TMI Blog2008 (5) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No. 1 has for the past two decades been dealing with the project for development of a hotel complex known as Crowborough Hotel ( the Hotel for short) at Police Bazar, Shillong, but due to litigation problems, the project could not see light of the day. After finally settling the litigation, the respondent No. 1, in the year 2005, took a decision to re-develop the partially constructed structure of the Hotel, which had been lying idle for over two decades. A decision was accordingly taken by the respondent No. 1 proposing that the Hotel be re-developed by trying up with a developer/operator of national/international repute on Public Private Partnership (PPP) basis, which would undertake the exercise on build, operate and transfer (BOT) system. Towards this end, the respondent No. 1 vide the letter dated 22.1.2007 engaged M/s IL FS Infrastructure Development Corporation Ltd., a consultancy firm, for selection of a private developer through transparent bidding process. It would appear that the bidding process contemplated two stages, namely, the stage of Expression of Interest (EOI) and thence the stage of Request for Proposal (RFP) and that in the first stage, an advertisement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officers of the State to ensure transparency in awarding contracts. In response to the advertisement, a total number of fourteen firms/individuals submitted their Expression of Interest (EOI), which were then opened and scrutinized by the respondent No. 1 by preparing a comparative statement. Though technical criteria were clearly mentioned in the advertisement, according to the petitioner, no objective criteria were prescribed by the respondent No. 1 till that stage. After the respondent No. 1 made evaluation of technical and financial capabilities of the respective bidders, 11 bidders including the petitioner and the respondent No. 2 were short listed for issuance of the bid documents for the second stage of Request for Proposal (RFP). One of the bidders, namely, Unitech Ltd. was disqualified for their inability to submit a formal letter of association with a hospitality chain, while two other bidders, namely, Polo Towers and Reena Enterprises were not short listed for their inability to meet the criteria for turnover and net worth though the criteria for turnover and net worth were never formulated in the advertisement. It is contended by the petitioner that the respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be allotted for turnover and net worth and any bidder scoring a total of 5 marks or more was to be considered to have met the criteria with respect to turnover and net worth. The Committee was also stated to have considered the criteria for engineering project in which 30% was to be the turnover required while 15% would be the net worth, which would work out to be ₹ 8 crores and ₹ 4 crores respectively. According to the petitioner, the Committee, to broaden the participation, finally fixed the qualifying criteria at ₹ 5 crores (turnover) and ₹ 2.5 crores (net worth) by superseding the recommendation of the said consultant. The petitioner points out that in the matter of adopting the financial criteria for bidding, the guidelines issued by the panel on Infrastructure in the Prime Minister's Office (PMO) has prescribed that in all cases of public-private -partnership such as in this case, a bidder must have undertaken a similar project over the past five years (meaning experience) and must also have a net worth of not less than 15% of the total project costs. This is aimed at keeping non serious and predatory pricing or dummy bidders out as they often en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the aforesaid action of the respondent No. 1, the petitioner, on 25.6.2007, submitted his representation to the respondent No. 1 pointing out therein the illegalities, irregularities and procedural improprieties found in the tender process and requested them to reconsider the matter in accordance with law and award the contract in favour of a technically and financially competent and deserving bidder, but in vain. On the contrary, the respondent No. 1, on 23.6.2007, issued a letter of intent for award of the contract in favour of the respondent No. 2. The petitioner has now come to learn through local newspapers including Shillong Times that the respondent No. 1 had finally decided to award the contract in question to the respondent No. 2. It is thus contended by the petitioner that the action of the respondent No. 1 in awarding the contract in favour of the respondent No. 2 is illegal, arbitrary and discriminatory and is, therefore, liable to be quashed. 7. The writ petition is resisted by both the respondents by filing their respective affidavits-in-opposition. The case of the respondent No. 1 as pleaded in its affidavit-in-opposition is that IL FS Infrastructure Developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sliding criteria take into account both turnover and net worth but without any minimum requirement for internal evaluation of the bidders : the evaluation criteria for final selection from the short-listed bidders were clearly mentioned in the bid document (RFP document), which is the highest license fee payer. While the respondent No. 1 maintains that all the conditions stipulated by the CVC circular have been followed, it also points out that the CVC itself came out with another circular stating that the pre-qualification criteria specified in the tender document should neither be made very stringent nor very lax to restrict/facilitate the entry of bidders and that the guidelines so issued are merely illustrative, which maybe suitably modified for specialized jobs/works, if considered necessary. The respondent No. 1 accuses the petitioner of fabricating comparative statement at Annexure-3, which is not on record, to derive