REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                 OF 2008 (Arising out of SLP (C) No. 19607 of 2008)

M/s Ganpati RV-Talleres Alegria Track Pvt. Ltd. ...Appellant

Versus

Union of India and Anr. ...Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.

2. Challenge in this appeal is to the judgment of a Division Bench of the

Delhi High Court dismissing the writ  petition filed by the appellant.  The

writ petition was filed challenging the order dated 7.3.2008 issued  by the

respondents by which the appellant was communicated  that he had not met

the eligibility criteria of the tender quoted by the respondents and, therefore,

its commercial bid will not be considered.  

3. Background facts in a nutshell are as follows:

On 7.11.2007  a  tender  for  thick  web  switches  was  invited  by  the

Ministry  of  Railways.  The  details  of  the  tender  items were  given  in  the

Schedule  of  Quantities.  As  per  Clause  2.8  of  the  terms and  instructions

mentioned  in  the  tender  document,  the  tender  was  to  be  in  two  packets

systems i.e. (i) Technical Bid (ii) Commercial Bid, and that the commercial

bid  will  be opened subsequently only for those tenderers  who have been

found successful in the technical bid as per clause 4.0.

As per Clause 4.1.1 of the tender document the tenderer must be ISO

9001 certified, RDSO approved, for 1 in 12 curved switch manufacturers on

the date of opening of tender.

The  Executive  Director  Track  (P)  Railway  Board,  Delhi,  vide  his

letter dated 14.11.2007 sought for various clarifications and document from

the appellants. The reply to aforesaid letter was given by the appellant along

with  relevant  documents  on  22.11.2007.  The  appellant  pursuant  to

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telephonic  conversation  on  21.1.2008  submitted  a  copy  of  inspection

certificate  of  RDSO  and  also  certified  about  its  composition  i..e.  joint

venture  (in  short  ‘JV’)  partners.   Another  representation  was  made  on

31.1.2008. The appellant received a letter dated 7.2.2008 intimating that in

terms  of  para  2.8  the  appellant’s  commercial  bid  will  be  opened  on

22.2.2008. The respondents vide its letter dated 13.2.08 informed the three

of the other bidders whose technical bids were dis-approved  and they were

requested  to  collect  their  unopened  commercial  bids  and  bid  guarantee

bonds amounting  to rupees one crore. In continuation of the aforesaid letter

another letter dated 20.02.2008 was received by the appellant informing that

the  opening  of  commercial  bid  stands  postponed  to  03.03.2008  due  to

administrative reasons. Again a similar letter dated 28.02.08 was received

by the appellant intimating that the commercial bid which was scheduled for

opening on 03.03.08 is postponed till further notice. The respondents vide

letter  dated  07.03.2008  stated  that  appellant’s  offer  does  not  meet  the

eligibility  criteria  and  hence  the  commercial  bid  could  not  be  opened.

Therefore,  office  letter  of  even  no.  dated  07.02.2008  issued  by  the

respondents earlier stands cancelled. No reason for rejection was specified.

The appellant filed the Writ Petition before the High Court on 11.3.2008

and the court issued notice and stayed the supply of order on 12.3.2008. On

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28.3.2008 the counter affidavit was filed by the respondents stating therein

the false and unbelievable story of misrepresentation made by the appellant.

The respondents’ contention was that the case of the appellant was wrongly

approved by the  respondents  in  the first  chance due to misrepresentation

made by the appellant and only later on was mistake corrected. According to

the  appellant,  respondents  have  not  disclosed  anywhere  in  the  counter

affidavit  as  to  what  was  misrepresented  and  what  was  false  in  the

appellant’s representations which was only made pursuant to the telephonic

discussion with the respondents. The appellant brought to the notice of the

High Court the cartel formation by filing the rejoinder affidavit on 7.4.2008.

The  appellant  also  stated  before  the  High  Court  about  the  various  gross

irregularities overlooked by the respondents by filing CM Application no.

5639 Of 2008. The High Court did not consider  them holding that these

allegations are not part of pleading.

