# BYPASS, KOLKATA- 700 I 07, WEST BENGAL v. NAGPUR METRO RAIL CORPORATION LTD. (NMRCL)

- **Citation:** [2017] 5 S.C.R. 337
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Case number:** Civil Appeal Nos. 1353-1354of2017
- **Bench:** Dipak Misra, Amitava Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bypass-kolkata-700-i-07-west-bengal-v-nagpur-metro-rail-corporation-ltd-nmrcl-32265
- **Pages:** 30

## Headnote

Contract:
Award of contract - By Government body (respondent No.
1) - To a company (respondent No. 2) owned by Government of
Peoples Republic of China - In preference to the appellant-company
- Challenged on the ground that respondent No. 2 company was
not technically qualified as its bid was not that of a 'single entity'
and it had relied on the experience of its subsidiaries - Held:
Respondent No. 2 being a Government Company, was the owner of
its subsidiary companies and came within ambit of Cl. 4.1 of the bid
document as a 'Government owned entity' - 1" respondent applied
its commercial wisdom in the understanding and interpretation which
has been given concurrence by the concerned Committee and the
Financing Bank - In absence of any perversity. bias or malafide,
interpretation placed by 1"' respondent need not be interfered with
in exercise of power of judicial review.
Judicial Review:
B
c
D
E
F
Judicial review of administrative decision in respect of G
contractual matters - Scope of - Held: Judicial review of
administrative decisions of Government bodies in respect of
contractual matters is intended to prevent arbitrariness or favoritism
and is exercised in larger public interest - There should be judicial
restraint on administrative action as the court lacks expertise to
H
337
338
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2017] 5 S.C.R.
correct the administrative decision - Administrative decision must
not only be tested by the application of Wednesbury principle or
reasonableness, but also must be free from arbitrariness not affected
by bias or actuated by mala tides - If the decision relating to award
of contract is bona fide and in public interest, courts will not, in
exercise of power of judicial review, interfere even if a procedural
observation or error in assessment or prejudice to a tenderer, is
made out - In the facts of the present case, decision of awarding
the contract in question should not be interfered with in absence of
any perversity, bias or mala fide.
Dismissing the appeals, the Court
HELD: 1. Though the principle of judicial review cannot
be denied so far as exercise of contractual powers of Government
bodies are concerned, but it is intended to prevent arbitrariness
or favouritism and it is exercised in the larger public interest or
if it is brought to the notice of the court that in the matter of
award of a contract power has been exercised for any collateral
purpose. There should be judicial restraint on administrative
action. The role of the court is only to review the manner in
which the decision has been taken. The Court lacks expertise
to correct the administrative decision. The Government is
conferred freedom of contract which recognizes a fair play in the
joints as a necessary concomitant for an administrative body
functioning in an administrative sphere or quasi-administrative
sphere. The administrative decision must not only be tested by
the application of Wednesbury principle of reasonableness but
also must be free from arbitrariness not affected by bias or
actuated by malafides. If the decision relating to award of contract
is bona fide and is in public interest, courts will not, in exercise of
power of judicial review, interfere even if a procedural aberration
or error in assessment or prejudice to a tenderer, is made out.
[Paras 27, 29) [359-C-E; 361-F-G]
Tata Cellular v. Union of India (1994) 6 SCC 651 :
[1994) 2 Suppl. SCR 122; Montecarlo Ltd. v. NTPC
Ltd. 2016 (10) SCALE 50; Jagdish Manda! v. State of ·
Orissa & Ors. (2007) 14 SCC 517: [2006) 10 Suppl.
SCR 606; Master Marine Services (P) Ltd. v. Metcalfe
& Hodgkinson (P) Ltd. and another (2005) 6 SCC 138 :
CONSORTIUM OF TITAGARH FlREMA ADLER S.P.A. v.
NMRCL
(2005) 3 SCR 666; B.S.N. Joshi & Sons Ltd. v. Nair
Coal Services Ltd. and others (2006) 11 SCC 548 :
[2006] 8 Suppl. SCR 11; Michigan Rubber (India) Ltd.
v. State of Karnataka (2012) 8 SCC 216 : (2012] 8
SCR 128; A/cons Infrastructure Ltd. v. Nagpur Metro
Rail Corporation Ltd. 2016

