TMI Blog2017 (10) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... lause 77 of DPP 2013 shows that it was clearly inapplicable to the present matter since the RFP acquisitions and the commercial bid was made prior to implementation of the DPP 2013. Whether the custom duty amount, could be reevaluated after Vectra’s explanations and clarifications? - Held that:- Judicial precedents as well as contractual clauses clearly and affirmatively suggest that State Authorities have considerable latitude in evaluating tenders on their own basis. In the present matter, the customs duty mentioned by Vectra is to be taken on the face of it, as part of bid, and the Court cannot scrutinize its correctness, or the accuracy of the second respondent’s bid, quoting different rates of duty. The clarification issued by the MOD gives further credence to its submissions. It is evident that Customs Duty is included as part of the bid and the exemption is on a fixed amount. The selection of Respondent No.2 as L1, is prima facie on the basis, that it submitted a lower bid (inclusive taxes and duties) and this fact was admitted by Vectra. Therefore, even if the bid was to be reevaluated in arguendo, Vectra’s submissions are unsustainable. Whether the result of the bid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting, to be present at the time of opening of the offers. The committee will determine the lowest bidder (L1). No negotiations would be carried out with the L1 vendor once the reasonability of the price quoted by him is established (This provision would be applicable only in a multi-vendor cases. For such cases the aspects of advance f stage payments if any and all requisite details for the vendor to formulate a comprehensive commercial proposal be indicated upfront in the RFP so that selection of L1 is facilitated).The date, time and venue fixed for this purpose will be intimated separately after the evaluations are completed. 39. You are requested to take into consideration the Payment terms given at Appendix E while formulating the Commercial Offers. 40. To assist the supplier in formulating the Commercial Proposal and to ensure that all aspects are covered, a suggested format is given at Appendix F. 4. Part IV- Paragraph 45 of the RFP which inter alia deals with the evaluation and acceptance criteria of commercial bids is as under: - 45. Evaluation and Acceptance Process a. **** b. Evaluation of Commercial Proposals - The Commercial prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,67,558.40 D TRAINING In India:- a) Operator s Training 40 1,10,000.00 2352000.00 b) Maintenance Training 23 74,750.00 0.00 c) QA Training 4 60,000.00 0.00 Abroad NA NA E COST OF DOCUMENTS, LITERATURE, MANUALS User hand Book/Operator s Manual 620 1,24,000.00 11,40,000.00 Technical Specifications 50.00 0.00 Workshop Manual 240 1,44,000.00 0.00 Manufacture s Recommended List of Spares 0.00 Illustrated Spare Parts Catalogue 240 1,44,000.00 0.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the earliest convenience. Vectra also annexed to this letter a cost comparison chart of the two bids clearly showing a difference of almost ₹ 10 crores. Further, by letter dated 05.12.2013, following the meeting with the Chairman, Price Negotiation Committee (PNC), the Petitioner once again clarified that the second respondent could not have been declared as Ll and also clarified certain elements of Custom Duty which had been raised during the meeting with the Chairman PNC. 8. The Petitioner - Vectra objected to the treatment of second respondent as Ll and highlighted this issue in writing in its letters dated 25.11.2013, 26.11.13 as well as 05.12.2013, and sought remedy. As these were to no avail, it has impugned the MoD s action declaring the second respondent as L1 and sought the quashing of the letter dated 14.11.2013 and sought a further declaration that it (i.e the Petitioner) is L1. 9. Vectra argues that the evaluation of the bid is not done on a Cost to User basis but on a Cost to State basis whereby the customs duty and taxes are not included as part of the bid. Reliance is placed on the submission that the end user in the present case is the State, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the instant case, the principle of excluding Customs Duty and Central Excise is implicit in the RFP itself, because it required these items to be shown separately and referred to issuance of CDEC. It is stated that excluding the Customs Duty would have been consistent with the past contracts of the MoD (list at page 100). Span's bid admittedly did not conform to the format prescribed in the RFP and should have been rejected on this ground alone. On the contrary, the MoD has gone to extraordinary lengths to recalculate Vectra's bid to compare it with Span. It is argued, therefore, that the MoD has committed a fundamental error by not comparing the basic price quotes, as required, but recalculating the bids to reflect taxes out of which Excise Duty will be paid back to the Government and Customs Duty will not be paid at all as it is exempted. 13. Counsel argues that assuming that taxes are to be taken into consideration to evaluate the bids, the MoD has made a second fundamental error - by taking the tax rates as quoted by the bidders, rather than the tax rate as applicable under law. The rates applied by the MoD are given below: Tax Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.31 as against Spam s higher quote of ₹ 1,07,03,06,850.89 rendering Vectra L1 in the process. 16. The MoD argues that the evaluation of the bid is done on a Cost to User basis and given that proposition, the inclusion of taxes and duties would be expedient in the present matter since the goods would be liable to taxation and subjected to duty. More importantly, the respondents submit, that Vectra s argument regarding the miscalculation of Custom Duty was not an issue they had raised in the multiple meetings that were held after the opening of the bid, and in that regard, it was unfair for Vectra, to seek a remedy through the Court given the contractual scenario between the parties. 