Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2008
(Arising out of SLP (C) No. 19607 of 2008)
M/s Ganpati RV-Talleres Alegria Track
Pvt. Ltd. ...Appellant
Versus
Union of India and Anr. ...Respondents
J U D G M E N T
Dr. ARIJIT PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the judgment of a Division Bench of the
Delhi High Court dismissing the writ petition filed by the appellant. The
writ petition was filed challenging the order dated 7.3.2008 issued by the
respondents by which the appellant was communicated that he had not met
the eligibility criteria of the tender quoted by the respondents and, therefore,
its commercial bid will not be considered.
3. Background facts in a nutshell are as follows:
On 7.11.2007 a tender for thick web switches was invited by the
Ministry of Railways. The details of the tender items were given in the
Schedule of Quantities. As per Clause 2.8 of the terms and instructions
mentioned in the tender document, the tender was to be in two packets
systems i.e. (i) Technical Bid (ii) Commercial Bid, and that the commercial
bid will be opened subsequently only for those tenderers who have been
found successful in the technical bid as per clause 4.0.
As per Clause 4.1.1 of the tender document the tenderer must be ISO
9001 certified, RDSO approved, for 1 in 12 curved switch manufacturers on
the date of opening of tender.
The Executive Director Track (P) Railway Board, Delhi, vide his
letter dated 14.11.2007 sought for various clarifications and document from
the appellants. The reply to aforesaid letter was given by the appellant along
with relevant documents on 22.11.2007. The appellant pursuant to
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telephonic conversation on 21.1.2008 submitted a copy of inspection
certificate of RDSO and also certified about its composition i..e. joint
venture (in short ‘JV’) partners. Another representation was made on
31.1.2008. The appellant received a letter dated 7.2.2008 intimating that in
terms of para 2.8 the appellant’s commercial bid will be opened on
22.2.2008. The respondents vide its letter dated 13.2.08 informed the three
of the other bidders whose technical bids were dis-approved and they were
requested to collect their unopened commercial bids and bid guarantee
bonds amounting to rupees one crore. In continuation of the aforesaid letter
another letter dated 20.02.2008 was received by the appellant informing that
the opening of commercial bid stands postponed to 03.03.2008 due to
administrative reasons. Again a similar letter dated 28.02.08 was received
by the appellant intimating that the commercial bid which was scheduled for
opening on 03.03.08 is postponed till further notice. The respondents vide
letter dated 07.03.2008 stated that appellant’s offer does not meet the
eligibility criteria and hence the commercial bid could not be opened.
Therefore, office letter of even no. dated 07.02.2008 issued by the
respondents earlier stands cancelled. No reason for rejection was specified.
The appellant filed the Writ Petition before the High Court on 11.3.2008
and the court issued notice and stayed the supply of order on 12.3.2008. On
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28.3.2008 the counter affidavit was filed by the respondents stating therein
the false and unbelievable story of misrepresentation made by the appellant.
The respondents’ contention was that the case of the appellant was wrongly
approved by the respondents in the first chance due to misrepresentation
made by the appellant and only later on was mistake corrected . According to
the appellant, respondents have not disclosed anywhere in the counter
affidavit as to what was misrepresented and what was false in the
appellant’s representations which was only made pursuant to the telephonic
discussion with the respondents. The appellant brought to the notice of the
High Court the cartel formation by filing the rejoinder affidavit on 7.4.2008.
The appellant also stated before the High Court about the various gross
irregularities overlooked by the respondents by filing CM Application no.
5639 Of 2008. The High Court did not consider them holding that these
allegations are not part of pleading.
The High Court accepted the stand of the respondents that the
appellant does not meet the eligibility criteria indicated in the tender. With
reference to Clause 2.8, 4.1.1, 4.1.2, 4.2 and 4.3 it was held that the view of
the respondents that the appellant did not fulfil the eligibility criteria cannot
be faulted. Accordingly, the writ petition was dismissed.
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4. In support of the appeal, learned counsel for the appellants submitted
as follows:
The appellant is the pioneer in manufacturing of tendered item which
is a modern technology item. The appellant’s manufacturing facility and
prototype sample of the thick web switches have been approved by RDSO
as intimated by the RDSO vide their letter dated 23.10.2007. The said letter
was annexed with tender offer and was also subsequently supplied again. It
is a practice that the firm can proceed for bulk production only after
prototype samples are approved. In the instant case subsequently RDSO,
Lucknow has carried out the inspection of more than 350 sets of thick web
switches.
