Delhi High Court (June 6, 2001) 2001 (TLS)126507 2001-AD (Del)-7-347 TEXMACO LIMITED Vs. UNION OF INDIA A. K. SIKRI ( 1 ) BY means of this writ petition, petitioner is challenging the action of respondent no. 2 in awarding contract no. CON/t/icb/310 dated 29/1/2001 for manufacture of 1320 wagons to m/s. Hindustan Engineering and Industries Ltd. (M/s. H. E. I.)-respondent no. 3. C. M. 5256/2001 is filed seeking ad interim stay of the implementation of notification of award dated 1/5/2001 and for maintaining status quo orders so far as further action pursuant to the contract dated 29/1/2001 is concerned. ( 2 ) ALTHOUGH at the time of commencement of arguments on this application, parties submitted that only this application is to be decided, in fact, arguments advanced by parties covered the entire gamut of dispute. Notwithstanding, by this order we propose to dispose of c. M. only. It may be mentioned at this stage along with this writ petition, CWP 2106/2001 and cwp 2098/2001 are also listed. Challenge in those petitions is also to the same award letter dated 1/5/2001 and CMs. for Interim stay are also filed. Those matters are also heard along with this matter. Counsel for the petitioner in all the three petitions as well as counsel for respondent nos. 2 and 3 were heard at length. After hearing all these parties, we are of the view that petitioners have not been able to make out any case for grant of Interim stay. This view we support by reasoning contained hereinafter. ( 3 ) RESPONDENT no. 2-Contalner Corporation of India Ltd. (in short "concor") a Government of India Undertaking has been constituted for handling of the complex work relating to the import and export of the cargo through the containers and managing the dry ports/handling container depots/container freight stations and inland transportation of containers through out India. In August, 1994, International Bank of Reconstruction and Development (IBRD) granted a loan of US$ 94 million for the Container Transport Logistics Project. Approximately 95% of this loan was earmarked for acquisition of new container flat wagons equipped with airbrakes and high speed bogies capable of running at 100 km. on the existing Indian Railway tracks. These wagons are therefore not ordinary railway wagons. The method of procurement of these wagons is also totally different from that adopted by the indian Railways. Approximately 95% of this loan was earmarked for acquisition of new container flat wagons equipped with airbrakes and high speed bogies capable of running at 100 km. on the existing Indian Railway tracks. These wagons are therefore not ordinary railway wagons. The method of procurement of these wagons is also totally different from that adopted by the indian Railways. This methodology is explained in the counter-affidavit which need not be dilated here. Suffice it to state that procurement of flat wagons by CONCOR is against a global tender issued as per the guide-lines of the funding agency namely the World Bank. The initial tender for purchase of 1500 high speed container flat wagons was issued by the concor in April, 1994. The CONCOR did not have happy experience in obtaining wagons pursuant to that tender. Various tenders have been floated thereafter. It Is also not necessary to give details thereof for the purpose of deciding this application. What is relevant to mention here is that pursuant to first tender, contract was awarded to Hindustan development Corporation Ltd. (in short "hdc") which did not yield desired results. Thereafter, another tender was issued in January, 1998 and this time, contract was awarded to M/ s. Cimmco Birla Ltd. However. M/s. Cimmco Birla Ltd. could supply 180 wagons out of 1500 wagons. The present tender is for supply of 1320 wagons after terminating the contract of M/s. Clmmco Birla Ltd. and the present tender was invited at the cost and risk of M/s. Clmmco biria Ltd. The present tender was issued in January, 2001. The commencement of sale of bidding documents was 29/01/2001 and the last date for sale of bidding documents was 12/03/2001. The last date for receipt of bids was 15/03/2001 by 11. 00 hours (Indian Standard Time) and bids were to be opened on that very date at 11. 00 hours. It Is stated in the counter-affidavit that:- "pursuant to the advertisements and the tender notice given to the 100 Embassies/ high Commissions, the following parties had brought the tender documents from the registered Office located at New Delhi of the answering respondent no. 2:- i) M/s. RITES, New Delhi. ii) M/s. Texmaco Ltd. , New Delhi. iii) M/s. Hindustan Engineering and Inds. Ltd. (HEI), Calcutta. iv) M/s. Modem Industries, Ghaziabad. v) M/s. Titagarh Wagons Ltd. . Calcutta. vi) M/s. Burn Standard Co. Ltd. , Bumpur. 