Dismissed

M/S. Lanco Infratech Limited through Authorized Signatory B. Srinivas Rao Bodduluri v. Mormugao Port Trust through Chief Engineer

Bombay HC11 Dec 2008WP/594/2008

Case brief

AI extract

What is this about?

This writ petition challenged the rejection of a tender application by the Mormugao Port Trust, which deemed the Petitioner's consortium ineligible due to indirect equity ownership. The Court upheld the Tender Authority's decision, finding no arbitrariness and confirming that the required experience must be directly linked to the project company.

What did the court decide?

Rule stands discharged; Petition dismissed; Parties bear their own costs.

M/S. Lanco Infratech Limited through… — Public Procurement and Tenders | Bombay HC (2008)

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IN THE HIGH COURT OF BOMBAY AT GOA

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WRIT PETITION NO. 594 OF 2008

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M/s LANCO INFRATECH LIMITED ) A Limited Company, constituted and ) incorporated under the Companies Act, 1956 ) having its registered office at Plot No. 4 ) Software Units Layout, Infocity, Madhapur ) Hyderabad 500 081, through its ) Authorized Signatory Shri B Srinivas Rao ) Bodduluri, 40 years old, married ) Indian National, Resident of 302, Murthy ) Enclave, Ameerpet, Hyderabad 500 063 ).. PETITIONER

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Versus

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MORMUGAO PORT TRUST ) A Trust incorporated and constituted under ) the Major Port Trusts Act, 1963 for the ) Port of Mormugao, Administrative Office ) Building, Headland, Sada, Mormugao ) Goa 403 804 ) and through its Chief Engineer. ).. RESPONDENT

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Mr S G Dessai, Senior Advocate with Mr Preetam Talaulikar, Advocate, for the Petitioner.

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Mr V B Nadkarni, Senior Advocate with Mr Y V Nadkarni, Advocate, for the Respondent.

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CORAM : SWATANTER KUMAR, C.J. AND N.A. BRITTO, J.

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JUDGMENT RESERVED ON : 20TH NOVEMBER 2008

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JUDGMENT PRONOUNCED ON : 11TH DECEMBER 2008

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JUDGMENT (PER SWATANTER KUMAR, C.J.)

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Heard.

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Rule, returnable forthwith. By consent of parties, the

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Petition is taken up for hearing and final disposal at the admission stage itself.

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Mormugao Port Trust, a Trust constituted and

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incorporated under the Major Port Trust Act, 1963, issued a global tender notice, on its website, inviting tenders from interested parties in accordance with Request for Qualification (hereinafter referred to as “RFQ”), in order to shortlist competent bidders for developing a Coal Import Terminal at Port of Mormugao, Goa on design, build, operate and transfer (DBOT) basis. Originally, the project cost was estimated at Rs.170 crores which was subsequently increased to

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Rs.332 crores.

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In order to submit their bids for the project, three Companies, namely, Lanco Infratech Limited (hereinafter referred to as “LITL”), Pembinaan Redzai Sdn. Bhd. (hereinafter referred to as “PRSB”) and M/s Emirates Trading Agency LLC (hereinafter referred to as “ETA”) entered into a Joint Bidding Agreement dated 24th June 2008 in response to the invitation of the Respondent Trust. Recitals of this Consortium Agreement specifically referred to initiation of tender process for the said project and desire of the members of the Consortium to submit the contract. It was stated that the parties wished to associate themselves as a Consortium for submitting the competitive bid for the project to develop, implement, operate and manage the project in the event the project being awarded to it. Thus, the parties submitted the documents in response to RFQ and LITL was the lead member of the Consortium.

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A clarification was sought on 7th July 2008 from the Petitioner with regard to percentage of ownership of voting share held by the Petitioner in respect of associate companies as on due date of making RFQ and also the basis of claiming experience by the

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members of Consortium in respect of the project in terms of Clause

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3.2.3(b) and Clause 2.2.9 of the RFQ document. This clarification

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was submitted by the Petitioner to the Respondent Trust stating that the project experience of Westports Malaysia Bhd, the project company, was available as claimed by the Petitioner, as PRSB was holding 42.9% equity in Westports Holdings Sdn Bhd which, in turn, holds 100% equity of the project company and, as such, one of the members of the Petitioner was entitled to claim the experience benefit in terms of the Clauses of the RFQ document.

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On 18th August 2008, the Respondent shortlisted five tenderers other than the Petitioner and their names were displayed on the website of the Trust.

