BLS INTERNATIONAL SERVICES LTD. vs. UNION OF INDIA AND ANR.

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
RESERVED ON: 11.08.2017
% PRONOUNCED ON: 26.10.2017

+ W.P.(C) 2844/2017, CM APPL.12383/2017
BLS INTERNATIONAL SERVICES LTD. ..... Petitioner
Through: Mr. Dayan Krishnan, Sr. Advocate
with Mr. Karan Luthra, Mr. Parvinder Singh,
Mr. Anant Raj Kanojia and Ms. Aakshi
Lodha, Advocates.

Versus

UNION OF INDIA AND ANR. ..... Respondents
Through: Mr. Rajesh Gogna, CGSC with
Ms. Vipra Bhardwaj, Mr. Akhilesh Kumar
and Mr. Sandeep Kaushik, Advocates for
Resp-1.
Ms. Maninder Acharya, Sr. Advocate with
Mr. Raghvendra M. Bajaj and Mr. Sahil
Sood, Advocates for Resp-2.



CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE S.P. GARG
S.RAVINDRA BHAT, J.
1. In this proceeding, under Article 226 of the Constitution of
India, the relief claimed is for a direction to quash the award of tender
to the second respondent (hereafter referred to as “VFS”) for
outsourcing of visa support services by the Consulate General of
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India, Antwerp and the Indian Embassy at Brussels and Luxembourg,
as contrary to law.
2. The brief facts are that the petitioner company is engaged in the
business of providing visa of Consular General across the world and
the 49 Indian and Diplomatic Missions across all continents. It
currently provides visa and consular services to 13 Indian Consulates
abroad. VFS, on the other hand, is also engaged in the business of
providing visa and consular services. On 29.02.2016, the first
respondent (hereafter referred to as “Union”) issued a Request for
Proposal (“RFP”) for selection of a company to act as service provider
and for entering into contract with the Indian Embassy at Brussels to
provide visa support services at three cities, i.e., Brussels, Antwerp
and Luxembourg.
3. The tender process comprised of two stages (technical bid and
financial bid) process. The contract was to be awarded to the bidder
determined to be the lowest, i.e., L-1 according to the financial bids
received. The petitioner relies upon the following conditions in the
RFP: -
"4. Bidding Companies are invited to submit a detailed
Technical and Financial proposal for the delivery of visa
support services in accordance with this RFP. The
proposal should be valid for a period of 6 months after
the RFP closing date indicated. The award of Contract
will be, as per provisions indicated in the succeeding
paragraphs, on L 1 basis of financial bids in the two-tier
tender process consisting of Technical Bids and
Financial Bids. The selected company should sign the
Contract within one month from the date of award of
Contract. The Contract signed will be valid for a period
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of 4 years, with review of operations after each
completed year. At the end of this 4-year period, the
Mission will have the option of extending the contract on
the same terms for a further period of up to one year due
to administrative reasons, with the express approval
of the Ministry of External Affairs. Mission/Post has the
right to terminate the contract if during the review
process, it is found by Mission/Post that the services
rendered by Service Provider did not meet the standards
of quality and efficiency of the services expected of the
Service Provider as per the RFP. Full services at the
Indian Visa Application Centre (IVA C) shall commence
within three months, as specified by Mission, of signing
of the contract in accordance with the timeline indicated
in the RFP. All the IVA Cs should be opened
simultaneously. Outsourcing Operations may be started
only after Mission/Post conveys in writing its satisfaction
on the arrangements made by the Service Provider. Any
delay in starting the operations as per schedule may lead
to cancellation of the Contract and forfeiture of the Bank
Guarantee meant for premature termination of
Contract."

