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CASE NO.: Appeal (civil)  5665 of 2006

PETITIONER: Rochem Separation Systems (I) Pvt. Ltd

RESPONDENT: Mazagon Dock Ltd. and Ors

DATE OF JUDGMENT: 08/12/2006

BENCH: Dr. AR. Lakshmanan & Tarun Chatterjee

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 10826/2005)

Dr. AR. Lakshmanan, J.

Leave granted.

This appeal is directed against the judgment and final  order dated 21.04.2005 passed by the High Court of  Judicature at Bombay in Writ Petition No. 884 of 2005.   The appellant is a manufacturer of various membrane  technology systems and components using the Reverse  Osmosis Process (ROP) for desalination of sea water and  treatment of industrial effluents for converting them to  reusable water.  The appellant also designs, manufactures and  services desalination plants.  The appellant commenced its  operations in 1993 for manufacturing sea water, desalination  system using ROP and is also an ISO 900:2000 Company.   The appellant is also registered with the Ministry of Defence,  Director General of Quality Assurance and is the only Indian  company to have supplied plants for submarines of the Indian  Navy.  Respondent No.1 called for a tender for design,  manufacture, testing, supply, preservation, alignment,  installation, setting to work, commissioning and trials of the  complete supply of 4 units of 30 tonnes per day, self- sustaining reverse osmosis plants per ship for 3 ships of P15A  class \026 destroyer of Indian Navy to be built by the 1st  respondent vide tender dated 20.06.2002, 04.07.2002 and  12.09.2002.  The appellant submitted its original techno-  commercial and price bids as per the tender terms.  The  appellant also submitted the clarification sought for by the  respondent No.1.  Commercial discussions were also held  between the parties.  The appellant submitted its  supplementary price bid dated 11.05. 2004 and the technical  bid dated 12.05.2004 as directed in the meeting dated  03.05.2004.  The first respondent again sought technical  clarifications from the appellant subsequent to the submission  of supplementary price bid.  The first respondent, by letter  dated 23.06.2004, set out certain comments of the 3rd  respondent on the revised technical offer submitted by the  appellant and sought further clarifications from the appellant.   The appellant submitted the technical clarifications as  required.  The first respondent once again sought technical  clarification on 20.09.2004 and the appellant submitted the  clarification sought.  The first respondent by a communication  acknowledged receipt of the appellant’s facsimile

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communication dated 23.06.2004 and sought review and  advice.  The first respondent once again wrote to the appellant  stating that it was in a position to open the price bids but that  additional time was required to complete the process of  obtaining internal approvals and, therefore, sought further  extension of the validity period of the price bids till  31.01.2005. On 29.12.2004, the first respondent issued a letter to the  appellant stating that an un-priced price format had not been  submitted with the supplementary price bid of 12.05.2004,  which was neither an essential condition nor complained of  until then and hence it would not be considered and that a  new supplementary price bid in the format annexed for only  increase over the original technical specifications should be  submitted on or before 05.01.2005 though the decision as per  the meeting of 03.05.2004 was for submission of  increase/decrease over the original TSP.  The appellant, by  letter dated 04.01.2005 addressed the first respondent to  extend the advantages of advancements in technology leading  to a reduction in price to respondent No.1.  The appellant  submitted the supplementary price bid as per the new format.   The first respondent had opened the original offer and the  supplementary price bid in the new format but did not inform  the appellant about the opening of the price bids.  The  appellant wrote to the first respondent enquiring about the  status of the opening of the tender price bids but did not  receive any reply.  Several reminders were sent.  The first  respondent stated that the Management approval was granted  on 18.02.2005 and that the letter of intent was given to  respondent No.4.  The first respondent sent a belated reply to  the reminder of the appellant dated 09.02.2005 stating that  the supplementary price bid of 12.04.2004 was rejected as the         unpriced price format was not submitted and that it was not  confirmed in the bid that it was the increase/decrease over the  original technical specifications and that on opening of the  bids, it was found that the appellant was not L1 and hence it  was mandatory to initiate price negotiations with the other  bidder.  The appellant questioned the action of the first  respondent as discriminatory.  Thereafter, appellant filed writ  petition under Article 226 of the Constitution of India in the  High Court and questioned the discriminatory and biased  action of the first respondent in permitting respondent No.4 to  alter its original offer nearly 2 years later in the new format  given to the 4th respondent which was different from that  furnished to the appellant.  By judgment and final order dated  21.04.2005, a Division Bench of the High Court rejected the  writ petition holding that it would not be proper to interfere at  that stage.   Being aggrieved by the above-mentioned judgment the  appellant has filed the above appeal in this Court.  The order passed by the High Court reads as follows:- "1.  Heard Mr. Dwarkadas in support of this petition, Mr.  Mandalik for Respondent No.1 and Mr. Chavan for  Respondent nos.2 & 3.  The grievance made in this petition  is in respect of award of contract to Respondent No.4.  Two  points are raised principally to challenge this award.  Firstly  it is stated that in December, 2004 there was a variation in  the terms offered to Respondent No.4 which was a favourable  variation.  The second submission is that the Petitioner was  ready to decrease the price offered earlier.  The second  submission is basically to submit that there are mala fides  on the part of decision making authorities.  