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Vide letter dated 16/18th August 2008, the Petitioner was informed that it was not shortlisted at RFQ stage and the results thereof had been published on the website of the Port Trust. The Petitioner, vide its letter dated 19th August 2008, averred that PRSB and the Petitioner had the experience of Category 1 at more than 77

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times at the threshold limit. Therefore, it was not understandable as to how the Consortium did not meet threshold technical capability and asked for appropriate reasons from the Respondent. This was replied to by the Respondent Trust, vide their letter dated 26th August 2008 whereby they confirmed that the evaluation of the pre-qualification of the parties had been carried out as per the requirements laid down in the RFQ and in terms of Clauses 2.17.4, 2.21 and 2.24 of the RFQ, no explanation or justification was required to be given and they would not entertain correspondence any further in that regard.

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Aggrieved by this attitude of the Respondent Trust and particularly letters dated 16/18th August 2008 and 26th August 2008, the Petitioner has filed the present Writ Petition praying for quashing of these two communications and has further prayed that the Respondent Trust be directed to hold the Petitioner eligible for participation in the second stage of the bidding process of the tender.

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In the Writ Petition, the Petitioner had prayed for certain

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interim directions and/or orders which were not granted by the Bench while issuing the notice to the Respondent vide its order dated 29th September 2008.

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Reply was filed on behalf of the Respondent to which no rejoinder has been filed and the Court heard the matter on the adjourned date for final disposal.

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The Petitioner's challenge to the impugned

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communications is primarily based on the following submissions :-

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(a) The Respondent has acted arbitrarily in not including the name of the Petitioner in the list of companies shortlisted for subsequent participation in the tender process;

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(b) The decision making process adopted by the Respondent Trust is defective thus rendering the decision unsustainable in law. The reason for

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excluding the Petitioner is based upon misreading and misconstruction of the relevant clauses of RFQ Document. The eligibility of the Petitioner has been determined on irrelevant consideration. While ignoring the relevant facts, this defective decision making process adopted by the Respondent has prejudicially affected the interest of the Petitioner.

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Thus, the impugned communications are liable to be quashed.

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It will be appropriate to refer to the reason for declaring the Petitioner unsuccessful at the very initial stage of the tender process. Vide letter dated 18th August 2008, the result of the RFQ was communicated to the Petitioner wherein out of 13 applications, only 5 had been short-listed, while other bids were found to be nonresponsive or not eligible for similar reason like the Petitioner or for such other reasons. As far as the Petitioner is concerned, the reason for rejecting the Petitioner's bid reads as under :-

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“Did not meet eligibility of “Threshold Technical Capability” as per clause no. 2. 2. 2(A) in case of projects in category 1 and/or 3.”

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Clauses which have bearing on the controversies raised in the present Writ Petition can also be usefully referred to and reproduced at this stage itself :-

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“2.2 Eligibility of Applicants

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2.2.1 (a) The Applicant for pre-qualification may be a single entity or a group of entities (the “Consortium”), coming together to implement the Project. However, no applicant applying individually or as a member of a Consortium, as the case may be, can be member of another Applicant Consortium. The term Applicant used herein would apply to both a single entity and a Consortium.

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(b) An Applicant may be a natural person, private entity, government-owned entity or any combination of them with a formal intent to enter into an agreement or under an existing agreement in the form of a Consortium. A Consortium shall be eligible for consideration subject to the conditions set out in Clause 2.2.6 below.

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(c) An Applicant shall not have a conflict of interest (the “Conflict of Interest”) that affects the Bidding Process. Any Applicant

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found to have a Conflict of Interest shall be disqualified. An Applicant shall be deemed to have a Conflict of Interest that affects the Bidding Process, if :

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(i) the Applicant, its Member or Associate (or any constituent thereof) and other Applicant, its Member or Associate (or any constituent thereof) have common controlling shareholders or other ownership interest; provided that this disqualification shall not apply in cases where the direct or indirect shareholding of an Applicant, its Member or Associates (or any shareholder thereof having a shareholding of more than five percent of the paid up and subscribed share capital of such Applicant, Member, or Associates, as the case may be) in the other Applicant, its Member or Associates as the case may be, is less than one percent of the paid up and subscribe share capital thereof: provided further that this disqualification shall not apply to a bank, insurance company, pension fund or a Public Financial Institution referred to in section 4A of the Companies Act, 1956; or

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(ii) a constituent of such Applicant is also a constituent of another Applicant; or

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(iii) such Applicant receives or has received any direct or indirect subsidy from any other Applicant, its Member or Associate or has provided any such subsidy to any other Applicant; or

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(iv) such Applicant has the same legal representative for purposes of this Application as any other Applicant; or

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(v) such Applicant has a relationship with another Applicant, directly or through common third party/parties, that puts either or both of them in a position to have access to each others' information about, or to influence the Application of either or each other; or

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(vi) such Applicant has participated as a consultant to the Authority in the preparation of any documents, design or technical specifications of the Project.