Moreover, as per clause 1.5 of the tender document, those successful
bidders who will install CNC machine and will produce at least 75 Thick
Web Switches will qualify to be in the approved list of vendors for future
tenders. Therefore, it clearly implies that the appellant is RDSO approved
manufacturer on two fronts i.e. for Conventional curved switches in the
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name of the JV partner and for the Thick Web Switches (new technology) in
the tendered item.
It is not out of place to mention that material produced for RVNI, as
per their specification was exactly the same as instant tender specification.
The appellant has a CNC Plano-milling machine at its premises. CNC
Machine is must for manufacturing of TWS and it involves investment of
about Rs. 5-6 crores. As per respondents’ admission only two other bidders
have CNC Machine. All other bidders have not even set up this machine.
As per Clause 4.1.4 (c) the government has given 270 days time to them.
Thus the bids of those bidders who have not even produced a single TWS
have been approved and bid of the appellant has been rejected.
The action of the respondents in subsequently rejecting the duly
approved technical bid of the appellant without assigning any reasons is
highly illegal, malicious, arbitrary, irrational and unjustified.
It is pointed out that the bid was initially accepted, but on the basis of
the representation of two of the competitive bidders, totally different views
were taken. It is pointed out that in view of what has been stated by this
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Court in New Horizons Ltd. and Anr. v. Union of India and Ors. (1995 (1)
SCC 478) the view taken by the respondents is erroneous.
5. Learned counsel for the Union of India, on the other hand, submitted
that New Horizon’s case (supra) related to the experience of the joint
venture partners and that logic cannot be applied to the present case where
the parameters are different. So far as the factual position is concerned, it is
to be noted that the appellant annexed ISO 9001 certification of joint
venture partners with the tender offer. Though the ISO 9001 certification of
the joint venture company prior to the date of opening of tender existed, the
same was not annexed with the tender as the appellant was under the
impression that submission of certificate in the name of individual partners
is sufficient and the respondents had also never demanded the same. In
respect of RDSO approval it was pointed out that one of the joint venture
partners i.e. M/s R.V. Rail Products Pvt. Ltd. is also an existing RDSO
approved manufacturer of conventional curved switches i.e. 1 in 12 curved
switches. The said certificate was enclosed with the appellant’s offer.
6. The concept of joint venture has been highlighted in paras 21, 22, 23,
24, 25 and 41 of New Horizon’s case (supra) as follows:
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“21. The requirement with regard to experience, as stated in the
advertisement dated 22-4-1993 for inviting tenders, as noticed
earlier was in the following terms :
“The tenderer should have the experience in
compiling, printing and supply of telephone
directories to the large telephone systems with the
capacity of more than 50,000 lines. The tenderer
should substantiate this with documentary proof.
He should also furnish credentials in this field.”
The requirement of experience was, however, differently
worded in the notice for inviting sealed tenders dated 26-4-
1993 which was attached to the tender documents which
prescribes the conditions to be fulfilled for submission of
tenders and wherein it was stated as under :
“The successful tenderer will also submit copies of
telephone directories printed and supplied by them
to the telephone systems of capacity more than
50,000 lines as credentials of his past experience.”
22. In the said notice the expressions ‘tenderer’ and “successful
tenderer” have been used. While the expression ‘tenderer’ has
been used in paragraphs 5, 7, 11 and 14, the expression
“successful tenderer” is used in paragraphs 7, 9( a ), 10 and 12.
Since paragraph 10 provides for execution of the agreement by
the successful tenderer, the said expression is intended to mean
the tenderer whose tender has been found suitable for
acceptance. The use of the expression “successful tenderer”
instead of the expression ‘tenderer’ in paragraph 12, therefore,
indicates that the documentary proof, by way of credentials of
past experience, has to be submitted after the tender has been
considered and is found suitable for acceptance by the
concerned authorities. This would mean that the past
experience is a matter which is to be considered after the tender
has been examined and evaluated and the tenderer whose
tender is found acceptable is required to submit documentary
proof regarding his past experience. In other words, a tender is
not liable to be excluded from consideration on the ground of
non-eligibility on account of lack of past experience.
