Disposed

M/S.Arkay Energy (Rameswaram) v. the Govt. of Tamil Nadu

Madras HC14 Oct 2011WP(MD)/9830/2011

Case brief

AI extract

What is this about?

The Madurai Bench disposed of a writ petition challenging the minimum bid capacity of 100 MW in a tender for power procurement. The court held that while tenders should proceed, the respondents must approach the Tamil Nadu Electricity Regulatory Commission to resolve the capacity shortfall to safeguard public interest.

What did the court decide?

Petition disposed; respondents directed to proceed with bid processing and approach TNERC within two days to resolve capacity shortfall.

M/S.Arkay Energy (Rameswaram) Vs the Govt. of Tamil Nadu — Service and Employment | Madras HC (2011)

¶1

¶2

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

¶3

DATED 13.10.2011

¶4

CORAM

¶5

THE HONOURABLE MR. JUSTICE V.RAMASUBRAMANIAN

¶6

W.P.(MD)No.9830 of 2011 and M.P(MD)No.1 of 2011

¶7

M/s.Arkay Energy (Rameswaram)Limited, having its plant at Valuthur Village, Valantharavai post, Ramnad District - 623 623, Tamil Nadu represented by its Executive Vice President (Commercial and Legal), R.Jarad Kishore. ..Petitioner Vs 1. The Government of Tamil Nadu, represented by its Secretary to Government, Energy Department, Fort.St.George, Secretariat, Chennai - 600 009.

¶8

The Chairman and Managing Director, Tamil Nadu Generation and Distribution Corporation Limited(TANGEDCO), No.144, Anna Salai, Chennai - 600 002. 3. The Chief Engineer/PPP, Tamil Nadu Generation and Distribution Corporation Limited(TANGEDCO), V Floor, No.144, Anna Salai, Chennai - 600 002. ..Respondents.

¶9

Prayer: Writ Petition filed under Article 226 of the Constitution of India, praying this Court to issue a Writ of Mandamus directing the respondents herein to forthwith consider the petitioner's representation dated 24.08.2011 and reduce the minimum generation https://hcservices.ecourts.gov.in/hcservices/ capacity from a single source under Bid Specification No.01/PPMT/2011 in respect of the Request for Proposal for Procurement of Power for

¶10

¶11

450 MW on Medium Term from 100 MW or such other reasonable generation capacity as this Court may deem fit and to permit the petitioner to participate in the present bidding process.

¶12

For Petitioner :M/s.G.R.Swaminathan for AL.Gandhimathi

¶13

For Respondents :M/s.S.M.S.Johny Basha SSC for TNEB

¶14

ORDER

¶15

The petitioner has come up with the above Writ Petition seeking a Mandamus to direct the respondents to consider their representation and reduce the minimum generation capacity from a single source under Bid Specification in respect of the Request For Proposal for Procurement of Power for 450 MW on Minimum Term.

¶16

Heard Mr.G.R.Swaminathan,learned counsel for the petitioner and Mr.S.M.S. Johny Basha, learned Standing Counsel for the respondents.

¶17

Sans on technical details, the question raised by the petitioner who is involved in the business of generation of electricity through gas based plant is as to whether the Minimum Bid Capacity fixed as 100 MW from a single generation source, in the RFP floated by the respondents on 10.06.2011 was fair, reasonable and in public interest or not.

¶18

On 10.06.2011, third respondent herein floated the "Request For Proposal for Procurement of Power for 450 MW on Minimum Term" through tariff based competitive bidding process. Section(1) of said proposal (herein after referred to as RFP) indicated that the contract period would be five years commencing from 10.12.2011 to 09.12.2016. It also indicated that the Requisitioned Capacity was 450 MW for base load supply of power. However, there was a rider to the Requisitioned Capacity. The rider states that "during evaluation of bids and based on the competitiveness of the bid process, the Procurer retains the right to increase or decrease the Requisitioned Capacity by a quantum of 20%."