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(d) An Applicant shall be liable for disqualification if any legal, financial or technical adviser of the Authority in relation to the Project is engaged by the Applicant in any manner for matters related to or incidental to the Project.

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2.2.2 To be eligible for pre-qualification and shortlisting, an Applicant shall fulfill the following conditions of eligibility.

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(A) Technical Capacity : For demonstrating technical capacity and experience (the “Technical Capacity”), the Applicant shall, over the past 5 (five) financial years preceding the Application Due Date, have :

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(i) paid for, or received payments for construction of Eligible Project; and/or

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(ii) paid for development of Eligible Projects in Category 1 and/or Caregory 2 specified in Clause 3.2.1; and/or

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(iii) collected and appropriated revenue from Eligible Projects in Category 1, and/or Category 2 specified in clause 3.2.1,

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such that the sum total of the above is more than Rs.332 crores (Rupees Three Hundred and Thirty Two crores) (the “Threshold Technical Capability”).

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Provided that at least one fourth of the Threshold Technical Capability shall be from the Eligible Projects in Category 1 and/or Category 3 specified in Clause 3.2.1.

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(B) Financial Capacity : The Applicant shall have a minimum Net Worth (the “Financial Capacity”) of Rs.83 (eighty three) crore as at the close of the preceding financial year.

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In case of a Consortium, the combined technical capability and net worth of those members, who have an equity share of at least 26% each in such Consortium, should satisfy the above conditions of eligibility.

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2.2.3 O&M Experience : The Applicant shall, in the case of a Consortium, include a member, having at least 26% (twenty six percent) equity participation in the Project company/ SPV, who has experience of five years or

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more in operation and maintenance (O&M) of Category 1 projects specified in Clause 3.2.1, with an aggregate capital cost equal to the Estimated Project Cost. In case the Applicant is not a Consortium, it shall be eligible only if it has equivalent experience on its own. In the absence of such experience, the Applicant shall, for a period of at least 5 (five) years from the date of commercial operation of the Project, undertake to enter into an operations & maintenance (O&M) agreement with an entity having equivalent experience, failing which the Concession Agreement shall be liable to termination.

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2.2.4 The Applicants shall enclose with its application, to be submitted as per the format at Appendix-I, complete with its Annexe, the following :

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(i) Certificate(s) from its statutory auditors' or the concerned client(s) stating the payments made/received or works commissioned, as the case may be, during the past 5 years in respect of the projects specified in paragraph 2.2.2(A) above. In case a particular job/ contract has been jointly executed by the Applicant (as part of a consortium), he should further support his claim for the share in work done for that particular job/contract by producing a certificate from its statutory auditor or the client; and

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In case duly certified audited and financial statements containing the requisite details are provided, a separate certification by statutory auditors would not be necessary in respect of Clause 2.2.4(i).

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(ii) certificate(s) from its statutory auditors specifying the net worth of the Applicant, as at the close of the preceding financial year, and also specifying that the methodology adopted for calculating such net worth conforms to the provisions of this Clause 2.2.4(ii). For the purposes of this RFQ, net worth (the “Net Worth”) shall mean the sum of subscribed and paid up equity and reserves from which shall be deducted the sum of revaluation reserves, miscellaneous expenditure not written off and accrued liabilities.

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2.2.5 The Applicant should submit a Power of Attorney as per the format at Appendix-II, authorizing the signatory of the Application to commit the Applicant.

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2.2.6 Where the Applicant is a single entity, it may be required to form an appropriate Special Purpose Vehicle, incorporated under the Indian Companies Act, 1956 (the “SPV”) to execute the Concession Agreement and implement the Project. In case the Applicant is a Consortium, it should comply with the following additional requirements;

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(a) Number of members in a consortium should be limited to 6 (six), but information sought in the Application may be restricted to 4 (four) members in the order of their equity contribution;

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(b) subject to the provisions of clause (a) above, the Application should contain the information required for each member of the Consortium;

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(c) members of the Consortium shall nominate one member as the lead member (the “Lead Member”), who shall have an equity share of at least 26% in the Consortium. The nomination(s) shall be supported by a Power of Attorney, as per the format at AppendixIII, signed by all the other members of the Consortium;