The  High  Court  accepted  the  stand  of  the  respondents  that  the

appellant does not meet the eligibility criteria indicated in the tender. With

reference to Clause 2.8, 4.1.1, 4.1.2, 4.2 and 4.3 it was held that the view of

the respondents that the appellant did not fulfil the eligibility criteria cannot

be faulted. Accordingly, the writ petition was dismissed.   

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4. In support of the appeal, learned counsel for the appellants submitted

as follows:

The appellant is the pioneer in manufacturing of tendered item which

is  a  modern  technology item. The  appellant’s  manufacturing  facility  and

prototype sample of the thick web switches have been approved by RDSO

as intimated by the RDSO vide their letter dated 23.10.2007. The said letter

was annexed with tender offer and was also subsequently supplied again. It

is  a  practice  that  the  firm  can  proceed  for  bulk  production  only  after

prototype samples are approved.  In the instant  case subsequently  RDSO,

Lucknow has carried out the inspection of more  than 350 sets of thick web

switches.  

Moreover, as per clause 1.5 of the tender document, those successful

bidders who will install CNC machine and will produce at least 75 Thick

Web Switches will qualify to be in the approved list of vendors for future

tenders. Therefore, it clearly implies that the appellant is RDSO approved

manufacturer  on  two fronts  i.e.  for  Conventional  curved  switches  in  the

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name of the JV partner and for the Thick Web Switches (new technology) in

the tendered item.

It is not out of place to mention that material produced for RVNI, as

per their specification was exactly the same as instant tender specification.  

The appellant has a CNC Plano-milling machine at its premises. CNC

Machine is must for manufacturing of TWS and it involves investment of

about Rs. 5-6 crores. As per respondents’ admission only two other bidders

have CNC Machine. All other bidders have not even set up this machine.

As per Clause 4.1.4 (c)  the government has given 270 days time to them.

Thus the bids of those bidders who have not even produced a single TWS

have been approved and bid of the appellant has been rejected.

The  action  of  the  respondents  in  subsequently  rejecting  the  duly

approved technical  bid of  the appellant  without  assigning  any reasons  is

highly illegal, malicious, arbitrary, irrational and unjustified.

It is pointed out that the bid was initially accepted, but on the basis of

the representation of two of the competitive bidders, totally different views

were taken. It is pointed out that in view of what has been stated by this

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Court in New Horizons Ltd.  and Anr. v. Union of India and Ors. (1995 (1)

SCC 478) the view taken by the respondents is erroneous.  

5. Learned counsel for the Union of India, on the other hand, submitted

that  New  Horizon’s case  (supra)  related  to  the  experience  of  the  joint

venture partners and that logic cannot be applied to the present case where

the parameters are different. So far as the factual position is concerned, it is

to  be  noted  that  the  appellant  annexed  ISO  9001  certification  of  joint

venture partners with the tender offer. Though the ISO 9001 certification of

the joint venture company prior to the date of opening of tender existed, the

same  was  not  annexed  with  the  tender  as  the  appellant  was  under  the

impression that submission of certificate in the name of individual partners

is  sufficient  and  the  respondents  had  also  never  demanded  the  same.  In

respect of RDSO approval it was pointed out that one of the joint venture

partners  i.e.  M/s R.V. Rail  Products Pvt. Ltd.  is  also an existing RDSO

approved manufacturer of conventional curved switches i.e. 1 in 12 curved

switches. The said certificate was enclosed with the appellant’s offer.   

6. The concept of joint venture has been highlighted in paras 21, 22, 23,

24, 25 and 41 of New Horizon’s case (supra) as follows:     

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“21. The requirement with regard to experience, as stated in the advertisement dated 22-4-1993 for inviting tenders, as noticed earlier was in the following terms :

“The  tenderer  should  have  the  experience  in compiling,  printing  and  supply  of  telephone directories to the large telephone systems with the capacity of more than 50,000 lines. The tenderer should  substantiate  this  with  documentary proof. He should also furnish credentials in this field.”

The  requirement  of  experience  was,  however,  differently worded  in  the  notice  for  inviting  sealed  tenders  dated  26-4- 1993  which  was  attached  to  the  tender  documents  which prescribes  the  conditions  to  be  fulfilled  for  submission  of tenders and wherein it was stated as under :

“The successful tenderer will also submit copies of telephone directories printed and supplied by them to  the  telephone  systems  of  capacity  more  than 50,000 lines as credentials of his past experience.”