2.      Respondent No.1 has filed reply and it has placed on  record that the Petitioner participated all throughout in the

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decision making process.  The terms which were given while  inviting the bids were common to both the parties.  It is only  during the course of negotiations that the parties required  clarifications and that is how the letters were written to both  the parties in December, 2004.  There is some variation in  them.  That variation is related to the questions and queries  raised by the parties concerned.  

3.      In the circumstances, it would not be proper for us to  interfere at this stage.  Petition, therefore, is rejected."   

We heard Mr. R.F. Nariman, learned senior counsel for  the appellant and B. Datta, learned ASG for R-1 and Mr.  Upamanyu Hazarika and Mr. Swetank counsel for respondent  No.4.  At the time of arguments, our attention was invited to  the various communications and letters which were exchanged  between the appellant, the first respondent and 4th  respondent.  On 11.05.2005, this Court ordered notice to the  respondents and also passed an order that any action taken in  regard to the disputed contract shall be subject to further  orders of this Court.  Parties were asked to file counter  affidavit, rejoinder affidavit etc.  On 03.08.2006, this Court  directed respondent No.1 to produce the original records  pertaining to the tender in question.  The parties were  permitted to peruse the original records in the presence of the  Registrar (Judl.) and the representative of respondent No.1.   Additional affidavits were also filed after the inspection of the  files.  Mr. R.F. Nariman, learned senior counsel appearing for  the appellant made the following submissions:- (a)     The High Court has erred in holding that the  appellant had participated in the decision-  making process particularly in the 2nd  supplementary price bid submitted on January  5, 2005 as such participation by the appellant  was involuntary in the face of the two letters  sent by the appellant dated 04.01.2005 and  05.01.2005.  (b)     The High Court has failed to notice that even  the letter dated 29.12.2004 discriminates  between the appellant and respondent No.4 as  it permits respondent No.4 to include  additions/deletions in the new supplementary  price bid including two additional items in the  form whilst the appellant was directed to  include only increase over the original offer  made by them despite the TNC/CNC meeting  dated 28.04.2004 and 03.05.2004 respectively  permitting the appellant to increase/decrease to  the original offer, which per se discriminates  against the appellant and which has caused   grave prejudice to the appellant.  Several other  submissions were also made in regard to the  letter dated 29.12.2004.  Many other factual  and legal contentions have also been raised in  the grounds of appeal. (c)     That the High Court has failed to consider that  whilst the first respondent has permitted   respondent No.4 to alter its original offer of  2002 contrary to tender conditions, it has  peremptorily rejected the offer of the appellant  to extend the benefit of lower price resulting  from technological advances, though it would  have accrued to the benefit of respondent No.1

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despite the same is in accordance with tender  conditions 1.6.3 which according to Mr.  Nariman is patent discrimination and contrary  to public interest.  Mr. Datta, learned Additional Solicitor General, after  inviting our attention to the various documents and records  submitted that commercial discussions were held with the  appellant in which it was recorded: "Based on TNC meeting the firm stated that they  agreed to execute the order as per MDL & Navy’s  requirement.  After prolonged deliberations, the firm  stated that based on TNC meeting they will submit  their technical clarification and supplementary price  bid to the original offer, only for the increase/decrease  scope, over and above Tender’s TSP by 12.5.2004.   However, the Committee insisted to submit their  supplementary price bid in a sealed envelope by  12.5.2004 at 1200 hrs\005"

