M/S SELEX SISTEMI INTEGRATI, SPA v. UNION OF INDIA & ORS.

the major requirements of RFP. It was clearly indicated to the first Respondent to ensure that the third Respondent should not be afforded any opportunity to modify its proposal as in that event the principles of transparency in bidding process, approach of fairness and a level playing field would be defeated. As pleaded, the petitioner received no response to his letter. Thereafter, the commercial bids were opened but the petitioner was not invited for any meetings or discussions nor had he been informed of any decision taken with respect of declaration of any bidder as L-1. WP(C) No.13478/2009 Page 8 of 42

11. As has been set forth, eventually the commercial bid of the third Respondent was accepted treated him as L-1 which compelled the petitioner to prefer the writ petition assailing the action of the authorities.

12. A counter affidavit has been filed by the Respondent Nos.1 and 2 contending, inter alia, that the technical bids of the third Respondent and all other five bidders including the petitioner were duly assessed by the TEC as per the established norms of the DPP-2006. It is also urged that the evaluation of the technical bid was accepted by all concerned and, therefore, the challenge in the writ petition fundamentally rests on acceptance of commercial bid. In that regard, it is put forth that the Respondent No.3 had categorically stated that Depot Level Maintenance will be carried out by the seller and, therefore, the stand that the commercial bid was incomplete inasmuch as costs with respect to various items/services had not been stated and left blank really has no bearing on the bid. As regards, the failure of the Contract Negotiation Committee (CNC) to disclose the unit price and rates that would be applicable in relation to deviations found on actual measurement of the sites from the representative airfield, it has been averred that the prices quoted by each of the participating vendors were announced by the committee as it had a bearing on deciding the L-1. Other items including the unit price and rates that would be applicable in relation to deviations found on actual WP(C) No.13478/2009 Page 9 of 42 measurement of the sites from the representative airfield was not quoted as it was not a factor for determining the L-1. In this backdrop, it is set forth that the contention of the petitioner that not quoting the unit price and rates amounted to substantial breach of the terms of clarification issued by the Respondent Nos. 1 and 2 pursuant to the pre-bid meeting is totally incorrect and does not deserve acceptation. Meeting the allegation that the commercial bid of the third Respondent was incomplete with blanks and, hence, unresponsive, it has been asseverated that the commercial bid was opened on 12th August, 2009 in the presence of the representatives of all the vendors and the complete package costs of the various proposals including that of the third Respondent was read out. It was stated in categorical terms that the proposals would be studied in detail thereafter. So far as the maintenance of transfer of technology is concerned, it had been stated by the third Respondent in its proposal that Depot Level Maintenance shall be carried out by the seller. This stipulation, therefore, fulfils the requirement of RFP. Controverting the allegation of the petitioner that the Respondent No.3 had been given an opportunity to substitute equipment and systems offered by the petitioner, it was asserted that RFP and DPP-2006 did not confer any preferential right to OEM over others. In paragraph 2 of RFP, it has been clearly stated that only if the same equipment was being offered by more than one vendor, preference would be given to OEM and, therefore, the said allegation is totally baseless. WP(C) No.13478/2009 Page 10 of 42 Defending the act of choosing the third Respondent as L-1, it has been asserted that he was conferred the status of L-1 on the basis of comparative statement of quotes by all vendors as it had been found that the third Respondent had quoted the lowest price in the bid.

13. A return has been filed by the third Respondent controverting all the allegations made in the writ petition by the petitioner. Certain aspects have been highlighted to portray how the TEC evaluated the bids in accordance with the objective/criteria laid down in RFP which is common to all bidders, but we do not think it apposite to dwell upon the same as we have clearly indicated earlier that the same was accepted by the petitioner. As regards the acceptance of the commercial bid, it is contended when the commercial bids were opened the third Respondent was found to be the lowest bidder as there was a difference of 47 crores between the petitioner and it. Meeting the allegation that certain columns were not filled up and left blank, it has been stated that it relates to MTOT and the third Respondent had clearly clarified that “depot level maintenance would be carried out by the seller”. As far as the L-1 determination process is concerned, the unit rates have no relevance as they are not part of the procedure for determination of L-1. It is to be determined on the basis of the cost quoted for the requirement given. The L-1 vendor is required to go for the site survey of all 30 air fields and WP(C) No.13478/2009 Page 11 of 42 actual cost of each location would be determined before finalization of the contract and, therefore, there was no need to read out the unit rates at the time of bid opening as they have no impact on L-1 calculation. Other items including the unit price and rates that would be applicable in relation to deviation found on actual measurements of the site from the representative air field was also not announced during the opening of the commercial bid. The price quoted by the third Respondent was Rs.1094.79 crores, which was the lowest amongst all bidders and was complete in all aspects and resultantly as per the RFP and DPP-2006, he was declared as L-1. As per para 45 of DPP-2006, an equipment is required to be proved on a test bed for a turnkey project post contractual conclusion. In MAFI, Program Model Airbase has been designated as the test bed; according to the clarification III dated 14th March, 2008 stating that all equipment would be tested at the Model Airbase, there was no requirement for trial or testing of equipment under TEC evaluation before opening of the commercial bid. The same needs to be done only after signing of the contract. The answering Respondent has put forth that the procedure followed by Respondent Nos.1 and 2 in evaluation of the bids was strictly in accordance with DPP-2006 and RFP and had been done in open, fair and transparent manner. In this regard, it was also noted that this project was a turnkey project and was not a normal procurement equipment supply contract. WP(C) No.13478/2009 Page 12 of 42