22. In the said notice the expressions ‘tenderer’ and “successful tenderer” have been used. While the expression ‘tenderer’ has been  used  in  paragraphs  5,  7,  11  and  14,  the  expression “successful tenderer” is used in paragraphs 7, 9(a), 10 and 12. Since paragraph 10 provides for execution of the agreement by the successful tenderer, the said expression is intended to mean the  tenderer  whose  tender  has  been  found  suitable  for acceptance.  The  use  of  the  expression  “successful  tenderer” instead of the expression ‘tenderer’ in paragraph 12, therefore, indicates that the documentary proof, by way of credentials of past experience, has to be submitted after the tender has been considered  and  is  found  suitable  for  acceptance  by  the concerned  authorities.  This  would  mean  that  the  past experience is a matter which is to be considered after the tender has  been  examined  and  evaluated  and  the  tenderer  whose tender is found acceptable is required to submit documentary proof regarding his past experience. In other words, a tender is not liable to be excluded from consideration on the ground of non-eligibility on account of lack of past experience.  

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This inference is strengthened by paragraphs 8 and 11 of the notice  dated  26-4-1993.  In  paragraph  8  it  is  provided that  a tender is liable for summary rejection if it is submitted without the Demand Draft of Rs 5,00,000. Similarly in paragraph 11 it is  provided  that  tender  is  liable  to  be  excluded  from consideration  if  the  income  tax  clearance  certificate  is  not furnished  with  the  tender.  There  is  no  similar  provision  for excluding from consideration a tender on the ground of failure to  furnish  with  the  tender  the  required  material  by  way  of credentials of past experience. It means that the matter of past experience has to be considered after the tender has otherwise been found to be suitable for acceptance and a tender is  not liable to be rejected at the threshold without consideration on the ground that the tenderer lacks experience. The decision of the Tender Evaluation Committee to exclude the tender of NHL from consideration was, therefore, not warranted by the terms and  conditions  for  submission  of  tender  as  contained  in  the notice for inviting sealed tenders dated 26-4-1993.

23.  Even  if  it  be  assumed  that  the  requirement  regarding experience  as  set  out  in  the  advertisement  dated  22-4-1993 inviting  tenders  is  a  condition  about  eligibility  for consideration  of  the tender,  though we find  no basis  for  the same,  the  said  requirement  regarding  experience  cannot  be construed to  mean that  the  said experience  should  be of  the tenderer in his name only. It is possible to visualise a situation where  a  person  having  past  experience  has  entered  into  a partnership and the tender has been submitted in the name of the partnership firm which may not have any past experience in its own name. That does not mean that the earlier experience of one  of  the  partners  of  the  firm  cannot  be  taken  into consideration.  Similarly,  a  company  incorporated  under  the Companies  Act  having  past  experience  may  undergo reorganisation  as  a  result  of  merger  or  amalgamation  with another company which may have no such past experience and the  tender  is  submitted  in  the  name  of  the  reorganised company.

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It  could  not  be  the  purport  of  the  requirement  about experience  that  the  experience  of  the  company  which  has merged  into  the  reorganised  company  cannot  be  taken  into consideration because the tender has not been submitted in its name and has been submitted in the name of the reorganised company  which  does  not  have  experience  in  its  name. Conversely  there  may  be  a  split  in  a  company  and  persons looking after a particular field of the business of the company form  a  new  company  after  leaving  it.  The  new  company, though  having  persons  with  experience  in  the  field,  has  no experience  in  its  name  while  the  original  company  having experience  in  its  name  lacks  persons  with  experience.  The requirement regarding experience does not mean that the offer of  the  original  company  must  be  considered  because  it  has experience  in  its  name though  it  does  not  have  experienced persons  with  it  and  ignore  the  offer  of  the  new  company because it does not have experience in its name though it has persons having experience in the field. While considering the requirement  regarding experience  it  has  to be borne in  mind that the said requirement is contained in a document inviting offers for a commercial transaction. The terms and conditions of such a document have to be construed from the standpoint of a  prudent  businessman.  When  a  businessman  enters  into  a contract whereunder some work is to be performed he seeks to assure himself about the credentials of the person who is to be entrusted with the performance of the work. Such credentials are  to  be examined from a commercial  point  of  view which means that if the contract is to be entered with a company he will look into the background of the company and the persons who are in control of the same and their capacity to execute the work. He would go not by the name of the company but by the persons behind the company. While keeping in view the past experience  he  would  also  take  note  of  the  present  state  of affairs and the equipment and resources at the disposal of the company. The same has to be the approach of the authorities while  considering  a  tender  received  in  response  to  the advertisement issued on 22-4-1993.