¶19

In other words, the respondents had the leverage either to increase the Requisitioned Capacity or to decrease it by 20%. To put in figures, the bid could be finalised for the Requisitioned Capacity ranging from 360 to 540 MW.

¶20

The respondents also indicated in the RFP that the Minimum Bid Capacity was to be 100 MW from Single generation source throughout the contract period. In other words, the eligibility https://hcservices.ecourts.gov.in/hcservices/ criteria for persons to submit their offers in response to the RFP is that they should have the Minimum Bid Capacity of 100 MW from a

¶21

¶22

single generation source throughout the contract period.

¶23

Though the petitioner admittedly does not have the Minimum Bid Capacity of 100 MW, the petitioner submitted their bid and thereafter made representation through the Tamil Nadu Power Producers Association. The petitioner also independently submitted a representation on 24.08.2011. Since the representations did not evoke any response, the petitioner came up with the above Writ Petition.

¶24

On 29.08.2011 when the Writ Petition came up for hearing as to admission, R.Sudhakar,J passed an interim order directing the respondents to accept the bid offer by the petitioner and not to reject it until further orders. Thereafter the respondents filed a counter affidavit and the Writ Petition itself was taken up for disposal by consent in view of the urgency expressed.

¶25

The main plank of the objection of the petitioner to the RFP is that by prescribing 100 MW as the Minimum Bid Capacity, the respondents have edged out smaller players leading to the competition being narrowed down. The Government of India, according to the petitioner has already indicated that the Minimum Bid Capacity may generally be 10% of the capacity or 50 MW whichever is lesser. Therefore it is the contention of the petitioner that by prescribing 100 MW as the Minimum Bid Capacity, the local producers have been thrown out of competition. The other grievance of the petitioner is that by virtue of G.O.Ms.No.10 Energy(C3) Department, dated 27.02.2009, the local producers are not entitled to sell the energy generated by them to consumers outside the State. In other words, the local private power producers are under compulsion to sell the power generated by them only to consumers within the State. Therefore the grievance of the petitioner is that persons like the petitioner cannot be made to lose on all ends.

¶26

However, the respondents have filed a counter affidavit contending that the prescription of Minimum Bid Capacity at 100 MW is to ensure continuous, uninterrupted power supply. Since the State is reeling under severe shortage of power, the Government felt obliged to prescribe higher standards to make bigger suppliers get attracted towards the State. It is the contention of the respondents that when the bench-mark is increased, it attracts bigger suppliers who will be able to supply more power at a competitive rate uninterruptedly. The respondents have also extracted in para 6 of their counter the prescription issued by the Government of India in this regard. It reads as follows:

¶27

" The Minimum Bid Capacity shall be decided by the procurer, which may generally be the lower of the two values 10% of the Requisitioned Capacity or 50 MW. However the procurer shall be free to determine any https://hcservices.ecourts.gov.in/hcservices/ quantum as the Minimum Bid Capacity".

¶28

¶29

Based on the last line of the prescription issued by the Government of India, it is contended by the learned Standing Counsel for the respondents that the prescription by the Government of India was only general in nature and that Government of India had left it to the discretion of the procurer to determine any quantum as the Minimum Bid Capacity. Therefore, it is contended by the respondents that when they have done something in tune with the policy of the Central Government and when there are no mala-fides or arbitrariness, it is not open to the petitioner or anyone else to challenge the tender conditions. According to the learned Standing Counsel, the prescription of tender conditions can never form the subject-matter of the Writ Petition, unless they are found to be arbitrary and patently unfair and also found to be inserted with a view to favour a chosen few. In the absence of any allegation that the condition was inserted to favour a few, the condition cannot be assailed by the petitioner.

¶30

I have carefully considered the rival submissions.