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(d) the Application should include a brief description of the roles and responsibilities of individual members, particularly with reference to financial, technical and O&M obligations;

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(e) an individual Applicant cannot at the same time be member of a Consortium applying for pre-qualification. Further, a member of a particular Applicant Consortium cannot be member of any other Applicant Consortium applying for pre-qualification;

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(f) the parties to a Consortium shall form an appropriate SPV to execute the Project if awarded to the Consortium; and

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(g) members of the Consortium shall enter into a binding Joint Bidding Agreement (the “Jt. Bidding Agreement”) for the purpose of making the Application and submitting Bid in the event of being short-listed. The Jt. Bidding Agreement shall, inter alia;

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(i) convey the intent to form an SPV with shareholding/ownership equity commitment(s) in accordance with the RFQ, which would enter into the

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Concession Agreement and subsequently carry out all the responsibilities as Concessionaire in terms of the Concession Agreement, in case the concession to undertake the Project is awarded to the Consortium;

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(ii) clearly outline the proposed roles and responsibilities of each member at each stage;

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(iii) commit the minimum equity stake to be held by each member; and

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(iv) include a statement to the effect that all members of the Consortium shall, till the occurrence of the Appointed Date/ Financial Close under the Concession Agreement, be liable jointly and severally for all obligations of the Concessionaire in relation to the Project.

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(Note: A copy of the Jt. Bidding Agreement should be submitted along with the Application. The Jt. Bidding Agreement entered into between the members of the Consortium should be specific to the Project and should fulfill the above requirements, failing which the Application shall be considered non-responsive).

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2.2.7 Any entity which has been barred by the Central/State Government, or any entity controlled by them, from participating in any project (BOT or otherwise), and the bar subsists as on the date of Application, would not be eligible to submit an Application, either individually or as member of a Consortium.

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2.2.8 An Applicant/Consortium member should, in the last three years, have neither failed to perform on any contract, as evidenced by imposition of a penalty by an arbitral or judicial authority or a judicial pronouncement or arbitration award against the Applicant, nor been expelled from any project or contract nor have had any contract terminated for breach by such Applicant/ Consortium member.

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2.2.9 In computing the Technical Capacity and Net Worth of the Applicant/Consortium members under Clauses 2.2.2, 2.2.4 and 3.2, the Technical Capacity and Net Worth of their respective Associates would also be eligible hereunder.

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For purposes of this RFQ, Associate means, in relation to the Applicant/Consortium member, a person who controls, is controlled by, or is under the common control with such Applicant/Consortium member (the “Associate”). As used in this definition, the expression “control” means, with respect to a person which is a company or corporation, the ownership, directly or indirectly, of more than 50% (fifty per cent) of the voting shares of such person, and with respect to a person which is not a company or corporation, the power to direct the management and policies of such person, whether by operation of law or by contract or otherwise.

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2.2.10 The following conditions shall be adhered to while submitting an Application:

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(i) Applicants should attach clearly marked and referenced continuation sheets in the event that the space provided in the prescribed forms in the Annexes is insufficient. Alternatively, Applicants may format the prescribed forms making due provision for incorporation of the requested information;

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(ii) information supplied by an Applicant (or other constituent Member if the Applicant is a Consortium) must apply to the Applicant, Member or Associate named in the Application and not, unless specifically requested, to other associated companies or firms. Invitation to submit Bids will be issued only to Applicants whose identity and/or constitution is identical to that at prequalification;

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(iii) in responding to the pre-qualification submissions, Applicants should demonstrate their capabilities in accordance with Clause 3.1 below; and

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(iv) in case the Applicant is a consortium, each member of the Consortium should substantially satisfy the pre-qualification requirements to the extent specified herein.

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2.2.11 While Qualification is open to persons from any country, the Qualification of such Applicant or in case of any subsequent change in its shareholding or the shareholding in the consortium members, shall be subject to approval of the Authority from national security and public interest perspective. The decision of the Authority in this behalf shall be final and conclusive and

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binding on the Applicant. Subsequent change shall include change in the holding or acquisition of equity or control, by persons acting for themselves or in concert and in determining such holding or acquisition, the Authority shall be guided by the principles, precedents and definitions contained in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, or any substitute thereof, as in force on the date of acquisition.

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The Applicant shall promptly inform the Authority of any change in its shareholding, as above, and failure to do so shall render the Applicant liable for disqualification from the Bidding Process.

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2.2.12 In the event that the Application Due Date falls within three months of the closing of the latest financial year of an Applicant, it shall ignore such financial year for the purpose of; its Application and furnish all its information and certification with reference to the five years preceding its latest financial year.”