2:- i) M/s. RITES, New Delhi. ii) M/s. Texmaco Ltd. , New Delhi. iii) M/s. Hindustan Engineering and Inds. Ltd. (HEI), Calcutta. iv) M/s. Modem Industries, Ghaziabad. v) M/s. Titagarh Wagons Ltd. . Calcutta. vi) M/s. Burn Standard Co. Ltd. , Bumpur. vii) M/s. Bharat Heavy Electricals Ltd. , New Delhi. viii)M/s. Besco Ltd. , New Delhi. ix) M/s. Qishuyan Locomotives and Rolling Stock Works, China. Out of the above parties, only the following parties had submitted their tenders:- i) M/s. Texmaco Ltd. , New Delhi. ii) M/s. Hindustan Engineering and Inds. Ltd. , Calcutta. iii) M/s. Burn Standard Co. Ltd. Bumpur". The bids of the aforesaid parties were evaluated and the contract, was awarded to respondent no. 3 namely M/s. HEI. The record shows that after obtaining the bids of the parties, certain clarifications were sought from all the parties which they had furnished. The bids were evaluated. There were brief discussions on the offers submitted, comparison of offers was made and analysation of financial status of the bidders was done to adjudge their past qualification as per the requirement contained in Notice Inviting Tender (in short nit ) and ultimately recommendation was made to accept the bid of M/s. HEI. Reasons for adopting acceptance of this bid was stated by the Tender Committee although Tender Committee noted some of the shortcomings of M/s. HEI. The details in this respect would be stated at the appropriate stage. What is highlighted at this stage is procedure adopted by the Tender committee. Recommendations of the Tender Committee were placed before the Managing director who after examining the matter also recommended award of contract in favour of M/ s. HEI. The matter was thereafter placed before the Board of Directors. The Board of directors, after thorough deliberations in its 75th meeting held on 25/4/2001, decided to award the contract to respondent no. 3. Minutes of the meeting show that the recommendations were discussed threadbare and the Board has even recorded reasons why it was decided to place the order to M/s. HEI. Significantly bid of petitioner being L-2 was also discussed before taking the decision. The entire matter was thereafter placed before the Won Bank for its clearance. The Wond Bank has also given its concurrence to the Impugned award. The aforesaid facts stated In brief demonstrate following highlights:- 1) The project in question is funded by the World Bank. Significantly bid of petitioner being L-2 was also discussed before taking the decision. The entire matter was thereafter placed before the Won Bank for its clearance. The Wond Bank has also given its concurrence to the Impugned award. The aforesaid facts stated In brief demonstrate following highlights:- 1) The project in question is funded by the World Bank. 2) The terms and conditions onwhich NIT was issued has the approval of Won bank. 3) The tender floated was global tender which was widely published and notice was also given to 100 embassies/high commissions located in New Delhi. 4) Nine parties bought the tender documents and out of nine parties, only three parties submitted their tenders. The Tender Committee consisting of two Directors and one Group General Manager i. e. technical experts of very high ranks, evaluated these bids from technical and financial point of view. 5) Committee found respondent no. 3 conforming to the tender conditions and its bid being L-1. 6) The recommendations of the Tender Committee to award contract to respondent no. 3 was approved by the Managing Director. Matter, thereafter, was placed before the Board of Directors which also after thorough deliberations, decided to award the contract to respondent no. 3. 7) The World Bank, i. e. . funding financial agency, has also given its approval to the award of this contract. The entire record relating to the tenders along with recommendations was sent to the World Bank for its approval. When exercise of this nature has been undertaken by respondent no. 2 at different levels and also at its top level before deciding to award the contract to respondent no. 3 this court cannot interfere with such decision on merits and would substitute its own judgment. In fact, functioning of this court is not to evaluate different bids and to come to the conclusion as to which party should have been awarded the contract. B. The award of contract to respondent no. 2, however, was primarily challenged by mr. G. L. Sanghi, learned counsel for the petitioner on the ground that respondent no. 2 does not fulfil the eligibility conditions laid down in NIT and therefore, could not have been awarded the contract. B. The award of contract to respondent no. 2, however, was primarily challenged by mr. G. L. Sanghi, learned counsel for the petitioner on the ground that respondent