¶31

Mr.Johny Basha, learned Standing Counsel for the respondents informed the Court on instructions that when Case-1 on bidding was opened on 03.09.2011, it was found that there were four persons who had submitted their bids. The details of persons who submitted the bids are as follows:

¶32

(1)M/s.Arkay Energy (Rameswaram) Limited - 50 MW

¶33

(2)National Energy Trading Services(M/s.Lanco)-A-200 MW

¶34

B-100 MW

¶35

(3)OPG Energy(Gas) - 10 MW

¶36

(4) OPG Power Generation Private Limited - 100 MW

¶37

De hors the technical objections, it is clear that only four bids has been received in response to the RFP. If the Minimum Bid Capacity prescribed in the RFP is sustained, there will only be two bids who will be in the race. They are:

¶38

(1) National Energy Trading Services(M/s.Lanco)

¶39

(2)OPG Power Generation Private Limited.

¶40

While the Minimum Bid Capacity of the former is 300 MW, the Minimum Bid Capacity of the latter is 100 MW. The total bid capacity of the two bidders who will be ultimately left in the fray, would only be 400 MW.

¶41

In other words, the total bid capacity of both the bidders who will be left in the fray will fall short by 50 MW as against the Requisitioned Capacity of 450 MW which form the basis of RFP floated on 10.06.2011.

¶42

https://hcservices.ecourts.gov.in/hcservices/

¶43

¶44

In the background of the above factual scenario which has unfolded before this Court, if I go back to the contentions raised on both sides, it is seen that the respondents may ultimately have to reduce the Requisitioned Capacity by 20%,if they want to approve any one or both of the two bidders who will be in the race. To put it differently, if the tender conditions are strictly adhered to, the respondents can enter into Power Purchase Agreements with any one or both of the two companies only after reducing the Requisitioned Capacity to 400 MW. The respondents will not even have the choice to select only one among the two bidders since any one of them will not be able to supply even 360 MW, below which the Requisitioned Capacity cannot be lowered. In other words, the respondents will be left with no option except to accept the bids of both companies after reducing the Requisitioned Capacity from 450 MW to 400 MW. Will such an action be accepted as in public interest is the question that the Court should address itself to, even if the tender conditions are not tested on the touchstone of fairness, arbitrariness etc at the instance of the petitioner.

¶45

The answer to this question can be found from Section 3 of the RFP floated on 10.06.2011 itself. Step-II of Section 3 of RFP indicates the method by which the financial bids are to be evaluated. The proviso under under Para 3.4.1 reads as follows:

¶46

"3.4.1.Provided however, in case Envelope II of only one Qualified Bidder or two Qualified Bidders having any affiliate company or companies of the Procurer remain after the responsiveness check (Step-I), the Envelope II of such Bidder(s) shall not be opened and the matter shall be referred to Appropriate Commission and the selection of the successful Bidder shall then be at the sole discretion of the Appropriate Commission."

¶47

Similarly Step-IV of Section 3 prescribes the procedure for selection of successful bidder. Para 3.5.5 and 3.5.6 under Step -IV reads as under:

¶48

"3.5.5 At any step in the process in Clause 3.5.4, in case the Requisitioned Capacity has not been achieved and the offered capacity of the Bidder with the lowest Levelized Tariff amongst the remaining Financial Bids is larger than the balance Requisitioned Capacity, any fraction or combination of fractions offered by such Bidder shall be considered for selection,towards meeting the Requisitioned Capacity.

¶49

3.5.6. The selection process shall stand completed once the Requisitioned Capacity has been achieved through the summation of the quantum offered by the Successful https://hcservices.ecourts.gov.in/hcservices/ Bidders or when the balance of the Requisitioned Capacity

¶50

¶51

is less than the Minimum Bid Capacity."

¶52

A careful reading of the steps involved in the evaluation of bids prescribed in the RFP itself would go to show that whenever such contingencies arise, the Electricity Board itself can approach the Appropriate Commission, so that the issue can be resolved. While it is true that the respondents have a right to prescribe any conditions as they think are reasonable for the procurement of power, it is equally important to see that public interest does not suffer on account of the reduction of the Requisitioned Capacity, on account of an enhanced minimum bid capacity. At times when there is surplus of power, the reduction of Requisitioned Capacity can never be found fault with. But at times when there is severe shortage of power, the reduction of the Requisitioned Bid Capacity, which is not as a result of non-availability of suppliers, but is as a result of other suppliers not satisfying the Minimum Bid capacity, cannot be taken to be sub-serving public interest. The only alternative that may be available for the respondents in such cases may be to go in for another bid. But that may not also be in public interest, since the solution on hand is much better than the solution that could be found out subsequently.