Chapters 4 and 5 of the RFP spelt out the eligibility criteria on the
basis of technical qualifications. Apparently on 12.04.2016 a pre-bid
conference was held at the Embassy at Brussels where certain
questions were asked by the prospective bidders and responses
furnished. The Union issued responses to questions asked by the
prospective bidders. The relevant part of the questionnaire and
clarifications relied upon by the petitioner is extracted below: -

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4. A Corrigendum was issued to the RFP on 18.04.2016 by the
Union. On 27.04.2016, the petitioner furnished its technical and
financial bids in response to the RFP; it also furnished a bid security
deposit of US $50,000/- in the form of bank draft. The bid provided a
detailed cost sheet. According to the petitioner in terms of clause 23
(i) (a) of the RFP only the technical bid had to be opened in the first
instance. It is claimed that on 20.05.2016, the Union informed the
petitioner about its having been technically qualified and invited it to
attend the meeting on 09.06.2016 for opening of the financial bid.
Other than the petitioner, the technically qualified bidders included
VFS, Cox & Kings Global Services, Alankit Assignments Ltd. and
Insta Visa.
5. The petitioner states that the financial bid for Service Fee were
to be in three components, i.e., basic services, biometric enrolment of
ten-finger print, enrolment of facial biometrics along with prices for
VAS; the financial bid was to be followed by an outsourcing
committee as regards viability of the service fee quoted by the bidders.
The reliance is placed in this regard on clauses 23 (2) (c) (d) (e) and
(f). It is stated that the financial bids of the technically qualified
bidders announced on 09.06.2016 were as follows: -

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6. The petitioner argues that from the above data on the basis of
weightage formula stipulated in the RFP which comprises a total of
80% of service charges and 20% VAS rates, its rates for Euro 14.22
was the lowest and that it ought to have been treated as L-1. It
complains that despite a lapse of considerable time of opening the
financial bid, it was not notified as L-1. Apparently it addressed a
representation on 06.03.2017 to the Union in this regard. This e-
mail/representation was replied by the Union on 24.03.2017 intimating
that the VFS was declared successful and had been awarded the
tender.
7. The Petitioner urges that under the RFP no parameters
whatsoever have been provided by the Union to evaluate the
"viability" of the Service Fee quoted by a bidder. It is argued that the
test for the "viability" was left to the unfettered discretion of the
Outsourcing Committee constituted by the Union. The Petitioner
submits that there can be no gainsaying that such discretion vested in
the Outsourcing Committee has to be exercised in a completely non-
arbitrary manner and in accordance with the principles enshrined
under Article 14 of the Constitution of India.
8. Mr. Dayan Krishnan, learned senior counsel for the petitioner
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submits that to obtain clarity as to the factors and/or criteria to
determine the "viability" of a bid, a pre-bid query was made wherein it
was stated that the decision to disqualify a bidder in the financial bid
stage by declaring the bid as unviable was highly subjective and needs
clarification. In response to the said query the Union stated that, that
"cannot be specified". However, in another pre-bid Query seeking the
Union’s definition of unviable service fee, it provided some inkling as
to the test of "viability" of a bid stated as under:

"The current service provider is giving stellar services in
the same fees and mission sees no reasons to increase
service fees."