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“3.2.1 Subject to the provisions of Clause 2.2., the following categories of experience would qualify as Technical Capacity and eligible experience (the “Eligible Experience”) in relation to eligible projects as stipulated in Clauses 3.2.3 and 3.2.4 (the “Eligible Projects”):

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Category 1: Project experience on Eligible Projects in Port sector that qualify under Clause 3.2.3.

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Category 2: Project experience on Eligible Projects in core sector that qualify under Clause 3.2.3.

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Category 3: Construction experience on Eligible Projects in Port sector that that qualify under Clause 3.2.4.

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Category 4: Construction experience on Eligible Projects in core sector that qualify under Clause 3.2.4.

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For the purpose of this RFQ :

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(i) Port sector would be deemed to include Marine structures, On-shore and Offshore Terminals, Berths, Jetties, Quays, Cargo-Handling System, Bulk/Liquid Material Handling System, Port based Terminal Facilities, CFS/ICDs, Storage Tanks/Tank Farms, Conveyors, Pipelines, Warehousing, etc., and

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(ii) core sector would be deemed to include power, telecom, highways, airports, railways, industrial parks, petroleum and natural gas, pipelines, irrigation, water supply, sewerage and real estate development.”

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“3.2.3 For a project to qualify as an Eligible Project under Categories 1 and 2 :

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(a) It should have been undertaken on BOT, BOLT, BOO, BOOT or other similar basis for providing its output or services to a public

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sector entity or for providing nondiscriminatory access to users in pursuance of its charter, concession or contract, as the case may be;

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(b) the entity claiming experience should have held, in the company owning the Eligible Project, a minimum of 26% equity during the period for which Eligible Experience is being claimed;

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(d) the entity claiming experience shall, during the past 5 (five) financial years preceding the Application Due Date, have (i) paid for development of the project (excluding the cost of land), and/or (ii) collected and appropriated the revenues from users availing of non-discriminatory access to or use of fixed project assets, such as revenues from highways, airports, ports and railway infrastructure, but shall not include revenues from sale or provision of goods or services such as electricity, gas, telecommunications or fare/freight revenues and other incomes of the company owning the Project.”

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With reference to the above Clauses, it is the case of the Respondent that the Petitioner did not possess requisite experience. Clause 3.2.1 stated that experience which would be qualified as technical capacity and eligible experience in relation to the eligible

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projects in Port sector had two different kind of categories. Under Category 1 it was project experience while under Category 3 it was construction experience on eligible projects in Port sector. This concept of eligibility project is further controlled by Clause 3.2.3 which provides that eligible project under Categories 1 and 2 should have been undertaken on BOT, BOLT, BOO, BOOT or other similar basis for providing its output or service to a public sector entity and the capital cost of the project should be more than Rs.33 crores, entity claiming experience shall, during the past five financial years preceding the application due date should have paid for development of the project and/or collected and appropriated the revenues from users of the project. Besides this, Clause 3.2.3(b) is heavily relied upon by the Respondent which states that the entity claiming experience should have held in the company owning the eligible project, a minimum of 26% equity during the period for which eligible experience was being claimed. On the cumulative reading of these clauses, the Respondent rejected the technical bid of the Petitioner on the ground that they did not have adequate experience and directly did not hold minimum of 26% equity share in the company owning

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the eligible project. However, while relying upon the same Clauses, the Petitioner claimed that they have adequate experience inasmuch as they hold 42% share holding in the financing company which in turn holds 100% share of the eligible project company and, therefore, the approach of the Respondent is erroneous, illegal and unjustified. This aspect, of course, was not very clear from the documents submitted by the Petitioner along with its tender. In Appendix 1, details of applicant claiming the experience of the project, it was stated that the company owns a majority stake of 42.9% in the Westports holdings Sdn Bhd which runs and operates Westports, one of the two world class terminals in Port Klang, Malaysia. Vide their letter dated 7th July 2008, the Respondent Trust sought clarification from the Petitioner as under :-

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“(iii) As per your Application, in respect of Project Code: 2(a), the company owning the Eligible Project is Westports Malaysia Sdn Bhd (i.e. the project company). The Member Pembinaan Redzai Sdn Bhd (the entity claiming the experience) holds 42.9% shares in Westports Holding Sdn Bhd, which in turn holds 100% capital of the project company. Kindly explain the basis of claiming this experience by the Member in respect of this project in terms of Clause 3.2.3 (b) and Clause 2.2.9 of the RFQ Document. “

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The Petitioner vide Annexure 3 to their letter dated 19th July 2008 replied to the aforesaid letter and clarified as follows :-

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“Westport Holdings Sdn Bhd is an Investment Vehicle created only for the purpose routing the investments for the port development projects. There is no other activity which is being undertaken in Westport Holdings Sdn Bhd. This is in line with the general practice followed in Malaysia for investment in any project company.”