undue advantage in order to espouse his cause. At this stage, it may be noted that the petitioner by filing additional affidavit conceded that no pre-qualification criteria in respect of minimum net worth and turnover was prescribed that Clause (e) inserted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beration, agreed that the criteria were to be assessed on a Point Based Scale , which were to be worked out by the consultant and the consultant thereafter acted upon decision of the Evaluation Committee and made evaluation. However, subsequent to the evaluation made by the consultant, a meeting of the Evaluation Committee was held on 4.5.2007 when the following words were inadvertently inserted, namely, Given the criteria for engineering projects, 30% is the turnover required and 15% would be the net worth. This would work to ₹ 8 crores and 4 crores respectively. However to broaden the participation platform, the qualifying criteria has been kept at ₹ 5 crores and ₹ 2.5 crores respectively. The Committee discussed in detail approved criteria for shortlisting of bidders. This stipulation was to be confirmed in the third meeting of the Evaluation Committee. In the third meeting held on 11.6.2007, the Committee was apprised of the fact that since no minimum stipulation had been made in respect of the net worth and turnover in the EOI, the same could not be changed at the subsequent stage. The mistake was accordingly rectified, and the EOIs were thus evaluated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 70.31 crores for the entire lease period and not ₹ 90.62 crores as has been sought to be made out by him and that by taking into account all these factors, the bids of the petitioner is lower by nearly ₹ 20 crores as compared to that of the respondent No. 2. It is also pointed that the respondent No. 2 in terms of the letter dated 5.3.07 (Annexure-C) has entered into an agreement with T.K. International Ltd., which has more than twenty years of experience in operating, management, construction and development of hotels, which satisfies the stipulated criteria in the EOI. The respondent No. 1 reiterates that the draft minutes of the second meeting, namely the financial criteria of fixing a turnover of ₹ 5 crores and net worth of ₹ 2.5 crores being erroneous was suitably amended, which was confirmed on 11.6.2007, and the process was carried out prior to opening of the bids : in fact, the petitioner never raise any objection before the opening of the financial bid. According to the respondent No. 1, it was only when the petitioner realized that he was in the third highest bidder that he started raising objection: he, having qualified in the pre-qualifying s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 4.9.2003 has been amended by the CVC memorandum dated 7.5.2004 for this kind of tender process and clearly states that it refers to the guidelines dated 17.12.2002 which, in turn, was issued essentially for relaxation of the tender process, and the same has been duly followed in the instant tender process. The consultant only followed the directives and developed a mid way to ensure maximum participation by relaxing the criteria and by providing sufficient shields whenever necessary to block the entry of fly-by-night operator. The respondent No. 2 disputes the very existence of the draft note annexed as Annexure-5 and claims that the same is a fabricated document. The respondent No. 2 further asserts that the point based scale/sliding criterion was discussed by the Evaluation Committee in the meeting dated 4.3.2007 and was approved, which was explained to all the bidders thereby making the entire tender process a very transparent one. While reiterating the contentions of the respondents No. 1, the respondent No. 2 points out that he has accepted the letter of intent issued to him in his communication dated 25.6.2007 by remitting demand drafts worth ₹ 77,43,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State lies in generation of revenues. The respondent No. 2, while quoting his rate, has naturally viewed the viability of the rate quoted by him from all feasibility angles and workable parameters and thereafter finally decided that the lease period of 33 years offers him ample opportunities to recover the expenditures initially incurred by him and make good business profits by running the Hotel. The respondent No. 2 ridicules the doubts raised by the petitioner on his competence to run the hotel as he is a mere coal dealer and claims that an investor with adequate financial resources, be he a coal dealer or a transporter, can always successfully run a hospitality industry of any magnitude if he has proper operation and management tie-up with an existing hotel operator. The respondent No. 2 alleges that the writ petition has been filed by the petitioner with mala fide intention as he wants the Hotel, which is located in close proximity to his Centre Point Hotel, to remain non-operational so that his hotel business is not affected and that he, out of fear of healthy competition resulting from the operation of a star category hotel close to his own hotel, is determined to stall the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious local dailies and after minutes of the meetings were available. It is contended by the petitioner that the mere fact that it had qualified in the pre-qualification stage does not bar it from challenging those acts of commission or omission inasmuch as they prejudicially affected its interest at the RFP stage. The petitioner submits that the point based scale adopted by the respondent No. 1 in the third meeting is highly defective inasmuch as no minimum cut off points have been prescribed for Turnover or Net Worth : the omission was done deliberately to make way for the respondent No. 2, who apparently did not qualify the criteria of ₹ 5 crores and ₹ 2.5 crores. The petitioner maintains that it has quoted a progressively escalating bid, the total whereof would come to ₹ 90.61 crores in 33 years and denies that its total bid value is only 70.31 crores. These are the sum and substance of the new facts pleaded by the petitioner in its reply affidavit. 