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This inference is strengthened by paragraphs 8 and 11 of the
notice dated 26-4-1993. In paragraph 8 it is provided that a
tender is liable for summary rejection if it is submitted without
the Demand Draft of Rs 5,00,000. Similarly in paragraph 11 it
is provided that tender is liable to be excluded from
consideration if the income tax clearance certificate is not
furnished with the tender. There is no similar provision for
excluding from consideration a tender on the ground of failure
to furnish with the tender the required material by way of
credentials of past experience. It means that the matter of past
experience has to be considered after the tender has otherwise
been found to be suitable for acceptance and a tender is not
liable to be rejected at the threshold without consideration on
the ground that the tenderer lacks experience. The decision of
the Tender Evaluation Committee to exclude the tender of NHL
from consideration was, therefore, not warranted by the terms
and conditions for submission of tender as contained in the
notice for inviting sealed tenders dated 26-4-1993.
23. 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 to 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
reorganisation 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 reorganised
company.
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It could not be the purport of the requirement about
experience that the experience of the company which has
merged into the reorganised 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 reorganised
company which does not have experience in its name.
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 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 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. The same has to be the approach of the authorities
while considering a tender received in response to the
advertisement issued on 22-4-1993.
This would require that first the terms of the offer must be
examined and if they are found satisfactory the next step would
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be to consider the credentials of the tenderer and his ability to
perform the work to be entrusted. For judging the credentials
past experience will have to be considered along with the
present state of equipment and resources available with the
tenderer. Past experience may not be of much help if the
machinery and equipment is outdated. Conversely lack of
experience may be made good by improved technology and
better equipment. The advertisement dated 22-4-1993 when
read with the notice for inviting tenders dated 26-4-1993 does
not preclude adoption of this course of action. If the Tender
Evaluation Committee had adopted this approach and had
examined the tender of NHL in this perspective it would have
found that NHL, being a joint venture, has access to the benefit
of the resources and strength of its parent/owning companies as
well as to the experience in database management, sales and
publishing of its parent group companies because after
reorganisation of the Company in 1992 60% of the share
capital of NHL is owned by Indian group of companies namely,
TPI, LMI, WML, etc. and Mr Aroon Purie and 40% of the
share capital is owned by IIPL a wholly-owned subsidiary of
Singapore Telecom which was established in 1967 and is
having long experience in publishing the Singapore telephone
directory with yellow pages and other directories. Moreover in
the tender it was specifically stated that IIPL will be providing
its unique integrated directory management system along with
the expertise of its managers and that the managers will be
actively involved in the project both out of Singapore and
resident in India.
24. The expression “joint venture” is more frequently used in
the United States. It connotes a legal entity in the nature of a
partnership engaged in the joint undertaking of a particular
transaction for mutual profit or an association of persons or
companies jointly undertaking some commercial enterprise
wherein all contribute assets and share risks. It requires a
community of interest in the performance of the subject-matter,
a right to direct and govern the policy in connection therewith,
and duty, which may be altered by agreement, to share both in
profit and losses. ( Black’s Law Dictionary, 6th Edn., p.839)
According to Words and Phrases , Permanent Edn., a joint
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venture is an association of two or more persons to carry out a
single business enterprise for profit (p.117, Vol. 23). A joint
venture can take the form of a corporation wherein two or more
persons or companies may join together. A joint venture
corporation has been defined as a corporation which has joined
with other individuals or corporations within the corporate
framework in some specific undertaking commonly found in
oil, chemicals, electronic, atomic fields. ( Black’s Law
Dictionary , 6th Edn., p. 342) Joint venture companies are now
being increasingly formed in relation to projects requiring
inflow of foreign capital or technical expertise in the fast
developing countries in East Asia, viz., Japan, South Korea,
Taiwan, China, etc. [ See Jacques Buhart : Joint Ventures in
East Asia — Legal Issues (1991).] There has been similar
growth of joint ventures in our country wherein foreign
companies join with Indian counterparts and contribute towards
capital and technical know-how for the success of the venture.
The High Court has taken note of this connotation of the
expression “joint venture”. But the High Court has held that
NHL is not a joint venture and that there is only a certain
amount of equity participation by a foreign company in it. We
are unable to agree with the said view of the High Court.