14. Mr.Rajive Sawhney, learned senior counsel appearing for the petitioner has submitted that Respondent Nos.1 and 2 have violated the sacrosanct principles relating to acceptance of tender by suppressing facts relating to material defects in the commercial bid of the third Respondent inasmuch as no reasons or any justification has been given for accepting such non-responsive bid. It is urged by him that the commercial bid of the third Respondent is not firm and fixed since it has blanks at certain spaces and, therefore, should have been treated as incomplete. It is canvassed by him that the bid was conditional with riders and the acceptance of such a bid manifestly smacks of arbitrariness, unfairness and unreasonableness. It is his further submission that as per the conditions laid down in para 4.2 of the „Integrity Pact‟ observations of the stipulation therein are mandatory and no relaxation is possible. When the bid is non-responsive and incomplete, it should have been treated as non-responsive.

15. It is worth noting that in the writ petition as well as in the submission certain stands have been taken with regard to acceptance of the technical bid. In the course of hearing, we categorically asked Mr. Sawhney, learned senior counsel as to how the issue of technical bid can be gone into at that stage. Learned senior counsel really failed to satisfy us on that count inasmuch as the technical bid was accepted long back and there was no protest by the petitioner. Everyone was WP(C) No.13478/2009 Page 13 of 42 satisfied that the technical bid of the third Respondent was in order. It needs no special emphasis to state that it is the considered position that after technical bid is accepted the commercial bid is opened. Therefore, we do not intent to advert to the submissions that have been raised, of course, to put the clock back. Hence, we have referred to the submissions of the learned counsel for the petitioner pertaining to the acceptance of the commercial bid by the Respondent Nos. 1 and 2. The learned counsel in favour of his submission pertaining to the issue that the commercial bid was non-responsive has commended us to the decisions in The Tata Power Company Ltd. & Anr. v. Union of India, 2009 (8) AD (DEL) 583, S.J.S. Business Enterprises (P) Ltd. v. State of Bihar & Ors., (2004) 7 SCC 166, Dilip Singh v. State of U.P. & Ors., JT 2009 (15) SC 201, W.B. State Electricity Board v. Patel Engineering Co. Ltd. & Ors., (2001) 2 SCC 451, P.K. Delicacies Pvt. Ltd. v. Union of India & Ors., 122 (2005) DLT 685 (DB), Siemens Public Communication Network Pvt. Ltd. & Anr. v. Union of India & Ors., (2008) 16 SCC 215, Sumitomo Chemical India Pvt. Ltd. v. Union of India & Ors., W.P.(C) No.4196/2010 (26th July 2010) (DB : Delhi High Court), Rakesh Kapoor v. Oriental Insurance Co. Ltd. & Anr, 91 (2001) DLT 677.

16. Mr. A.S. Chandhiok, learned Additional Solicitor General on behalf of the Respondent Nos. 1 and 2 submitted that the Respondent No.3 had qualified in the WP(C) No.13478/2009 Page 14 of 42 technical bid and for the said purpose he had placed reliance on clause 39(b) of the RFP. Mr.Chandhiok, learned Additional Solicitor General by abundant caution also argued that the acceptance of technical bid is absolutely correct. Be it noted, the learned Additional Solicitor General has canvassed many a aspect to show how the same is unimaginable but as noted earlier we have not taken note of the submissions of Mr. Sawhney in this regard. Similarly there is no necessity to deal with the counter submission as this is the agreed position that acceptance of technical bid was not an issue in the whole scheme of things at any point, otherwise the petitioner would have protested at that stage. He chose not to do so. After the short listing of the bidders, whoever qualified in the technical bid, the commercial bid was opened in the presence of others.