12. Mr. H.S. Thangkhiew, the learned Counsel for the petitioner, submits that in a competitive bids such as the one here, it is incumbent upon the respondent No. 1 to incorporate in an unambiguous term all pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the petitioner has never challenged the EOI at the relevant time and cannot at this belated stage question the same even if the EOI is not done in accordance with the procedure prescribed by law, more so, after he failed to secure the work order. According to the learned Counsel, the subsequent letter dated 7.5.2004 of the CVC has clarified that the pre-qualification criteria specified in the tender document should neither be very stringent nor very lax so as to restrict/facilitate the entry of bidders and that the guidelines issued by the CVC are merely illustrative, which can be suitably modified for specialized jobs/work, if considered necessary. Drawing my attention to the letter dated 5.3.2007 of the Welcome Group, ITC as well as the solvency certificate submitted by the petitioner, the learned Counsel for the respondent No. 1 pointed out that the petitioner does not have any valid management contract with any operator nor is the solvency certificate of the Bank in question issued in the name of the Centre Point Group Enterprises, but is issued in the name of Shri Prabhat D. Sawian. It is thus submitted by him that the petitioner itself is not eligible to participate in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 2 while adopting the submissions of the learned Counsel for the respondent No. 1, however, adds that it is settled principle of law that the terms and conditions of tender are in the realm of contract and cannot be challenged in a writ petition, and if any aspiring bidder has any objection against the adoption of a particular policy decision, he should do so at the first instance without waiting for the entire process to be over. He further points out that the respondent No. 1 subsequently, on the query of the petitioner itself, clarified by addendum that an individual would be allowed to participate in the tender process and, therefore, rejects the contention of the petitioner to the contrary. In fact, according to the learned Counsel, the petitioner himself participated in the bidding process in his capacity as an individual and not as a company incorporated under the Companies Act, 1956. The learned Counsel for the respondent No. 2 finally contends that the writ petition is mala fide and has been filed with the oblique motive of preventing the establishment of a rival hotel at its doorstep to complete with it. 13. I have given my thoughtful consideration to submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under the name and style of T.K. International Ltd. has a tie-up to undertake the project in question and that he has executed a valid management contract for the tie-up with this firm, which was submitted by him to the respondent authorities. The term consortium has many dictionary meanings. One of them is (T) or more parties acting together as a partnership of joint venture'' (See Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edn.). The bidding crieria, among others, stipulates that in case of consortium between a developer and operator, there needs to be a valid management contract between them for operation and maintenance of the hotel for a minimum period of 10 years. In the tender file, it is found that there is an agreement dated 5.3.2007 executed between the respondent No. 2 and the said T. K. International Hotel Ltd. indicating therein that the latter would be responsible to lead the project (Crowborough Hotel) for providing management consulting services as well as manage and operate the hotel after its renovation and refurbishment at Shillong for a period of 33 years. In my opinion, the fact that the respondent No. 2 is a coal dealer and has no experien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of RFP bids. If the pre-qualification criteria were really vague and was, therefore, likely to cause prejudice to it, it ought to have challenged the same in an appropriate manner. Having proceeded to participate in the bidding process knowing fully well such alleged defective criteria, it cannot at the belated stage turn around and say that the bidding process is unfair or arbitrary or vague. I find considerable force in the contention of the learned Counsel for the respondents that the petitioner challenged the bidding process only when it failed to securer the contract. Coming now to the meat of the matter, it is the contention of the petitioner that though the respondent No. 1 had on 14.5.2007 finalized the financial criteria and had fixed the same at a minimum of ₹ 5 crores for the turnover and ₹ 2.5 crores for the net worth, it changed these criteria again on 11.6.2007 and reformulated the same on a point based scale for the turnover and net worth in order to accommodate the respondent No. 2. To verify the correctness of this contention, I have carefully perused the tender file produced by the respondent No. 1. It appears that in the first meeting of the Eval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evaluation of technical and financial capabilities on the basis of the stipulated criteria and the second stage being financial bidding and process to submits that the financial bidding becomes relevant only when the bidder statisfies the pre-qualification technical and financial criteria and submits his financial bid, and the respondent No. 2 was illegally allowed to take part in the financial bid when he did not satisfy the technical and financial criteria. The learned Counsel finally contends that the point based scale adopted by the respondent No. 1 also suffers from incurable defect inasmuch as no minimum cut off points have been prescribed for either the turnover or the net worth, which resulted in enabling the respondent No. 2 to take part in the financial bid and eventually grab the contract illegitimately. 