Identical decision was taken qua the respondent No.4. On 12.5.2004, Supplementary bids were submitted by  the appellant and respondent No.4 in sealed envelope.  These  bids were not accompanied by Proforma Price Scheme  Blanking the prices and indicated items quoted. On 15.12.2004, offers made by the appellant and  respondent No.4 was declared to be technically acceptable. The net result was that the appellant as also respondent  No.4, were required to provide certain additional items/satisfy  certain requirements over and above what was quoted by them  in their original offer submitted in October, 2002.  Both in the  case of the appellant and respondent No.4, there was an  increase in scope over and above what was quoted by them in  October, 2002 and there was no decrease whatsoever on any  account.  It was in respect of these additional requirements  that supplementary bids were called from the appellant and  respondent No.4.  It was not permissible for either the  appellant or the respondent No.4 to revise their original bid  submitted in October, 2002 but instead only supplement the  same by quoting for the additional requirements.  On 29.12.2004 letters were sent to both the appellant  and respondent No.4 requesting them to submit their  supplementary bid only by indicating the change over the  original offer.  A supplementary rate sheet was enclosed along  with the said letter setting out the additional  items/requirements in respect of which the parties were  required to quote.  The parties were also told that the earlier  supplementary bid submitted on 12.05.2004 will not be  considered.  This letter was necessitated since the parties had  not submitted any Proforma Price Schedule Banking the prices  and indicating items quoted/not quoted, as required under  Tender Condition IN-202.  On 04.01.2005, the appellant replied to the letter dated  29.12.2004 and sought permission to revise the original price  bid submitted in October, 2002 instead of just quoting for the  additional items.  The said request was declined by the  respondent No.1 as the same would virtually amount to  starting the tender process de novo.  On 05.01.2005, the appellant submitted its  supplementary price bid in the prescribed format.  Price bids  were opened on 17.01.2005 and respondent No.4 found to be  L1.  PNC was conducted with respondent No.4 on 03.02.2005.   On 18.02.2005, LOI issued to respondent No.4.  On  22.02.2005 purchase order placed on respondent No.4.  Thus, he submitted from the pleadings filed before this  Court, the following facts stand admitted by the appellant:-

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i)      That the amount quoted by the appellant vide  its Bid dated 04.10.2002 was much higher  than that was quoted by respondent No.4  while the amount quoted by the appellant was  around Rs.11.92 crores, the amount quoted by  respondent No.4 was around Rs.8.57 crores.  ii)     Even assuming that the original bid of  respondent No.4 did not include any quotation  for the Second Stage RO Plant, even if the  supplementary offer submitted by respondent  No.4 (which admittedly included the Second  Stage RO Plant) is added to its original offer,  even then the total amount quoted by  respondent No.4 is lower than the original  price quoted by the appellant.  The entire case of the appellant rests on the premise that  it should be allowed to retract from its original offer dated  04.10.2002 and be allowed to submit a "revised" price bid  instead of a "supplementary" price bid confined to "additional  items/requirements" not covered by the original offer dated  04.10.2002.  At no stage was it ever contemplated that the parties be  allowed to withdraw/retract from their original offer and  submit a fresh/revised offer.  The understanding was always  clear that the parties would only give their supplementary bid  in respect of the additional items/requirements not covered by  their original offer.  However, as it transpired before the High  Court, and now again before this Court that in the guise of  submitting its "supplementary bid" in May, 2004, the  appellant sought to completely revise its original bid, which is  not permissible.  Vide letter dated 29.12.2004, the respondent  No.1 rightly asked both the appellant and the respondent No.4  to submit their supplementary price bids in the proper format.   The said request of the respondent No.1 was complied with by  the appellant on 5.1.2005.  The writ petition was belatedly  filed on 28.03.2005 clearly as an afterthought.  There is no  infirmity in the decision making process warranting any  interference from this Court.                Mr. Datta has also drawn our attention to the affidavit in  reply of respondent No.1. Respondent No.4 also filed a detailed affidavit in reply to  the grounds of appeal.  According to learned counsel for  respondent No.4 that he has complied with the formalities,  terms and conditions and in view thereof, the contract is  concluded between respondent No.4, and 1 and hence the  question of setting aside and or quashing the tender process  or any other reliefs as prayed for in the present appeal does  not arise.   Respondent No.4 has also denied the averments  and allegations raised by the appellant in the present appeal  against the 4th respondent with regard to the tender in  question.  Learned counsel took us through the said counter  affidavit.  A rejoinder affidavit was filed by the appellant to the  affidavit in reply filed on behalf of respondent No.4.  Our  attention was also drawn to the minutes regarding inspection  and the affidavit in rejoinder on behalf of the appellant to the  affidavit filed on behalf of respondent No.1.  Voluminous  documents have been filed before us in this appeal.  It was  specifically contended that the action of respondent No.1. in  rejecting the bids of the appellant was arbitrary, collusive and  contrary to the principles laid down by this Court in the  acceptance of tenders/bids by the government/its agencies.  It  was also strenuously contended by Mr. Nariman that the  tender conditions would not permit respondent No.1 to  consider the bid of respondent No.4 which was admittedly not  complete at the time of its first submission and that

