The Court examined writ petitions challenging a tender condition requiring bidders to have positive net worth for the last three years. Ruling that the State enjoys latitude in framing tender eligibility criteria to ensure financial soundness and that no mala fides were alleged, the petitions were dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 08.01.2016
+ W.P.(C) 122/2016
+ W.P.(C) 186/2016
M/S PARAMOUNT COMMUNICATIONS LTD ... Petitioner
versus
POWER GRID CORPORATION OF INDIA LIMITED ... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Vaibhav Gaggar with Mr Aaditya Vijay Kumar, Mr Anil Jha, Ms Samali Verma, Mr Utkarsh and Mr Saksham Dhingra For the Respondent : Mr Parag P. Tripathi, Sr Advocate with Mr Saket Sikri, Ms Sumedha Dang and Ms Kanika Tandon
CORAM:-
HON’BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
CM 542/2016 in W.P.(C) 122/2016 and CM 757/2016 in W.P.(C) 186/2016
Allowed subject to all just exceptions.
W.P.(C) 122/2016 & CM 541/2016 and W.P.(C) 186/2016 & CM 756/2016
and underground cabling are separate, though virtually identical.
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that is Clause 1.2(a) of Appendix QR (CAB01). The said clause reads as under:-
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connected with the object sought to be achieved and that is that the supplier should make timely supplies of cables as and when required under the Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY) and the Integrated Power Development Scheme (IPDS) of the Government of India. The learned counsel further submitted that because the petitioner does not meet this financial criteria, it is virtually debarred from participating in any of the tenders to be floated by any of the State Electricity Boards in India under these schemes.
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manufacturers for procurement of various equipments/items for different States/discoms under the said two schemes on behalf of the Ministry of Power, Government of India. Therefore, the second contention raised by the learned counsel for the petitioner would not hold good in view of this categorical statement made in the Request for Empanelment (RFE) document itself.
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prospective bidders to have the conditions tailor-made according to their likes and dislikes.
paragraphs 23 and 24 thereof, which read as under:-
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the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;
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:
If the answers to the above questions are in negative, then there should be no interference under Article 226.”
Court in the case of S. S. & Company v. Orissa Mining Corporation
Limited: (2008) 5 SCC 772 . In particular, he referred to paragraph 22, which reads as under:-
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“22. The first two circumstances are woefully inadequate to bring home the grave charge of mala fide and the High Court was quite right in holding that the appellant completely failed to establish its case in that regard. It is axiomatic that the Corporation is the best judge of its interests and needs and it is always open to it to suitably modify or change the eligibility criteria so as to best serve its purposes. Whenever a change is introduced in the eligibility criteria either by introducing some new conditions or restricting or altogether doing away with certain previous concessions it might hurt the interests of someone or the other but for that reason the change(s) made in the eligibility criteria cannot be labelled as mala fide. The first two arguments advanced on behalf of the appellant thus completely fail to show any mala fide and we now proceed to examine the third argument advanced on its behalf.”
petitioner to challenge the condition with regard to financial position. He submitted that, first of all, the said condition was necessary because the respondent was concerned as to whether the prospective bidders would have the wherewithal and financial position/standing to be able to fulfil the orders as and when required. The two schemes, for which the empanelment was being done, were schemes in public interest and for the rural and urban electrification of various parts of India and that did not brook any delay and, therefore, it is vital that a condition for financial standing/position was incorporated in the terms and conditions of the Request for Empanelment (RFE).
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(2013) DLT 554 (DB) . In that case, there was a clause with regard to financial standing apart from incorporating conditions with regard to average annual turnover, financial losses, if any, suffered by the prospective bidder and the net worth of the firm. In fact, the condition there was that the net worth of the firm should not have eroded by more than 30% in the last three financial years ending 31.3.2012. Though the condition challenged in that petition was with regard to the financial losses suffered by the bidder firm, Mr Tripathi submitted that the entire condition had not been interfered with by the Division Bench and that condition of financial standing had included the question of net worth. He submitted that in that case it was not that the firm was disqualified if the net worth was negative, the firm would have been disqualified even if net worth was positive, but had eroded more than 30% in the last three financial years. It was, therefore, contended by Mr Parag Tripathi that no interference with the Request for Empanelment (RFE) in both these petitions was called for.
