No mention i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitment Fee in the Net Loan Amount; that the Respondent having not been declared as L1 bidder as a post facto contention, now say that Commitment Fee shall not be taken for evaluation in spite of the fact that they themselves have quoted Commitment Fees for ₹ 164.702 crores with split up details in the price bid and the above post facto contention is against all tenets of fairness and justice; that had the Respondent No. 1 become L1, they would have insisted that Commitment Fee being a financial charge forms part of the loan and therefore is payable by the borrower i.e., the Corporation as per their price bids submitted by Respondent No. 1; that since the Respondent No. 1 had not been evaluated as L1, a contention is advanced that Commitment Fee should not be taken for evaluation citing universal definition. 34. On interest on management and guarantee fee, the stand of the Corporation is that the CSEPDI-TRISHE CONSROTIUM have quoted ₹ 123.9746 crores as Management fees and ₹ 392.0163 crores as Guarantee fee in their Price bid. There is no dispute on the quantum of fees. The Consultant during the evaluation have worked out interest @ 7.2 per annum on the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution for Respondent No. 1 all costs and fee charged by ICBC will form part of the debt financing. 36. From the aforesaid, it is vivid that the Consultant has analysed the offers regard being had to the tender conditions. Be it ingeminated that the analysis and determination made by the financial consultant has been carried out before receipt of any additional document from either side. The documents were called for by the owner from both the qualifying bidders in a transparent manner and the same have been considered at the time of evaluation by the Consultant. Submission of Mr. Sibal is that the evaluation is ex facie defective inasmuch as the Consultant has loaded certain charges as a consequence of which the price has gone up. Mr. Rohatgi, learned Attorney General appearing for BHEL and Mr. Prasad, learned senior Counsel appearing for the Corporation would submit that the evaluation is founded on definities leaving nothing to any kind of contingency. They have referred to the Term Sheet and what is put up by Industrial and Commercial Bank of China Limited. At this juncture we are obliged to say that in a complex fiscal evaluation the Court has to apply the doctrine of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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