no. 2 does not fulfil the eligibility conditions laid down in NIT and therefore, could not have been awarded the contract. His submissions was that qualification criteria specified in NIT, inter alia, state that bidders should be a manufacturer or authorised representative of a manufacturer who has manufactured, and supplied not less than 1000 bogies wagons in a period of 12 months in at least one of the five preceding years and further that its annual turn over should not be less than US $ 50 Million at least in one of the preceding five years. It was his submission that on the face of It that M/s HEI could not qualify these twin conditions inasmuch as it was a company incorporated recently and was not even in existence for five years and had admittedly not fulfil the criteria of supply of not less than 1000 bogie wagons in a period of 12 months in at least one of the five preceding years which should have been in successful operation for a period of 12 months and also the criteria of annual turn over of not less than US $ 50 million at least in one of the five preceding years. His submission was that borrowing and relying upon the experience of M/s. HOC for this purpose was totally perverse and illegal inasmuch as M/s. HEI was a separate legal entity and therefore could not rely upon another company to fulfil this eligibility. Merger of wagon division of HDI and HEI was of no consequence, it was argued. Further submissions of Mr. Sanghi was that even when M/s. HEl had defaulted in completing the contractual supply when the contract was awarded to it. respondent no. 2 ought to have considered credentials of newly formed company and that it can be seen by any person with reasonable prudence that M/s. HEI would be incapable to deliver the wagons as per the schedule mentioned in NIT. It was also argued with vehemence that respondent no. 3 had been debarred by Railway Board from receiving new orders and therefore the contract could not be awarded to it on this ground as well. ( 4 ) THE aforesaid arguments were countered by Mr. It was also argued with vehemence that respondent no. 3 had been debarred by Railway Board from receiving new orders and therefore the contract could not be awarded to it on this ground as well. ( 4 ) THE aforesaid arguments were countered by Mr. Kirit Rawal, learned Addl. Solicitor general appearing for CONCOR as well by Mr. Rakesh Dwivedi, learned senior counsel appearing for M/s. HEI. Some of the preliminary objections raised by Mr. Rawal are dealt with separately. Replying to the arguments of the petitioner on merits, it was submitted that as per scheme of merger under Section 391 of the Companies Act, 1956 duly approved by the calcutta High Court wagon division of M/s. HDC had come to M/s. HEI and therefore while examining the eligibility of M/s. HEI, M/s. HEI could rely on the performance of wagon division of M/s. HDC to demonstrate that it fulfilled the conditions relating to supply and develop wagons in one of the last preceding five years as well as annual turn over of US $ 50 million in one of preceding five years. Mr. Dwivedi, learned senior counsel for respondent no. 3 also referred to various clauses of Schemes of Arrangements approved by the Calcutta High court supporting the aforesaid pleas. Prima facie, we feel that M/s. HEI because of scheme of arrangement on merger of wagon division of M/s. HDC with M/s. HEI had right to rely upon the performance of this wagon division to meet the eligibility condition As per the order dated 25/4/2000 passed by Calcutta high Court, the "scheme of Arrangement" between M/s. HDC and M/s. HEI and their respective shareholders was approved w. e. f. 1/4/1999 and wagon manufacturing units of M/s. HDC were transferred to M/s. HEl. Thus, for all practical purposes wagon manufacturing units of M/ s. HDC. were transferred to M/s. HEI. The Supreme Court in the case of New Horizons Limited and Another Vs. Union of india and Others (1995) 1 Supreme Court Cases page 478, had occasion to deal with some what same issue. That was a case where the appellant had relied upon the experience of its foreign collaborator to meet the eligibility criteria. were transferred to M/s. HEI. The Supreme Court in the case of New Horizons Limited and Another Vs. Union of india and Others (1995) 1 Supreme Court Cases page 478, had occasion to deal with some what same issue. That was a case where the appellant had relied upon the experience of its foreign collaborator to meet the eligibility criteria. The Tender Evaluation Committee of the respondent-UOI did not take that into consideration and had rejected the bid of the appellant on the ground that credentials of the appellant simplicitor were not sufficient to meet the eligibility condition contained in NIT. The