## Text

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[20 I 7] 5 S.C.R. 337
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. -
A
TITAGARH WAGONS LTD. THROUGH AUTHORIZED
SIGNATORY, TITAGARH TOWERS, 756, ANANDAPUR, E. M.
BYPASS, KOLKATA- 700 I 07, WEST BENGAL
v.
NAGPUR METRO RAIL CORPORATION LTD. (NMRCL)
HAVING ITS HEAD OFFICE AT METRO HOUSE, BUNGALOW
NO. 28/2, ANAND NAGAR, C.K. NAIDU ROAD, CIVIL LINES,
NAGPUR THROUGH ITS GENERAL MANAGER
(PROCUREMENT) & ANR.
(Civil Appeal Nos. 1353-1354of2017)
MAY09,2017
[DIPAK MISRA AND AMITAVA ROY, JJ.]
Contract:
Award of contract - By Government body (respondent No.
1) - To a company (respondent No. 2) owned by Government of
Peoples Republic of China - In preference to the appellant-company
- Challenged on the ground that respondent No. 2 company was
not technically qualified as its bid was not that of a 'single entity'
and it had relied on the experience of its subsidiaries - Held:
Respondent No. 2 being a Government Company, was the owner of
its subsidiary companies and came within ambit of Cl. 4.1 of the bid
document as a 'Government owned entity' - 1" respondent applied
its commercial wisdom in the understanding and interpretation which
has been given concurrence by the concerned Committee and the
Financing Bank - In absence of any perversity. bias or malafide,
interpretation placed by 1"' respondent need not be interfered with
in exercise of power of judicial review.
Judicial Review:
B
c
D
E
F
Judicial review of administrative decision in respect of G
contractual matters - Scope of - Held: Judicial review of
administrative decisions of Government bodies in respect of
contractual matters is intended to prevent arbitrariness or favoritism
and is exercised in larger public interest - There should be judicial
restraint on administrative action as the court lacks expertise to
H
337
338
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2017] 5 S.C.R.
correct the administrative decision - Administrative decision must
not only be tested by the application of Wednesbury principle or
reasonableness, but also must be free from arbitrariness not affected
by bias or actuated by mala tides - If the decision relating to award
of contract is bona fide and in public interest, courts will not, in
exercise of power of judicial review, interfere even if a procedural
observation or error in assessment or prejudice to a tenderer, is
made out - In the facts of the present case, decision of awarding
the contract in question should not be interfered with in absence of
any perversity, bias or mala fide.
Dismissing the appeals, the Court
HELD: 1. Though the principle of judicial review cannot
be denied so far as exercise of contractual powers of Government
bodies are concerned, but it is intended to prevent arbitrariness
or favouritism and it is exercised in the larger public interest or
if it is brought to the notice of the court that in the matter of
award of a contract power has been exercised for any collateral
purpose. There should be judicial restraint on administrative
action. The role of the court is only to review the manner in
which the decision has been taken. The Court lacks expertise
to correct the administrative decision. The Government is
conferred freedom of contract which recognizes a fair play in the
joints as a necessary concomitant for an administrative body
functioning in an administrative sphere or quasi-administrative
sphere. The administrative decision must not only be tested by
the application of Wednesbury principle of reasonableness but
also must be free from arbitrariness not affected by bias or
actuated by malafides. If the decision relating to award of contract
is bona fide and is in public interest, courts will not, in exercise of
power of judicial review, interfere even if a procedural aberration
or error in assessment or prejudice to a tenderer, is made out.
[Paras 27, 29) [359-C-E; 361-F-G]
Tata Cellular v. Union of India (1994) 6 SCC 651 :
[1994) 2 Suppl. SCR 122; Montecarlo Ltd. v. NTPC