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Thus, according to the Petitioner, the Company owning the eligible project Westport Malaysia Sdn Bhd was 100% owned by Westports Holdings Sdn Bhd in which the Consortium Pembinaan Redzal Sdn. Bhd. (PRSB) was holding 42.9% paid-up equity shares. Thus, in terms of Clause 3.2.3.(b) and Clause 2.2.9 of the RFQ

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Document, they were having eligible experience and their bid could not have been rejected. The original RFQ Document read with the subsequent letters even were not found satisfactory by the Respondent Trust which rejected the technical bid for lack of experience. In the reply affidavit, it has been averred that in terms of the Ministry of Finance Circular dated 22nd August 2007, the Respondent had appointed M/s Deloitte Touche Tohmastu India Pvt. Ltd., Mumbai in Consortium with M/s Hemant Sahai & Associates, New Delhi, the Transaction Advisor to scrutinize and evaluate all the applications submitted . After due scrutiny and upon taking the advise of the expert body, the parties at Sr. Nos.1, 7 and 13 referred in paragraph 4 of the reply affidavit, were excluded from seeking clarifications as their applications were found to be non-responsive to RFQ requirement. After clarifications were received from 9 parties, including the Petitioner, they were scrutinized and as the Petitioner did not meet the eligibility of the threshold technical capability in terms of the afore-noticed Clauses, the bid of the Petitioner was rejected. The Consortium of the Petitioner was not shortlisted for participating in the next stage of the bidding process as they did not

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meet the eligibility as stipulated under Clause 2.2.2(A) for satisfying the technical capacity criteria where an applicant was to satisfy the technical capacity and experience i.e. experience over the past five financial years preceding the application due date, collected and appropriated revenue from eligible projects which was to be more than Rs.83 crores for construction of and development of the eligible project of Category 1. In case of a Consortium, the combined technical capacity and net worth of those members who have an equity share of 26% each in such Consortium should satisfy the condition of eligibility. It is also averred by the Respondent Trust that going by the prescribed requirement, the Westport Holding Sdn Bhd even if it held 100% equity stake in project company i.e. Westport Malyasia Sdn Bhd, the PRSB had no direct control in the performance and functioning of the project company and even if it was treated as an associate company, then the share holding ought to have been more than 50% in terms of Clause 2.2.9 of RFQ, while admittedly it only had 42.9%. For these reasons, the technical bid of the applicant failed and the Petitioner was not shortlisted.

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The Petitioner had entered into joint bidding agreement

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and the three parties had associated themselves as Consortium for submitting the competitive bid. In terms of Clause 2.2.1, the applicant for pre-qualification may be single entity or a group of entities (the Consortium) coming together to implement the project. As such, the Consortium applicant was permissible and so was the Petitioner entitled to have the application entertained by the Respondent. As far as the ground of eligibility for applying, there is no dispute. Similarly, it was also stated that the application has not been rejected on the ground that the parties did not satisfy the criteria of associate company. The associate company criteria of 50% share holding was neither the ground nor stated in the letter dated 18th August 2008 and it was also not disputed at the bar. Thus, we are called upon to decide a very limited controversy in the present Writ Petition i.e. the application of Clause 2.2.2 read with Clauses 3.2.1 and 3.2.3. It is also not in dispute before us that the applicant company has to satisfy the technical capacity, experience for being eligible in terms of these Clauses. According to the Petitioner, they possessed such experience through the project company in Category

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1, both, on account of development of the eligible project and also as regards collection and appropriation of revenue from eligible project. As already noticed, according to the Petitioner, PRSB has 42.9% equity shares in M/s Westport Holding Sdn Bhd which in turn holds 100% capital of the project company Westport Malaysia Sdn Bhd. It was in this manner that the Petitioner claimed experience which satisfied the requirement of the above Clauses. According to the Respondent, the experience had to be direct and not remote as stated. The Respondent sought clarification vide its letter dated 7th July 2008 which was given in the same terms by the Petitioner. In their response, the Petitioner, vide Annexure 3 to its letter dated 19th July 2008, through the project company i.e. Westport Malaysia Sdn Bhd had also stated that Westport Holding Sdn Bhd is an investment vehicle created only for the purpose of routing the investment for the port development projects.