25. As noticed earlier, in its tender NHL had stated that it is a
joint venture company established by TPI, LMI and WML and
IIPL wherein TPI, LMI and WML and other companies in the
same group as well as Mr Aroon Purie own 60% shares and
IIPL owns 40% shares. It was also stated that the joint venture
has received approval of the Government of India and is
currently in operation and that the promoter will increase their
capital/contribution to commensurate with the project need and
that the company has been established as an information and
database management company with expertise in database
processing, publishing, sales/marketing and the dissemination
of related information. In the tender it is also stated that as a
joint venture in the true sense of the phrase, the company will
have access to expertise in database management, sales and
publishing of its parent group companies. It would thus appear
that the Indian group of companies (TPI, LMI and WML) and
the Singapore-based company (IIPL) have pooled together their
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resources in the sense that TPI, LMI and WML have made
available their equipment and organisation at various places in
the country while IIPL has made available its wide experience
in the field as well as the expertise of its managerial staff. All
the constituents of NHL have thus contributed to the resources
of the Company (NHL). This shows that NHL is an association
of companies jointly undertaking a commercial enterprise
wherein they will all contribute assets and will share risks and
have a community of interest. We are, therefore, of the view
that NHL has been constituted as a joint venture by the group
of Indian companies and IIPL, the Singapore-based company
and it would not be correct to say that IIPL which has a
substantial stake in the success of the venture, having 40% of
shareholding, is a mere shareholder in NHL.
xx xx xx
41. We have been informed that while the matter was pending
in the High Court and in this Court the telephone directory for
the year 1993 has been printed and supplied to the Department
by Respondent 4 as per terms of the contract. Insofar as the
directory for the year 1994 is concerned we find that, as per the
terms of the contract, the process for preparation of the
telephone directory has already commenced. We cannot lose
sight of the fact that as a result of quashing of the contract in
respect of the directory for 1994 fresh steps will have to be
taken to award a fresh contract and the said process would take
some time and thereafter the contractor will require time to
print and publish the telephone directory. It would, therefore,
not be feasible to bring out the directory for 1994 before the
close of the year. As a result, the Department would suffer loss
of revenue which it would otherwise earn by way of royalty
from Respondent 4 for the directory for the year 1994. Insofar
as the contract in respect of the year 1995 is concerned there is
sufficient time for the Department to award a fresh contract if
the contract awarded to Respondent 4 is cancelled and the new
contractor will have sufficient time at his disposal to print and
deliver the directory as per the time schedule. Moreover, in
respect of the directory for the year 1995 the amount of royalty
that is payable by Respondent 4 is Rs 45 lakhs and the
amount of royalty offered by NHL for the directory for the said
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year was Rs .291.6 lakhs. Keeping in view the circumstances
referred to above, the course that commends us is that, while
maintaining the contract awarded to Respondent 4 in respect of
the directories for the years 1993 and 1994, the said contract
may be set aside insofar as it relates to the directory for the year
1995 and fresh tenders may be invited for award of the contract
for the directory for the year 1995. The appeal filed against the
judgment and order of the Delhi High Court dismissing the writ
petition of the appellants must therefore, be allowed in the
above terms. The other appeal has been filed by the appellants
against the order of the Delhi High Court dismissing CM No.
6120 of 1993 which was an application for an interim relief
during the pendency of the writ petition in the High Court. In
view of the final order that is being passed in the writ petition
the application for interim relief has become infructuous and
the appeal against the order dismissing CM No. 6120 of 1993
must, therefore, be dismissed as infructuous.”
7. Though the aforesaid case related to experience, the other essential
characteristic of a joint venture has also been highlighted.
8. In that view of the matter the inevitable conclusion is that the view
taken by the High Court that the appellant did not fulfil the eligibility
criteria was not correct. The High Court was not justified in dismissing the
writ petition. We direct the Evaluation Committee to consider the bid of the
appellant alongwith two persons who had been selected and take a final
decision.
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9. The appeal is allowed to the aforesaid extent.
……………..…………………...J.
(Dr. ARIJIT PASAYAT)
…………………………………..J.
(Dr. MUKUNDAKAM SHARMA)
New Delhi,
December 8, 2008
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