9. Learned senior counsel submitted that from the above response
it is obvious that according to the Union the "Service Fee" quoted by
the earlier and/or current Service Provider was treated as a benchmark
or in other words the reserve price to test as to whether a bidder would
be able to provide the requisite quality of service in the price so
quoted. This is because according to the Union the earlier Service
Provider was providing "stellar" services in the said price. It is
submitted that the response to the pre-bid questions are deemed to be a
part of the Tender conditions and any decision by the Union must
adhere to the same and cannot be contrary to it. However, in not
following such procedure, and departing from the replies to the
queries, the Union acted arbitrarily.
10. It is argued for the petitioner that in terms of information
available in public domain the earlier Service Provider (i.e. none other
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than VFS) was providing services at a "Service Fee" of 6 (Six) Euro.
The Petitioner submitted a quote of 12.90 Euro as "Service Fee".
Having regard to the Union’s response, to Pre-bid Queries, the
Petitioner's Financial Bid could not have been declared as "unviable"
by the Outsourcing Committee.
11. It is submitted that the Central Vigilance Commission has
issued guidelines for various stages involved in public procurement to
ensure fairness, transparency and equity. Clause 10.1 of the said
Guidelines mandates that the evaluation must be made on the notified
criterion and the Bid of the L1 bidder is not to be ignored on flimsy
grounds. The petitioner therefore, submits that it was not open to the
Union to arbitrarily reject its bid without assigning any reason
especially in the light of the fact that it was the L1 bidder at the
Financial Bid stage.
12. According to the Union, which has filed a response and also
relied on the original records (including the analysis and observations
of the Viability committee, which were produced during the hearing)
an evaluation of the real costs undertaken by the committee disclosed
in respect of all important parameters, the petitioner’s bid was vastly
unrealistic. It was stated that if the rent of office space at the address
mentioned by the petitioner, in Brussels were to be realistically
valued, the annual cost would be approximately 30,000 Euros with an
increased annual expenditure of 18,000 Euros. Likewise in Antwerp
too, the annual charges would be in the range of 3000 Euros with the
further annual increase of 2000 Euros approximately. Similarly, with
respect to certain items in the costs sheet such as TV, Photo Booth etc,
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the price quoted by the petitioner was considerably lower than the
prevailing market rates; according to the respondents, the market rates
were not computed.
13. It was highlighted that so far as item no.23 of the cost sheet
provided by the petitioner with respect to the number of employees
and their salaries are concerned, the respondent stated as follows in
their counter affidavit: -

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14. Thus, it is stated by the respondents that in terms of realistically
revised estimate, the petitioner would incur a net loss of
approximately Euro 84,000 in regard to its Belgium operations. If the
Luxembourg operation is taken into account, the loss figure would
increase. The Union’s counsel argued that though ordinarily, the
public agency is expected to award the contract to the bidder evaluated
at L1, that consideration ipso facto is not always determinative. It was
submitted that the Union is entitled to consider, if in fact the bid (even
if the lowest) is realistic commercially and whether if accepted, the
service provider can pragmatically provide the required services, of
the requisite quality having regard to local conditions and local laws.
It was highlighted that the estimate of wages, for the personnel –
provisioned by the petitioner, in its bid, as well as the all important
consideration with respect to heightened security concerns (in view of
recent bombings and incidents of violence in Europe) had to be
adequately addressed, through provision for trained security
personnel. The provisions made by the petitioner, did not factor these
important considerations.
15. The factual narrative thus establishes that the petitioner’s
grievance is that its bid (lowest received by the Union) was not
preferred and instead, that of VFS was awarded the contract, for the
outsourced visa services, in the Indian mission in Belgium (Brussels
and Antwerp) and Luxembourg. Before embarking upon an analysis
of the merits of the rival contentions, it would be useful to recollect
that a judicial review court’s remit, under Article 226 is
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circumscribed. The outlines of this jurisdiction, to interdict executive
judgment, in matters of award of contract, was repeatedly revisited
and iterated by the Supreme Court in several jurisdictions. In
Michigan Rubber (India) Limited Vs. State of Karnataka & Others
(2012) 8 SCC 216 it was held that:
“23. From the above decisions, the following principles
emerge:
(a) 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. These actions are amenable to the
judicial review only to the extent that the State must act validly
for a discernible reason and not whimsically for any ulterior
purpose. If the State acts within the bounds of reasonableness,
it would be legitimate to take into consideration the national
priorities;
(b) fixation of a value of the tender is entirely within the
purview of the executive and courts hardly have any role to play
in this process except for striking down such action of the
executive as is proved to be arbitrary or unreasonable. If the
Government acts in conformity with certain healthy standards
and norms such as awarding of contracts by inviting tenders, in
those circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document
and awarding a contract, greater latitude is required to be
conceded to the State authorities unless the action of tendering
authority is found to be malicious and a misuse of its statutory
powers, interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to
be laid down to ensure that the contractor has the capacity and
the resources to successfully execute the work; and
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(e) If the State or its instrumentalities act reasonably, fairly and
in public interest in awarding contract, here again, interference
by Court is very restrictive since no person can claim
fundamental right to carry on business with the Government.
24. Therefore, a Court before interfering in tender or
contractual matters, in exercise of power of judicial review,
should pose to itself the following questions:
(i) Whether the process adopted or decision made by the
authority is mala fide or intended to favour someone; or
whether the process adopted or decision made is so arbitrary
and irrational that the court can say: "the decision is such that
no responsible authority acting reasonably and in accordance
with relevant law could have reached"; and (ii) Whether the
public interest is affected. If the answers to the above questions
are in negative, then there should be no interference under
Article 226.”
In Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd.
& Anr 2016 SCC Online SC 940 the Supreme Court held as follows:-
“14.....a mere disagreement with the decision making process
or the decision of the administrative authority is no reason for a
constitutional Court to interfere. The threshold of mala fides,
intention to favour someone or arbitrariness, irrationality or
perversity must be met before the constitutional Court interferes
with the decision making process or the decision.”
16. The Supreme Court has also ruled, in Air India Ltd v Cochin
International Airport Ltd 2000 (2) SCC 617 that