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This explanation rendered by the Petitioner was found without substance and not satisfying the pre-requisite of RFQ document. The Respondent also took an exception of the fact that the documents which had been submitted with the RFQ document

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including the Chartered Accountant's certificate did not depict the version which had subsequently been forwarded by the Petitioner Company. The aforestated clauses have been construed, interpreted and uniformly applied by the Respondent to the applications and upon such consideration they did not shortlist the Petitioner as successful in the initial tender process. This approach of the Respondent, in our view, can hardly be faulted with. Firstly, a group of Companies forming consortium can be an option and that is not disputed. The eligibility of pre-qualification and shortlisting process contemplated eligibility in regard to technical capacity and five years' experience preceding the application due date in relation to receiving payment for construction, development and collection and appropriation of revenue and from eligible project under Category-1. The application of this condition is hardly in dispute. In terms of Clause 3.2.1 eligible experience from Categories 1 and 3 both had to relate to Port sector'. Unless such experience of project and construction was in relation to eligible project in Port sector, the Applicant would not be able to claim benefit of such experience for satisfying eligibility criteria. Clause 3.2.3 which titles as For a

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project to qualify as an Eligible Project under Categories 1 and 2', under Clause (b), the entity claiming experience should have held in the company owning the Eligible Project a minimum of 26% equity during the period for which Eligible experience is being claimed. On plain reading of this clause, the experience has to be directly in the company owning the Eligible Project and not through an indirect ownership. A minimum of 26% equity has to be claimed by the Applicant in the Company owning Eligible Project. This simply means that an indirect route of ownership would not satisfy the language of this clause. The purpose and nexus of the clauses with the eligibility therefore is that a Company claiming such benefit should directly own the eligible project and if not should at least directly have 26% shareholding in the Company owning eligible project of which experience is claimed. This condition is not satisfied in the present case. Admittedly, PRSB the Petitioner (Member of Consortium ) claims experience on the basis that it has 42.9% equity shares in M/s.Westport Holding Sdn Bhd which owns 100% capital of the project company Westport Malaysia Sdn Bhd. Nothing was submitted along with the application by the Petitioner which could

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show that it is one and the same company or even that its management vested in the same entity.

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These are commercial transactions and it normally will

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have to be left for the parties to interpret such a clause. It is apparent that there is no concluded contract between the parties. It is only an offer for consideration and the meaning and connotation given to the expression used in these clauses would normally have to be construed as the person inviting offer understands it, unless, of course, with the exception if such an interpretation was patently absurd or was contrary to law. Neither of these situations exist in the present case. The approach of the Respondent that the intended members of the Consortium application to have a direct experience in eligible project relating to Port Sector cannot be termed as an absurd interpretation or a meaning which will be opposed to public policy or public interest. It is a settled rule of law that in commercial transactions, the Court would not substitute its view in preference to

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the meaning given to a clause inviting tenders unless it was absolutely essential to do so and the ends of justice would demand

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such substitution. It is at the very threshold that the Respondent has sought clarification expressing doubt in regard to the experience claimed by the Petitioner under Clauses 2.2.2, 2.2.9 read with Clauses 3.2.1 and 3.2.3 and the explanation was not found to be satisfactory and hence not accepted. We are unable to say that in the facts of the case, the Respondent has acted arbitrarily. Shortlisting was contemplated in terms of Clause 2.2.1 for participation in the bid stage. Clause 2.17.4 also contemplates that the pre-qualification of the Applicant was at the discretion of the Authority and the Applicant will be deemed to have understood and agreed that there would be no explanation or justification on any aspect of the Bidding Process or selection will be given. In terms of Clause 2.2.4, it was also stated that the Authority would not entertain any correspondence in relation to the acceptance or rejection of any application for shortlisting. Despite this, the Respondent asked for explanation from the Petitioner and also informed it that the explanation rendered was not satisfactory. In this regard, the Respondent relied upon the report of the Expert Committee which found that the stand taken by the

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Petitioner was not justifiable and it did not satisfy requirement of different clauses of the RFQ document.

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The practice adopted by the Respondent, in relation to the above clauses and they being uniformly applied to all the Applicants, would further dilute the effect of the arguments sought to be raised on behalf of the Petitioner. When the Petitioner approaches the Court and seeks judicial intervention in regard to the acceptance of a tender, it has to be borne in mind that the scope of judicial review in such cases is a very limited one. Once the action of the Respondent is reasonable and does not suffer from the element of arbitrariness, the Courts would be reluctant to interfere in tender process. It is also a settled principle of law that the Court at best could examine infirmities or legalities of the decision making process and not the decision itself.