This would require that first the terms of the offer must be examined and if they are found satisfactory the next step would

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be to consider the credentials of the tenderer and his ability to perform the work to be entrusted. For judging the credentials past  experience  will  have  to  be  considered  along  with  the present  state  of  equipment  and  resources  available  with  the tenderer.  Past  experience  may  not  be  of  much  help  if  the machinery  and  equipment  is  outdated.  Conversely  lack  of experience  may be  made  good  by improved  technology  and better  equipment.  The  advertisement  dated  22-4-1993  when read with the notice for inviting tenders dated 26-4-1993 does not  preclude adoption of  this  course of action. If  the  Tender Evaluation  Committee  had  adopted  this  approach  and  had examined the tender of NHL in this perspective it would have found that NHL, being a joint venture, has access to the benefit of the resources and strength of its parent/owning companies as well  as to the experience in database management,  sales  and publishing  of  its  parent  group  companies  because  after reorganisation  of  the  Company  in  1992  60%  of  the  share capital of NHL is owned by Indian group of companies namely, TPI,  LMI,  WML, etc.  and  Mr Aroon  Purie  and  40% of  the share capital is owned by IIPL a wholly-owned subsidiary of Singapore  Telecom  which  was  established  in  1967  and  is having long experience in publishing the Singapore telephone directory with yellow pages and other directories. Moreover in the tender it was specifically stated that IIPL will be providing its unique integrated directory management system along with the  expertise  of  its  managers  and  that  the  managers  will  be actively  involved  in  the  project  both  out  of  Singapore  and resident in India.

24.  The expression “joint venture” is more frequently used in the United States. It connotes a legal entity in the nature of a partnership  engaged  in  the  joint  undertaking  of  a  particular transaction  for  mutual  profit  or  an  association  of  persons  or companies  jointly  undertaking  some  commercial  enterprise wherein  all  contribute  assets  and  share  risks.  It  requires  a community of interest in the performance of the subject-matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement, to share both in profit  and  losses.  (Black’s  Law Dictionary, 6th  Edn.,  p.839) According  to  Words  and  Phrases,  Permanent  Edn.,  a  joint

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venture is an association of two or more persons to carry out a single business  enterprise for profit  (p.117,  Vol.  23).  A joint venture can take the form of a corporation wherein two or more persons  or  companies  may  join  together.  A  joint  venture corporation has been defined as a corporation which has joined with  other  individuals  or  corporations  within  the  corporate framework in  some specific  undertaking  commonly found in oil,  chemicals,  electronic,  atomic  fields.  (Black’s  Law Dictionary, 6th Edn., p. 342) Joint venture companies are now being  increasingly  formed  in  relation  to  projects  requiring inflow  of  foreign  capital  or  technical  expertise  in  the  fast developing countries  in  East  Asia,  viz.,  Japan,  South  Korea, Taiwan,  China,  etc.  [See  Jacques  Buhart  :  Joint  Ventures  in East  Asia  —  Legal  Issues (1991).]  There  has  been  similar growth  of  joint  ventures  in  our  country  wherein  foreign companies join with Indian counterparts and contribute towards capital and technical know-how for the success of the venture. The  High  Court  has  taken  note  of  this  connotation  of  the expression  “joint  venture”.  But  the High Court  has held that NHL is  not  a  joint  venture  and  that  there  is  only  a  certain amount of equity participation by a foreign company in it. We are unable to agree with the said view of the High Court.   25. As noticed earlier, in its tender NHL had stated that it is a joint venture company established by TPI, LMI and WML and IIPL wherein TPI, LMI and WML and other companies in the same group as well  as Mr Aroon Purie own 60% shares and IIPL owns 40% shares. It was also stated that the joint venture has  received  approval  of  the  Government  of  India  and  is currently in operation and that the promoter will increase their capital/contribution to commensurate with the project need and that the company has been established as an information and database  management  company  with  expertise  in  database processing, publishing, sales/marketing and the dissemination of related information. In the tender it is also stated that as a joint venture in the true sense of the phrase, the company will have  access  to  expertise  in  database  management,  sales  and publishing of its parent group companies. It would thus appear that the Indian group of companies (TPI, LMI and WML) and the Singapore-based company (IIPL) have pooled together their