the parties as also the case laws which have been placed before us. It is
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amply evident from the decision in Michigan Rubber (India) Limited (supra) that in the matter of formulating conditions of tender documents, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted. In the case before us there is no allegation of mala fides or malicious use of power. The only allegation that has been put forth is that the condition with regard to financial position is not connected with the objective sought to be achieved. We cannot sit in judgment on the said condition because it is for the tendering authority to determine as to what criteria it should adopt particularly with regard to financial soundness. In Michigan Rubber (India) Limited (supra) itself, it has been indicated that certain preconditions or qualifications for tenders have to be drawn to ensure that the contractor has the capacity and the resources to successfully execute the work. There are various financial criteria which can be employed by the tendering authority in order to assess the capacity and soundness on the part of the prospective bidders. As noticed in the decision in Jindal Stainless Limited (supra) , one of the criterias was the average annual turnover, another was the issue of whether the prospective bidder had suffered any financial losses in the last three financial years and yet another was the
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question of erosion of net worth of the company by a certain percentage. All of these conditions or any one of those conditions or modified conditions can be employed by a tendering authority for assessing the financial soundness of a prospective bidder. It could also be placed as a pre-condition for qualification of prospective bidders. In the present case, the condition of net worth being positive has been selected by the tendering authority and we find no reason to interfere with that.
Prequalification/Post Qualification shall be based entirely upon the capability and resources of prospective bidders to perform the particular contract satisfactorily, taking into account their (i) experience and past performance on similar contracts for last 2 years (ii) capabilities with respect to personnel, equipment and
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manufacturing facilities (iii) financial standing through latest I.T.C.C., Annual report (balance sheet and Profit & Loss Account) of last 3 years. The quantity, delivery and value requirement shall be kept in view, while fixing the PQ criteria. No bidder should be denied prequalification/post qualification for reasons unrelated to its capability and resources k; successfully perform the contract.”
“No. 12-02-1-CTE-6
Government of India Central Vigilance Commission (CTE’s Organisation) Satarkata Bhavan, Block A, 4th Floor, GPO Complex, INA, New Delhi – 10 023. Dated: 7th May, 2004 OFFICE MEMORANDUM
Subject : - Pre-qualification Criteria (PQ).
Guidelines were prescribed in this office OM of even number dated 17/12/2002, on the above-cited subject to ensure that the prequalification criteria specified in the tender document should neither be made very stringent nor very lax to restrict/facilitate the entry of bidders. It is clarified that the guidelines issued are illustrative and the organizations may suitably modify these guidelines for specialized jobs/works, if considered necessary. However, it should be ensured that the PQ criteria are exhaustive, yet specific and there is fair competition. It should also be ensured that the PQ criteria is clearly stipulated in unambiguous terms in the bid documents.
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(M.P. Juneja) Chief Technical Examiner
To
All CVOs of Ministries/Departments/PSUs/Banks/Insurance Companies/ Autonomous Organisations/Societies/UTs.”
itself stated in paragraph 4 that the list mentioned thereunder was illustrative and not exhaustive and it was also stated that the factors that may be kept in view while framing the prequalification criteria include the scope and nature of work, experience of firms in the same field and “financial soundness” of firms. The positive net worth condition is part of the criteria of financial soundness and, therefore, there is, in our view, no violation of the CVC guidelines. In any case, they are illustrative and not exhaustive.
petitions. The same are dismissed. The parties shall bear their own costs.
BADAR DURREZ AHMED, J
JANUARY 08, 2016 SANJEEV SACHDEVA, J SR
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2 issues framed by the court
Whether the tender condition requiring positive net worth for the last three financial years is arbitrary or violates Article 14.
Whether the Respondent had the authority to issue the Request for Empanelment without making the Ministry of Power a party.
Colour shows how this judgement treated each authority
Michigan Rubber (India) Limited v. State of Karnataka and OthersExplained¶10
Michigan Rubber (India) Limited v. State of Karnataka and Others: (2012) 8 SCC 216 · Who else cites this
S. S. & Company v. Orissa Mining Corporation LimitedExplained¶10
S. S. & Company v. Orissa Mining Corporation Limited: (2008) 5 SCC 772 · Who else cites this
Jindal Stainless Limited v. Indian Government MintExplained¶12
Jindal Stainless Limited v. Indian Government Mint: 203 (2013) DLT 554 (DB) · Who else cites this
1 provisions across 1 enactments
M/S Paramount Communications Ltd
Power Grid Corporation of India Limited
Badar Durrez Ahmed
Sanjeev Sachdeva
As recorded by the court registry
A petition under Article 226 of the Constitution asking a High Court to issue a writ against the State or a public authority in a civil matter.
Judgements on the same questions, provisions and authorities, from every court