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Learned Counsel appearing for the Petitioner contended, while relying upon the decision in the case of Subhash R. Acharya Vs State of Maharashtra, 2007(109) BLR 1847 = 2007(6) BCR 100, to

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argue that the State actions in domain of contractual matters is subject to judicial review on the touchstone of Article 14 of the Constitution where equality is denied or reasons stated are patently unsustainable. He also relied upon the judgment of the Supreme Court in the case of Air India Vs CIAL, ( 2000) 2 SCC 167 , as well as Sterling Computers Ltd. Vs M/s. M&N Publication Ltd., (1993) 1 SCC 445 , to further argue that an Authority or State is bound to adhere to the norms, standard and procedure laid down by them and cannot depart from such procedure arbitrarily. The Supreme Court in the case of Reliance Energy Limited Vs MSRDC Ltd., (2007) 8 SCC

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1, while holding that Article 14 of the Constitution embodies the principle of “non-discrimination”, clearly held that ”Level playing field” is an important concept while construing Article 19(1)(g) of the Constitution. This doctrine provides space within which equally placed competitors are allowed to bid so as to subserve the larger public interest. The Supreme Court further held that where tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This “legal certainty” is an important aspect of the rule of law. In the case of Sterling

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Computers Limited (supra), the Supreme Court also stated that scope of judicial review in such cases the Court cannot act as an appellate authority to examine details of terms of contract.

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The Respondent has also relied upon the judgment of the Supreme Court in the case of Raunaq International Ltd. Vs I.V. R. Construction Ltd and Others, 1999 AIR SCW 53 , where the Supreme Court enunciated the principle in relation to scope of power of judicial review in relation to the matters of tenders where grant of contract challenged by unsuccessful tenderer, the Court should not interfere unless substantial public interest is involved or grant is mala fide, held as under:

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“11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in

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mind that by Court intervention, the proposed project may be considerably delayed thus escalating the cost for more than any saving which the Court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the Court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the Court should not intervene under Art. 226 in disputes between two rival tenderers.”

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In the case of Kanchi Fleet Movers Vs The Collector of Solapur & Ors., 1998(3)ALL MR 474, this Court also laid down the guidelines after considering Tata Cellular's case (supra) in such matters, as under:-

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“21.

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i) The modern trend points to judicial restraint in administrative action;

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ii) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made;

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iii) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible.

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iv) The terms of the invitation to tender cannot be ope to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations, through several tiers. More often that not, such decisions are made qualitatively by experts.

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v) The government must have freedom of contract. I other words, a fair play in the joints, is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides;

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vi) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.”

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In the present case, examined in light of the above guidelines, we are unable to hold that the decision of the Respondents is illegal, irrational or arbitrary to invite application of Wednesbury principle of unreasonableness. There is no procedural

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impropriety in the decision making process. Clauses 2.2.1, 2.2.2, 2.2.9, 3.2.1, 3.2.3 and 3.2.4 have been understood by the Authority concerned in a particular manner keeping in view the interest of the project. This interpretation applied by the Authorities is based upon the advise of the Expert Body which was called as “Technical Advisors”. There is hardly any material before the Court to accept any other interpretation. Merely because it is possible to collectively read these clauses and give a meaning different than the one given by the Authorities per se would not be a ground justifying judicial intervention by this Court in exercise of its power under Article 226 of the Constitution of India. The challenge of the Petitioner falls in a narrow compass and the arguments raised do not have merit. Within the limited scope of judicial review of such administrative decision, we are unable to find that the approach of the Respondent manifestly suffers from arbitrariness or there is any attempt on the part of the said authority to exclude the Petitioner from participating in the tender process. The bid has been rejected being non eligible to the eligibility criteria clause being Clauses 2.2.2(A) in case of projects in Category 1 and/or 3.

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For the reasons aforestated, we do not find any substance in the contention raised on behalf of the Petitioner and resultantly dismiss the Petition, while leaving the parties to bear their own costs. The Rule, accordingly, stands discharged.

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CHIEF JUSTICE

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N.A. BRITTO, J

M/S. Lanco Infratech Limited through Authorized Signatory B. Srinivas Rao Bodduluri v. Mormugao Port Trust through Chief Engineer

Case brief

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M/S. Lanco Infratech Limited through Authorized Signatory B. Srinivas Rao Bodduluri v. Mormugao Port Trust through Chief Engineer

Case brief

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What did the court decide?

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