17. Mr. Chandhiok countering the submissions of Mr. Sawhney with regard to the non-responsive and incomplete commercial bid of the Respondent No.3 urged that the commercial proposals were opened on 12th August, 2009 in the presence of the representatives of all vendors and the complete package costs of the various proposals including that of Respondent No.3 were read out which were subsequently examined in detail by the CNC and as a result of a comprehensive valuation of the commercial proposal that the Respondent No.3 was found to be the L-1. It is urged by him that the proposal for the third Respondent carrying out WP(C) No.13478/2009 Page 15 of 42 the „D‟ level facilities by itself was in consonance with the requirements of RFP. Learned ASG would submit that the „D‟ level maintenance facility has to be provided to M/s BEL by the bidder. As the commercial bid would reflect that the third Respondent had the requisite „D‟ level maintenance capability and it is ready to provide the maintenance support, the same was duly evaluated by a team of experts and found them to be compliant with the requirements of the RFP. It is urged by him that the bidder had „D‟ level maintenance facility available in India, no cost component was incorporated in MTOT and it is an inclusive cost and, therefore, the bid was firm and fixed and not a conditional one with riders. Commenting on the fairness and transparency of procedure, it is proponed by Mr.Chandhiok that it was clearly mentioned by the Chairman to all the representatives of the bidders that the CNC would examine all the commercial clauses in detail and the L-1 bidder would be informed that the CNC, constituted as per DPP 2006, evaluated commercial bid and on the basis of the recommendations of the CNC, the Secretary (Defence Finance) and the Ministry of Finance accepted the said commercial bid. The learned Additional Solicitor General has urged that the commercial bid of the third Respondent by no stretch of imagination can be regarded as unresponsive just because certain columns were not filled up and as no cost impact was there. Once the total cost addition is less than that of the petitioner, there is no irregularity or illegality in accepting the commercial bid. WP(C) No.13478/2009 Page 16 of 42 Had it been stated otherwise with conditions or riders, the matter possibly would have been different. It is urged by him that in exercise of power of judicial review especially, pertaining to tender relating issues involve highly technical issues, a free play in the joints has to be allowed to the owners and the writ court should not ordinarily interfere. In support of the said decisions, he has drawn inspiration from Tata Cellular v. Union of India, AIR 1996 SC 11, G.B. Mahajan v. Jalgaon Municipal Council, AIR 1991 SC 1153, Poddar Steel Coporation v. Ganesh Engineering Works, [1991] 2 SCR 696, AIR India Ltd. v. Cochin International Airport, (2000) 2 SCC 617, Siemens Public Communication Network Pvt. Ltd. (supra)and Larsen & Turbo Ltd. v. Union of India, 172 (2010) DLT 454 (DB).

18. Dr. A.M. Singhvi, learned senior counsel appearing for the Respondent No.3 submitted that the challenge to the acceptance of the technical bid of the third Respondent by the petitioner is of ulterior motive and, in fact, is an effort to bring an issue to the Court which had been put to rest long back and when such an attempt is made, the writ petition deserves to be thrown overboard on the said score. It is worth noting the learned senior counsel had argued that the technical bid has been appropriately accepted as there had been detailed scrutiny at every stage. We repeat at the cost of repetition that we will not enter into the said arena as at no point of time there was any protest by the petitioner and the matter WP(C) No.13478/2009 Page 17 of 42 travelled to this court after the commercial bid of the third Respondent was accepted.

19. It is contended by Dr. Singhvi that the bid submitted by the third Respondent is compliant of the essential conditions of RFP and on proper scrutiny it was treated lower than that of the petitioner. The evaluation has been correctly made by the CNC which is empowered under clause 32 of the RFP. It is urged by him that the price offered by the third Respondent was complete, firm and fixed and not in the realm of speculation. The criticism that there were blanks in the commercial bid of the third Respondent which would enable it to increase its bid at a later point of time was completely incorrect inasmuch as on a specific query made by the Respondent Nos.1 and 2 on a specific query put forth by one of the bidders qua the „D‟ level maintenance facility, it had been clarified at the pre-bid meeting held on

14.2.2008 that the need was to have „D‟ level maintenance facility in India and if a particular vendor had the said facility, the same shall be validated by the nominated team. It was further clarified that only in a scenario wherein the bidder does not have „D‟ level maintenance facility in India then the same shall be provided to Bharat Electronics Limited by the Respondent Nos.1 and 2. The „D‟ level maintenance capability of Tata Power SED was validated by TEC and a bare perusal and reading of the clarification would make it abundantly clear that the WP(C) No.13478/2009 Page 18 of 42 requirement of MTOT was to have „D‟ level maintenance capability and, accordingly, nothing was left blank in the pricing payable against MTOT by the third Respondent. On the contrary, it clearly stated that the Depot Level Maintenance would be carried out by the seller; the pricing table, MTOT is the cost of transferring the technology for maintenance to BEL and not the cost of providing the maintenance support. The Respondent No.3 and its vendors had the existing infrastructure and capability at the time of submission of the bid and the same has been evaluated in an appropriate manner regard being had to the terms of the RFP and the clarification provided by the third Respondent.