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The above formulation of law has been accepted and applied in other
judgments as well (Ref. H.P. Housing & Urban Development

Authority v Universal Estate 2010 (14) SCC 253).
17. The facts recounted in the earlier part of this judgment no doubt
point that the petitioner’s bid was facially the lowest. However, the
commercial viability of that bid had to be tested or examined. The
Union had a pre-bid conference/consultation with all the bidders, in
which their queries were sought to be addressed. Replies in a tabular
form were furnished after discussion. All bidders were made aware
that appraisal of the bid for commercial viability would be made, by a
committee. The petitioner no doubt complains that the lens or
parameters that were to be adopted by the committee were not known
previously. However, that per se, does not vitiate the decision making
process, as long as relevant and material circumstances were taken
into account. In this case, the set of circumstances that weighed with
the “Viability committee” were all relevant. Of these, the realistic
nature of the expenses projected by the various bidders (including the
petitioner) was considered. With respect to the petitioner, it was
noticed that the rental rates quoted were considerably lower from the
market rates prevailing in the concerned areas; the petitioner did not
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take into account the increase in rent, annually. Likewise, the rates of
wages to personnel were not factored properly; besides, a crucial
consideration, i.e., security, was - according to the respondents,
overlooked by the petitioner’s bid. Overall, the committee felt that the
rates quoted would result in losses, if the quality of services expected
were to be actually given. In view of these salient aspects, it was
concluded that the petitioner had quoted rates merely to gain the
contract: implying that the quotation was unviable. Quite naturally, the
Union had concerns about the quality of services that would be
offered, were the petitioner awarded the contract.
18. It is noteworthy that the petitioner was not questioned the
decision as a consequence of mala fides, or that the award to VFS was
a result of bias. Nor is it established that the process (or indeed award
of contract) was tainted with illegality. Procedurally, too, barring the
general complaint that the factors taken into account were subjective
there is no allegation of procedural unfairness or unreasonableness. So
far as the subjectivity plea is concerned, this court holds that the plea
is insubstantial, because the Union took into account material and
relevant factors, which were applied to all. Therefore, the entire
challenge boils down to the argument that VFS could not have been
awarded the contract as it was not the lowest bidder. As noticed
earlier, there is no universal rule that lowest bidders have to be
awarded public contracts; if there are good and valid reasons (as there
are in this case) the public agency can take a commercial decision not
to award the contract to the lowest bidder, but rather to someone
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whose bid is feasible and viable. Therefore, the challenge to the award
of tender to VFS, in this case, is unfounded.
19. For the foregoing reasons, the writ petition fails and is
therefore, dismissed; in the circumstances, there shall be no order on
costs.

S. RAVINDRA BHAT
(JUDGE)


S.P. GARG
(JUDGE)
OCTOBER 26, 2017





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