¶53

In view of the above, I am of the considered view that the interest of the respondents as well as public interest could be safeguarded by doing two things namely:

¶54

(1) by allowing the respondents to proceed with the processing of the tenders and allowing them to arrive at a provisional conclusion and

¶55

(2) by directing the respondents to approach the TNERC, to resolve the issue that has arisen out of the short fall in the Requisitioned Capacity, due to the increase of the Minimum Bid Capacity

¶56

(3). The execution of Power Purchase Agreements can be based upon the ultimate recommendation of the TNERC so that as per the contract, the supply of power can commence from the successful bidders from 10.12.2011 onwards.

¶57

Accordingly, the Writ Petition is disposed of with the following directions:

¶58

(1) the respondents shall proceed with the processing of the bids and the provisional finalisation of the same, after taking all the steps prescribed in the RFP dated 10.06.2011.

¶59

(2) the respondents shall within two days approach the Tamil Nadu Electricity Regulatory Commission along with a copy of this order and https://hcservices.ecourts.gov.in/hcservices/ submit the factual details before the Commission for appropriate directions in view of the urgency that had arisen in this case. The

¶60

¶61

TNERC is requested to issue necessary directions within three weeks so that the execution of Power Purchase Agreements by Electricity Boards is not unduly postponed and the respondents are able to execute the agreements in time so as to commence the supply by the target date 10.12.2011.

¶62

(3) The execution of Power Purchase Agreements shall await the directions to be issued by the TNERC.

¶63

(4) Since out of four bidders, two are qualified even as per the original tender conditions and the petitioner alone has approached this Court,out of the remaining two, they may also be heard by the TNERC before a direction is issued. It is made clear that persons who have not responded to the RFP so far, cannot take advantage of this order and seek to implead themselves before the TNERC, in view of the fact that they would be guilty of delay and laches to approach either this Court or the TNERC at this distance of time.

¶64

23.Consequently, connected Miscellaneous Petition is closed. No costs.

¶65

Sd/-

¶66

Assistant Registrar(RTI)

¶67

/True Copy/

¶68

Sub Assistant Registrar

¶69

¶70

The Secretary to Government,

¶71

Government of Tamil Nadu,

¶72

Energy Department, Fort.St.George,

¶73

Secretariat, Chennai - 600 009.

¶74

The Chairman and Managing Director, Tamil Nadu Generation and Distribution Corporation Limited(TANGEDCO), No.144, Anna Salai,

¶75

Chennai - 600 002.

¶76

The Chief Engineer/PPP, Tamil Nadu Generation and Distribution

¶77

Corporation Limited(TANGEDCO), V Floor, No.144, Anna Salai,

¶78

Chennai - 600 002.

¶79

+1cc to Mr.S.M.S.Johnny Basha, Advocate, Sr.No.35702

¶80

+1cc to M/S.AL.GANDHIMATHI, Advocate, Sr.No.35691

¶81

W.P(MD)No.9830 OF 2011 14.10.2011

¶82

https://hcservices.ecourts.gov.in/hcservices/ vsn/SMA/14.10.2011/6C/7P

M/S.Arkay Energy (Rameswaram) v. the Govt. of Tamil Nadu

Case brief

What is this about?

What did the court decide?

M/S.Arkay Energy (Rameswaram) v. the Govt. of Tamil Nadu

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Sabruth Begam Vs the Regional Passport

M. Selvarani, Vs the District Collector

R. Papanasam, S/O.Ramasamy, Vs the Superintendent of Police

M.R. Manickam, Vs Tamil Nadu State Election

S. Ponsekar Vs the Secretary to Govt.

M/S. Ramesh Traders, Vs the Managing Director