17. The MoD argues that both parties were allowed to participate in the Contract Negotiating Committee (CNC) fifth meeting held on 18.09.2013, to ensure transparency. It was submitted that, whereas, Vectra stated in the event CDEC is not made available, custom duty as per structure in vogue at the time of import would have to be added over the Base Cost. However, Span submitted that customs duty was included in the base price. It is submitted that clarifications on commercial quotes were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all RFPs being issued under DPM-2009, it is already stated under Part V - Evaluation Criteria and Price Bid Issues that in cases where only indigenous bidders are competing all taxes and duties including those for which exemption certificates are issued) quoted by the bidders are considered. The ultimate cost to the Buyer will be the deciding factor for ranking of bids (Part V Para 1 (c). The IFA informed that a similar approach was adopted in the recently concluded case of Diesel Smoke Meter and Petrol Engine Gas Analyzer (Concerned Directorate is EME). He submitted that the same can be considered for adoption in the present case as well. The CNC agreed to the said approach. 19. It was argued that the decision of the MoD is neither irrational, nor capricious nor has any mala fide been alleged or proved. Furthermore, no illegality or procedural irregularity was established. Therefore, a conscious and informed decision taken by the MoD, based on a consideration of all circumstances and inputs cannot be challenged on general and insubstantial grounds of arbitrariness. 20. It was submitted by the MoD that DPM 2009 clearly visualized that bidders had to spell out the customs du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached ; and (ii) Whether the public interest is affected. If the answers to the above questions are in negative, then there should be no interference under Article 226. 23. In the seminal case of Tata Cellular v. Union of India, (1994) 6 SCC 651, the law on this point was exhaustively reviewed and the Supreme Court noted that in relation to public contracts and tenders, the following principles are discernible from the plethora of decisions: The modern trend points to judicial restraint in administrative action. The Court does no sit as a court of appeal but merely reviews the manner in which the decision was made. 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. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene. 25. In Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. Anr. 2016 SCC Online SC 940 the Supreme Court held as follows:- 14.....a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision. .. .. 24. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, unreasonableness or mala fides evident on the face of the record, the Court should in the larger public interest, not interfere with the process. Moreover, it is open to the tenderer to grant relaxation for bona fide purposes, or to insist on strict compliance of certain tender conditions, as long as the same is not done with a mala fide or discriminatory intent. 27. In the present matter there are certain questions of law which need to be answered in order to come to a conclusion and adjudicate the matter: a. Whether the bid is to be evaluated on the basis of Cost to User or Cost to State ; b. Whether the Custom Duty amount, can be reevaluated after explanations and clarification of the Petitioners; and c. Whether the result of the bid evaluation and the declaration of Respondent No.2 as L1 is arbitrary; 28. This Court has to essentially examine the critical subject whether the analysis of the bid should be in accordance with cost to the user or cost to the State . In the opinion of this Court, the question is answered by the fact that the MoD is liable to be taxed and does pay the custom duty to the Government of India for its imports. Keeping that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach. 30. Vectra refutes this logic of the MoD, and in defence has relied on the Defence Procurement Policy 2013. The DPP 2013 stipulates that bids should be evaluated as per the Cost to State basis wherein Taxes and Duties are excluded in the bid. As to this aspect, the court notices that the RFP was silent on this aspect. This meant that the MoD had the discretion to adopt either method. Vectra s logic is merited; however, this Court has to be alive to the fact that it is not called upon to decide which method to adopt, but to merely decide, whether the method adopted by the MoD was illegal or unreasonable. That the MoD had used the Cost to User in the past, per se is no ground to brand as unjustified the choice exercised in the facts of this case. The MoD s citing Clause 77 of DPP 2013 shows that it was clearly inapplicable to the present matter since the RFP acquisitions and the commercial bid was made prior to implementation of the DPP 2013. 31. The next issue is whether the custom duty amount, could be reevaluated after Vectra s explanations and clarifications. Vectra s bid stated the sum of ₹ 10.24 Crore as Custom Duty to be paid. With the analysis above, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n basis. In the present matter, the customs duty mentioned by Vectra is to be taken on the face of it, as part of bid, and the Court cannot scrutinize its correctness, or the accuracy of the second respondent s bid, quoting different rates of duty. The clarification issued by the MOD gives further credence to its submissions. It is evident that Customs Duty is included as part of the bid and the exemption is on a fixed amount. The selection of Respondent No.2 as L1, is prima facie on the basis, that it submitted a lower bid (inclusive taxes and duties) and this fact was admitted by Vectra. Therefore, even if the bid was to be reevaluated in arguendo, Vectra s submissions are unsustainable. 34. The third question is whether the result of the bid evaluation and the declaration of Respondent No.2 as L1 is arbitrary. Since the Cost to User evaluation has not been held to be arbitrary, along with the premise that Custom Duty could be evaluated as part of the bid, it is established that declaring the second Respondent L1 was not arbitrary or unfair. 35. In view of the foregoing discussion and conclusions, it is held that the writ petition has no merit; it is, therefore, dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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