20. Meeting the stand with regard to seeking clarification from a bidder, it has been urged by Dr. Singhvi that the clauses in DPP-2006 and RFP enable the Respondent Nos. 1 and 2 to seek clarifications / ascertain as regards the reasonability of price bids and more so when the bid was in conformity with the DPP-2006 and all essential conditions of the RFP were fulfilled. It is urged by him that as per the process enumerated under DPP-2006, it allowed the CNC to record any kind of dissonance as per paragraph 49 of the DPP and if merited, clarification can always be sought from the bidder as it has been so stipulated in paragraphs 42, 49 and 51 of the DPP-2006 and the said procedure had been followed by the Committee. It is canvassed by him that a combined reading of the relevant clauses WP(C) No.13478/2009 Page 19 of 42 of DPP and RFP clearlys show that the CNC can go into the reasonability of an offer and have negotiations in such circumstances. It is further contended by him that when the essential conditions were fulfilled, there was no speculative bid, the space that was not filled up as it was mentioned that the MTOT shall be maintained by the vendor and it had no impact on the final cost and if total cost is taken into consideration it was less than 47 crores than the petitioner, the concept of judicial review moreso pertaining to defence contract, does not arise. It is propounded by him that the court should always keep the larger public interest in view and a judicial intervention would only be called for when there is a definite conclusion that overwhelming public interest requires interference or the action taken by the Respondent Nos.1 and 2 is, per se, arbitrary, unreasonable and totally perverse. The learned senior counsel would contend that the State, its corporations and agencies are required to adhere to norms, standard and procedures laid down by them and cannot depart from them arbitrarily and though their decision is not amenable to judicial review, yet the court has to examine the decision making process, if the decision is not vitiated by malafides, unreasonableness and does not smack of arbitrariness and to that extent the scope of judicial review is limited. The learned senior counsel propounded that in the case at hand there has been total transparency and tested on the touchstone and anvil of every limb of Article 14 of the Constitution, it withstands keen scrutiny. To bolster his submission, he has WP(C) No.13478/2009 Page 20 of 42 placed reliance on Cochin International Airport Ltd. (supra) and Reliance Airport Developers (P) Ltd. v. Airports Authority of India, (2006) 10 SCC 1 and Siemens Public Communication Network Pvt. Ltd. (supra).

21. The controversy which has been portrayed on a larger canvass by the learned counsel for the petitioner and sought to be narrowed down fundamentally to the concept of public interest, really adverted to three core issues, namely, (i) whether the bid of the third Respondent was non-responsive to be ignored for consideration at the stage of commercial bid; (ii) whether the clarification sought from the third Respondent smacks of arbitrariness and vitiates the decision determining the said respondent as L-1; and (iii) whether the whole decision judged on the touchstone of the principles, namely, “allowing some play in the joints” and “involvement of public interest” is justified or deserves to be lanceted.

22. Before we proceed to scan the factual contours and move through the terrain of the real crux which has been astutely and assiduously pyramided and edificed by the learned counsel for the parties, we think it apposite to refer to certain authorities in the field. We think it seemly as Mr. Sawhney, learned senior counsel for the petitioner would urge that the whole decision making is absolutely vitiated and is bound to founder and collapse like a pack of cards and in oppugnation Mr. Chandhiok and Dr. Singhvi would submit that the decision arrived at by the WP(C) No.13478/2009 Page 21 of 42 competent authority falls within the essential power of flexibility bestowed on the owner regard being had to the field of contract which necessitates adaptability and thereby, in the ultimate eventuate, the decision stands on the terra firma presently to the authorities.

23. In Poddar Steel Corporation (supra), a two-judge Bench of the Apex Court has held as follows: “……As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases.”

24. In Sterling Computers Ltd. V. M.N.Publications Ltd., (1993) 1 SCC 445 = AIR 1996 SC 51, the Apex Court, while dealing with the concept of judicial review in respect of contracts entered into on behalf of the State, had expressed the view as follows: - WP(C) No.13478/2009 Page 22 of 42 “18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the “decision making process.” By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans (supra), the Courts can certainly examine whether “decision making process” was reasonable, rational, not arbitrary and violative of Art. 14 of the Constitution.

19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract.”

25. In New Horizons Ltd. & Anr. v. Union of India & Ors., (1995) 1 SCC 478, the Apex Court in para 17 opined thus: “17. ….. The decision of this Court, therefore, insist that while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licenses or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. It is, however, recognized that certain measure of "free play in the joints" is necessary for an administrative body functioning in an administrative sphere [See : Ramanna Dayaram Shetty v. The International Airport Authority of India, (1979) 3 SCC 489; Kasturi Lal Lakshmi Reddy v. State of J&K WP(C) No.13478/2009 Page 23 of 42