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respondent No.1 could not permit respondent No.4 from re- submitting its bid with additions to the original offer on the  ground that the requirements were not understood at the time  of submitting the original offer.   The Court has, therefore, to see as to whether the action  of respondent No.1 in permitting respondent No.4 to include a  basic requirement of the original offer subsequently without  offering any such opportunity to others is discriminatory and  bias.   The Court also has to see as to whether the action of  respondent No.1 in permitting respondent No.4 to submit  supplementary price bid by indicating additions and deletions  while at the same time, calling upon the appellant to submit  supplementary price bid only by indicating increase over  original offer was not discriminatory, arbitrary and bias.  A careful perusal of the judgment of the High Court  impugned in this appeal would only go to show that the High  Court has failed to consider the real issues raised by the  appellant and proceeded merely on the basis of a reply filed by  appellant No.1 that does not address or touch upon such  issues as contended by Mr. Nariman.     It is seen from the order passed by the High Court that  the writ petition was dismissed at the admission stage.  No  counter affidavit was filed by the 4th respondent and 4th  respondent to whom the approval was granted on 18.02.2005  and the letter of intent was given to them on the same day was  not heard at all.  Learned counsel for respondents 1,2 and 3  alone were heard.  Two points were raised principally to  challenge the award in favour of the 4th respondent by the  appellant.  The first point was in respect of variation in terms  offered to respondent No.4 which according to the appellant  was a favourable variation.  The second submission was that  the appellant was ready to decrease the price offered earlier.   The second submission was basically to submit that there are  malafides on the part of decision making authorities.  The  High Court without considering the mala fides on the part of  the decision making authorities dismissed the writ petition  without considering the rival submissions and the documents  filed before it.  The High Court though stated in its order that  there was some variation in the terms had not considered the  nature of variation at all.  The project in question and the work sought to be  undertaken by the tender process is one of national  importance.  Learned ASG submitted that the tender process  is purely of commercial nature and no interference by this  Court is called for.  The High Court, in our opinion, ought to  have heard respondent No.4 in whose favour the letter of  intent is now given.  The High Court has not disposed of the  writ petition after affording opportunity to all the parties and  in particular the fourth respondent.  In our opinion, the  matter requires deep and elaborate consideration in the nature  of pleadings filed by the appellant, respondent No.1 and  respondent No.4.  We, therefore, set aside the order passed by  the High Court and remit the matter to the High Court with a  request to dispose of the writ petition on merits after affording  opportunity to all the parties.  Since the project is of national  importance, the High Court is requested to dispose of the  same on priority basis and at any rate not later than 28th  February, 2007.  Both the appellants and the other  respondents are at liberty to raise the grounds/contentions  that have been raised in this Court before the High Court by  way of additional pleadings.  They are also at liberty to file the  civil appeal grounds, counter by all the parties and the  rejoinder and other documents and records before the High  Court for a fair and proper consideration of the same by the

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High Court.  In the result, the appeal filed by the appellant is allowed  and the order of the High Court stands set aside and matter is  remitted back for fresh disposal.  No costs.