High Court accepted the plea of the respondents. Reversing this judgment of the Supreme Court, the Supreme Court held that experience of collaborator was to be taken into consideration. It may be mentioned that one of the arguments was that requirement set out in the advertisement inviting tenders was regarding experience of the tenderer and not the collaborator. This was negatived by making the following observation:- ". . . . . . . Even if it be assumed that the requirement regarding experience as set out in the advertisement dated 22/4/1993 inviting tenders is a condition about eligibility for consideration of the tender, though we find no basis for the same, the said requirement regarding experience cannot be construed to mean that the said experience should be of the tenderer in his name only. It is possible visualise a situation where a person having past experience has entered into a partnership and the tender has been submitted in the name of the partnership firm which may not have any past experience in its own name. That does not mean that the earlier experience of one of the partners of the firm cannot be taken into consideration. Similarly, a company incorporated under the Companies Act having past experience may undergo reorganization as a result of merger or amalgamation with another company which may have no such past experience and the tender is submitted in the name of the reorganized company. It could not be the purport of the requirement about experience that the experience of the company which has merged into the reorganized company cannot be taken into consideration because the tender has not been submitted in its name and has been submitted in the name of the reorganized company which does not have experience in its name. It could not be the purport of the requirement about experience that the experience of the company which has merged into the reorganized company cannot be taken into consideration because the tender has not been submitted in its name and has been submitted in the name of the reorganized company which does not have experience in its name. (Emphasis supplied) Conversely there may be a split in a company and persons looking after a particular field of the business of the company form a new company after leaving it. The new company, though having persons with experience in the field has no experience in its name while the original company having experience in its name lacks persons with experience. 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 stand point of a prudent businessman. (Emphasis supplied ). When a business enters into a contract where undersome 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 the persons behind the company. While keeping in view the past experience he would also take note of the present state of affairs and the equipment and resources at the disposal of the company. We are of the prima facie view that the aforesaid observations, particularly, highlighted portions, would cover the present case making the respondent No. 3 eligible to bid. C. The preliminary objection of Mr. We are of the prima facie view that the aforesaid observations, particularly, highlighted portions, would cover the present case making the respondent No. 3 eligible to bid. C. The preliminary objection of Mr. Rawal was that the petitioner did not come to this court with dean hands inasmuch as there were two false statements made in the petition and the petition was liable to the thrown out on this ground. Firstly, it was stated in para 2. 9 of the petition that petitioner was L-1 bidder whereas L-1 bidder was M/s. HEI and petitioner s bid was L-2. Secondly in para 7 of the petition, the petitioner has again made false averments to the effect that M/s. HEI had been debarred by Railway Board. It was also submitted that instead of denying these averments categorically in the counter-affidavit, petitioner had audacity to repeat the same in the rejoinder. In fact, there appears to be some substance in the preliminary issue raised by learned Addl. Solicitor General in so far as second averment made in the petition is concerned, alleging that M/s. HEI has been debarred by Railway Board from receiving any orders. Mr. Sanghi tried to explain that in para 7, the petitioner has stated that petitioner had gathered this information. Basis of information according to him was the unstarred question no. 1056 raised in the Lok Sabha, answered on 1/3/2001. But this explanation does not convince us. It may be stated, at the outset, that this question relates to M/s. HDC and not M/s. HEI. Therefore, petitioner should have been candid enough to clarify this fact. Moreover, even as per this unstarred question, there is only a recommendation by Vigilance Department of the Railways