Corporate Entity’s Past Experience Remains Valid For Tender Eligibility Irrespective of Changes in Shareholding Structure

In brief

The question

1. Whether a change in the corporate shareholding and loss of access to a parent group's proprietary technology renders a bidder ineligible to rely on its past experience under the tender criteria

The court held

The Court dismissed the petition, holding that the Petitioner failed to demonstrate any arbitrariness or procedural impropriety in the decision-making process

It also directed

The court answered that a change in shareholding does not disqualify a company from relying on its past experience unless the tender specifically bars it

The technical and financial evaluations were held to be within the valid discretion of the tendering authority. Consequently, the Techno-Commercial and Bid Evaluation Summaries were upheld, and all pending applications were closed

01Facts

Respondent No. 2 (IOCL) issued a Notice Inviting Tender (NIT) on 09.01.2024 for cooling tower works at its Panipat Refinery

p. 3

Respondent No. 4 was declared technically qualified and emerged as the L1 bidder

p. 2

The Petitioner challenged this, alleging Respondent No. 4 was ineligible because it was no longer part of the global "Hamon Group" due to insolvency proceedings in 2022

p. 7

The Petitioner contended that since Respondent No. 4 lost access to Hamon’s proprietary technology and intellectual property, it could not rely on past experience (specifically the 2013 Mangalore Refinery project) to meet the "Commercial Experience Criteria" under Clause 12.5 of the tender

pp. 4, 7-8

Additionally, the Petitioner argued Respondent No. 4’s bid was "abnormally low"

p. 8

Respondents countered that approximately 80% of the work was already completed and that a company's experience remains with the juristic entity regardless of shareholding changes

p. 9, 11

02Issues

i.1. Whether a change in the corporate shareholding and loss of access to a parent group's proprietary technology renders a bidder ineligible to rely on its past experience under the tender criteria

p. 2 / para. 2

ii.2. Whether the decision-making process of the tendering authority was arbitrary or vitiated by the acceptance of an allegedly "abnormally low bid"

p. 2 / para. 2

iii.3. What is the effect of a project being substantially completed (80%) on the maintainability of a challenge to the tender award

p. 2 / para. 2

03Law Applied

The Court applied the principles of limited judicial review in contractual matters established in Tata Cellular v. Union of India and Jagdish Mandal v. State of Orissa, which dictate that the government is the best judge of its requirements and interference is only warranted in cases of manifest arbitrariness or mala fides

p. 13

It further applied the doctrine of "separate legal personality," noting that a company is a distinct juristic entity independent of its shareholders

p. 15

Regarding procurement, it referenced Clause 5.6.4 of the Manual for Procurement of Works, 2019, which provides a framework for evaluating abnormally low bids but does not mandate automatic rejection

pp. 17-18

Finally, the court applied the principle from New Horizons Ltd. v. Union of India regarding the assessment of technical capability, distinguishing it on facts

p. 20

Provisions in the judgment · 1

Manual for Procurement of Works, 2019 Section 5.6.4

04Reasoning

The Court reasoned that Clause 12.5 of the NIT focused on the nature of activities performed and did not expressly require continued ownership of specific intellectual property or continuity of management

p. 14

Since Respondent No. 4 was a separate juristic entity, its past credentials did not extinguish upon a change in shareholding

p. 15

The Court deferred to the technical consultant's (Respondent No. 3) assessment that cooling tower design is an established engineering discipline not confined to Hamon’s proprietary domain

p. 16

Regarding the financial bid, the Court found that being lower than the estimate does not ipso facto render a bid unworkable; Respondent No. 2 exercised valid commercial discretion in accepting the lowest bid to benefit the public exchequer

p. 18

The Court distinguished New Horizons because that case involved aggregating experience for a joint venture, whereas here, the entity was relying on its own corporate history

p. 20

The Court also noted that disrupting a project that is 80% complete would be contrary to public interest

p. 19

05Holding

The Court dismissed the petition, holding that the Petitioner failed to demonstrate any arbitrariness or procedural impropriety in the decision-making process

p. 21

The court answered that a change in shareholding does not disqualify a company from relying on its past experience unless the tender specifically bars it

¶ 20-21

p. 16, 18, 21

LawLens.Delhi High Court

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