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resources  in  the  sense  that  TPI,  LMI and  WML have  made available their equipment and organisation at various places in the country while IIPL has made available its wide experience in the field as well as the expertise of its managerial staff. All the constituents of NHL have thus contributed to the resources of the Company (NHL). This shows that NHL is an association of  companies  jointly  undertaking  a  commercial  enterprise wherein they will all contribute assets and will share risks and have a community of interest. We are,  therefore, of the view that NHL has been constituted as a joint venture by the group of Indian companies and IIPL, the Singapore-based company and  it  would  not  be  correct  to  say  that  IIPL  which  has  a substantial stake in the success of the venture, having 40% of shareholding, is a mere shareholder in NHL.

xx xx xx  41. We have been informed that while the matter was pending in the High Court and in this Court the telephone directory for the year 1993 has been printed and supplied to the Department by Respondent 4 as per terms of the contract.  Insofar  as the directory for the year 1994 is concerned we find that, as per the terms  of  the  contract,  the  process  for  preparation  of  the telephone  directory has  already commenced.  We cannot  lose sight of the fact that as a result of quashing of the contract in respect  of  the  directory for 1994 fresh steps  will  have to  be taken to award a fresh contract and the said process would take some time  and  thereafter  the  contractor  will  require  time  to print and publish the telephone directory. It would, therefore, not be feasible to bring out the directory for 1994 before the close of the year. As a result, the Department would suffer loss of revenue which it  would otherwise earn by way of  royalty from Respondent 4 for the directory for the year 1994.  Insofar as the contract in respect of the year 1995 is concerned there is sufficient time for the Department to award a fresh contract if the contract awarded to Respondent 4 is cancelled and the new contractor will have sufficient time at his disposal to print and deliver  the  directory  as  per  the  time schedule.  Moreover,  in respect of the directory for the year 1995 the amount of royalty that is payable by Respondent 4 is Rs 45  lakhs  and  the amount of royalty offered by NHL for the directory for the said

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year was Rs .291.6 lakhs. Keeping in view the circumstances referred to above, the course that commends us is that, while maintaining the contract awarded to Respondent 4 in respect of the directories for the years 1993 and 1994, the said contract may be set aside insofar as it relates to the directory for the year 1995 and fresh tenders may be invited for award of the contract for the directory for the year 1995. The appeal filed against the judgment and order of the Delhi High Court dismissing the writ petition  of  the  appellants  must  therefore,  be  allowed  in  the above terms. The other appeal has been filed by the appellants against the order of the Delhi High Court dismissing CM No. 6120 of 1993 which was an application for  an interim relief during the pendency of the writ petition in the High Court. In view of the final order that is being passed in the writ petition the application for interim relief  has become infructuous and the appeal against the order dismissing CM No. 6120 of 1993 must, therefore, be dismissed as infructuous.”

7. Though the aforesaid case related to experience, the other essential

characteristic of a joint venture has also been highlighted.  

8. In that view of the matter the inevitable conclusion is that the view

taken  by  the  High  Court  that  the  appellant  did  not  fulfil  the  eligibility

criteria was not correct.  The High Court was not justified in dismissing the

writ petition. We direct the Evaluation Committee to consider the bid of the

appellant  alongwith  two persons  who had been selected  and take a final

decision.  

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9. The appeal is allowed to the aforesaid extent.   

 ……………..…………………...J.  (Dr. ARIJIT PASAYAT)

…………………………………..J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, December 8, 2008

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