to impose a ban oh HDC for manufacturing of wagons. In answer it is further clarified that the matter had been referred to C. B. I, for further Investigation by an Independent agency. Thus. there is no order of ban as yet but only a recommendation to this effect and that too by vigilance department of the Railways Matter is still at the stage of further Investigation. It is a matter of common knowledge that before deciding to impose such a ban, the competent authority would first accept the recommendation, then give opportunity to show cause to the HDC and after receiving reply from HDC, in consonance with principles of natural justice, take decision. It is a matter of common knowledge that before deciding to impose such a ban, the competent authority would first accept the recommendation, then give opportunity to show cause to the HDC and after receiving reply from HDC, in consonance with principles of natural justice, take decision. When the matter was still at investigation stage, making a categorical statement in the petition, on the basis of information gathered from such unstarred question raised in the Lok Sabha, that M/s. HEl had been debarred from receiving any order was clearly uncalled for. It amounts to dishonest distortion of facts to say the least. The petitioner therefore having come to the court with unclean hands would not be entitled to equitable and discretionary relief in this C. M. ( 5 ) THE law on evaluation of such bids and award of contracts is well settled by series of judgments. It was common case of all the parties that while seeking judicial review of such an administrative action, court is not sitting in appeal. Court is also not concerned with the merits of the decision but concerned only with the decision making process. While highlighting facts of the case, it has already been pointed out that necessary exercise which was warranted in decision making process has been gone into. It is not that respondent no. 2 did not know about the merger of wagon division of HDC with M/s. HEI. After deliberations, a conscious decision was taken by respondent no. 2 to give regard to the performance of the wagon division of HDC for the purpose of testing the eligibility of M/s. HEl. After considering the matter from this angle, it was found that M/s. HEI. was qualified to bid. Respondent no. 2 in para 5 of para wise reply in the counter-affidavit has stated how M/s. HEI met the twin conditions of manufacturing and supply of wagons as well as that of annual turn over of US$ 50 million. In fact, counsel for the petitioner could hot dispute that if figures are taken in the aforesaid manner i. e. by including the supply and turn over of wagon unit of HDC, after merger with M/s. HEI, M/s. HEI in fact fulfil these conditions. In fact, counsel for the petitioner could hot dispute that if figures are taken in the aforesaid manner i. e. by including the supply and turn over of wagon unit of HDC, after merger with M/s. HEI, M/s. HEI in fact fulfil these conditions. Such an approach being possible in law as well, particularly, in view of the judgment of the Supreme Court in New Horizons Ltd. (Supra), there is no further scope of judicial review. Similarly, the record reveals that respondent no. 2 was conscious of earlier performance of HDC when contract was awarded to it. It is not a case where this aspect was not considered or was ignored. In fact, Tender committee noted certain other factors including that one of its plants was under lock out w. e. f. 28/3/2001 which position existed in April, 2001, when Tender Committee evaluated the bids. In spite of these factors and after having given due regard to them, respondent no. 2 in its wisdom, still chose to award the contract to respondent no. 3 keeping in view certain other more significant aspects which in its judgment outweigh the aforesaid weakness of respondent no. 3. Decision has been taken at the highest level i. e. by Board of Directors. There are no malafldes attributed to any of the members of the Evaluation Committee or the Board of directors. Thus, respondent no. 2, prima fade, has been able to establish fairness in the decision making process. In fact, while arguing that respondent no. 3 did not fulfil the eligibility condition and that it did not have credentials to meet the requirements of NIT or the capacity to supply the wagons after order is placed, what was emphasised that these aspects were ignored by respondent no. 2 while selecting respondent no. 3 for award of the work. However, when record speaks to the contrary and demonstrate that all these aspects were duly considered, the scope of review which is limited, has not to go beyond this point. ( 6 ) THERE is yet another factor which is to be borne in mind In dealing with such