16. In the first meeting of the Evaluation Committee held on 17.4.2007, the Committee itself observed that there were no definite parameters for selection with respect to the turnover and the net worth though such parameters were necessary for assessment of the credibility of the bidders and ultimately decided that both the criteria (technical and financial criteria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may kindly be approved at the earliest for undertaking the next activity in selection process. With Warm regards, Yours sincerely Sd/- S.K. Mahanta Asstt. Vice President. 17. In the third meeting of the Evaluation Committee, four bidder, namely, (i) City View Hotels Pvt. Ltd., (ii) H.M. Cements Ltd. (iii) Centre Point Group Enterprise (the petitioner herein) and (iv) M/s Lessly Shylla were found to be responsive, which were then opened in the presence of the Committee members and the bidders. The Committee observed that though the Centre Point Group quoted ₹ 90.61 crores, as per escalation criteria in the RFP documents, its bid stood reduced to ₹ 70.31 crores. The Committee thereupon found the respondent No. 2, who quoted ₹ 98.99 crores, to be the preferred bidder and accordingly recommended his bid for approval and ratification by the respondent No. 1. The proposition of law with respect to the power of judicial review over contractual matter is now no longer res integra. It is not every deviation from the precise path of best practice that warrants judicial review. Judicial review, as repeated ad nauseam, is exercised to rein in an unbridled ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive decisions must grant certain measure of freedom of play in the joints to the executive. (underline mine) 18. In Air India Ltd. v. Cochin International Airport Ltd. [2000]1SCR505 , the Apex Court also observes that even when some defect is found in the decision making process, the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point, that the court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not and that only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene. 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 carefully to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as unreasonable if it is impartial and unequal in its operation as between different classes. In all these cases, the test to be adopted is that the court should, ''consider whether something has gone wrong of a nature and degree which requries its intervention. (emphasis mine) 3. The modern trend points to judicial restrain in administrative action. 4. The court does not sit as a court of appeal but merely reviews the manner in which the decision is made. 5. The court does not have the expertise to correct the administrative decision. If a review of administrative action is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. 6. The terms of the invitation to tender cannot be open 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 a process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. 7. The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adoption of point based criteria was only for the purpose of internal assessment by the Evaluation Committee, which were never prescribed in the EOI. As already held earlier, if the petitioner was really aggrieved by the omission to specify the parameters for judging the technical and financial capability of the bidders, it ought to have challenged the same before the commencement of the tender process. Moreover, no mala fide or, at any rate, no specific material on this behalf, against the respondent authorities is alleged by the petitioner. In addition, no substantial prejudice to the petitioner has been established by reason of adoption of the sliding criteria. The respondent No. 2 has demonstrably outbidded the petitioner by ₹ 8.38 crores-- Even if the qualifying criteria of ₹ 5 crores for the turnover and ₹ 2.5 crores for the net worth were adopted, the average turnover and net worth of the respondent No. 2 for the preceding three years, on the own showing of the petitioner, would still be ₹ 13.17 crores and ₹ 1.87 crores respectively. True the average net worth of the respondent No. 2 would be ₹ 63 lakhs short of the required ₹ 2.5 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite criteria seems to be misplaced. The procedure adopted by the respondent No. 1 in the decision-making process, as conceded by themselves, has left a lot to be desired, for which the consultant, the so-called expert, which has reportedly been paid hefty consultant fees, is squarely to be blamed. Nevertheless, the modern trend in contractual field appears to be that though a public authority does not have an unfettered discretion to ignore the norms recognized by the courts, but at the same time if a decision has been taken by a public authority in a bona fide manner, although not strictly following the norms laid down by the courts, while adjudging the constitutional validity of executive actions, must grant a certain measure of freedom of play in the joints to the executive. Ultimately, the yardstick for interference by a writ court in a contractual matter is whether something has gone wrong of a nature and degree which requires its intervention or whether the decision taken by the respondent No. 1 in awarding the LOI in favour of the respondent No. 2 or in ignoring the bid of the petitioner is so outrageous in its defiance of logic or of accepted moral standards that no s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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