cases. This has been highlighted by the Supreme Court time and again namely "balance of Inconvenience" as opposed to the popular known principle of "balance of Convenience". ( 6 ) THERE is yet another factor which is to be borne in mind In dealing with such cases. This has been highlighted by the Supreme Court time and again namely "balance of Inconvenience" as opposed to the popular known principle of "balance of Convenience". If execution of such contracts is stayed what is going to be the effect thereof on the State as well as exchequer. In the instant case, even the World Bank is involved which is funding the project and any further delay, to the delay already caused, may have adverse affect on the future of such funding. The consequence can be disastrous if the stay is now given and ultimately this writ fails. On the other hand if the stay is refused and even if the writ petition ultimately succeeds the petitioners can claim damages and be compensated. After all supplies to be made by respondent no. 3 would be subject to the acceptance by respondent no. 2 as to their quality and in conformity with the specifications. In the case of Raunaq International Ltd. Vs. I. V. R. Construction Ltd. and Others (1999) 1 Supreme Court Cases page 492, the Supreme court after exhaustively dealing with this subject matter and taking stock of various judgments has observed in paras 24,25 and 26 of the judgment:- "24. Dealing with interim orders, this Court observed in CCE Vs. Dunlop india Ltd. (SCR 190at p. 196) that an Interim order should not be granted without considering the balance of convenience, the public Interest involved and the financial Impact of an interim order. Similarly, in Ramniklal N. Bhutta v. State of Maharashtra the Court said that while granting a stay, the court should arrive at a proper balancing of competing interests and grant a stay only when there is an overwhelming public interest in granting it, as against the public detriment which may be caused by granting a stay. Therefore, in granting an injunction or stay order against the award of a contract by the Government or a government agency, the court has to satisfy itself that the public interest in holding up the project far outweighs the public Interest in carrying it out within a reasonable time. The court must also take into account the cost involved in staying the project and whether the public would stand to benefit by incurring such cost. 25. The court must also take into account the cost involved in staying the project and whether the public would stand to benefit by incurring such cost. 25. Therefore, when such a stay order is obtained at the instance of a private party or even at the instance of a body litigating in public interest, any interim order which stops the project from proceeding further must provide for the reimbursement of costs to the public in case ultimately the litigation started by such an Individual or body fails. The public must be compensated both for the delay in Implementation of the project and the cost escalation resulting from such delay. Unless an adequate provision is made for this in the interim order, the Interim order may prove counterproductive. 26. In the-present case, it was submitted that the terms and conditions of the tender specified the requisite qualifying criteria before a person could offer a tender. The criteria which were so laid down could not have been relaxed because such a relaxation results in a denial of opportunity to others. In support, the respondents relied upon Ramana Dayaram Shetty V. International Airport Authority of India. In that case, the Court had held judicial review as a check on the exercise of arbitrary powers by the State and as a check on its power to grant largess. The Court also observed that when the exercise of discretion is structured In terms of the tenders which have been invited, the discretion must be exercised in accordance with the norms so laid down. The same view has been taken by this Court in Premium granites Vs. State of T. N. where this court observed that where this Court observed that where rational non-discriminatory norms have been laid down for granting of tenders, a departure from such norms can only be made on valid principles. These principles enunciated by this Court are unexceptional. "to the same effect are the observations of Supreme Court In the,case of Sterling computers Limited Vs. M/s. Mandn publications Limited and others and Others (1993) 1 Supreme court Cases page 445. For all these reasons, we hold that petitioners are not entitled to ad interim stay. This application is accordingly dismissed. However any observations made here are tentative and would not tantamount to any expression given on the merits of the case --- *** --- .