Ltd. 2016 (10) SCALE 50; Jagdish Manda! v. State of ·
Orissa & Ors. (2007) 14 SCC 517: [2006) 10 Suppl.
SCR 606; Master Marine Services (P) Ltd. v. Metcalfe
& Hodgkinson (P) Ltd. and another (2005) 6 SCC 138 :
CONSORTIUM OF TITAGARH FlREMA ADLER S.P.A. v.
NMRCL
(2005) 3 SCR 666; B.S.N. Joshi & Sons Ltd. v. Nair
Coal Services Ltd. and others (2006) 11 SCC 548 :
[2006] 8 Suppl. SCR 11; Michigan Rubber (India) Ltd.
v. State of Karnataka (2012) 8 SCC 216 : (2012] 8
SCR 128; A/cons Infrastructure Ltd. v. Nagpur Metro
Rail Corporation Ltd. 2016 (8) SCALE 765; Tamil
Nadu Generation and Distribution Corporation Ltd.
(TANGEDCO) rep. by its Chairman & Managing
Director and another v. CSEPDl-Trishe Consortium, rep.
by its Managing Director and another 2016 (10)
SCALE 69; Reliance Telecom Ltd. and another v. Union
of India and another 2017 (1) SCALE 453; Asia
Foundation & Construction Ltd. v. Trafalgar House
Construction (I) Ltd. and others (1997) 1 SCC 738 :
(1996] 10 Suppl. SCR 209 - relied on.
339
A
B
c
2.1 Respondent No. 2 is a company owned by the People's
Republic of China and, therefore, it comes within the ambit of D
Clause 4.1 of the bid document as a Government owned entity.
As perceived by the 1" respondent, a single entity can bid for
itself and it can consist of its constituents which are wholly own~d
subsidiaries and they may have experience in relation to the
project. That apart, as is understood by the said respondent, where
the singular or unified entity claims that as a consequence of E
merger, all the subsidiaries form a homogenous pool under its
immediate control in respect of rights, liabilities, assets and
obligations, the integrity of the singular entity as owning such
rights, assets and liabilities cannot be ignored and must be given
effect. While judging the eligibility criteria of the second
F
respondent, the 1'' respondent has scanned Article 164 of the
Articles of Association of respondent No. 2 which are submitted
along with the bid from which it is evincible that the Board of
Directors of respondent No. 2 has been entrusted with the
authority and responsibility to discharge all necessary and
essential decisions and functions for the subsidiaries as well.
G
According to 1 '' respondent, the term "Government owned
entity" would include a Government owned entity and its
subsidiaries and there can be no matter of doubt that the identity
of the entities as belonging to the Government when established
H
340
SUPREME COURT REPORTS
[20 l 7] 5 S.C.R.
A can be treated as a Government owned entity and the experience
claimed by the parent of the subsidiaries can be taken into
consideration. [Para 32) [363-G-H; 364-A-D)
2.2 Thus, there is material on record that respondent No.
2, a Government company, is the owner of the subsidiary
B
companies and subsidiary companies have experience. 1''
respondent, has applied its commercial wisdom in the
. understanding and interpretation which has been given the
concurrence by the concerned Committee and the financing Bank.
The concept of "Government ow'ned entity" cannot be conferred
a narrow construction. It would include its subsidiaries subject
C
to the satisfaction of the owner. There need not be a formation of
a joint venture or a consortium. In the obtaining fact situation,
the interpretation placed by the 1" respondent in the absence of
any kind of perversity, bias or ma/a fide should not be interfered
with, in exercise of power of judicial review. Decision taken by
D the 1" respondent is keeping in view the commercial wisdom
and the expertise and it is no way against the public interest.
(Para 34] (366-D-G]
E
F
G
H
New Horizons Ltd. v. Union of India (1995) 1 SCC 478 :
[1994] 5 Suppl. SCR 310; State of U.P. v. Renusagar
Power Co. (1988) 4 SCC 59: [1988] 1 Suppl. SCR
627 -
relied on.
W.B. Electricity Board v. Patel Engineering Co. Ltd.
(2001) 2 SCC 451: [2001) 1 SCR 352; Littlewoods
Mail Order Stores, Ltd. v. Mc Gregor (1969) 3 All ER
855; DHN Food Distributors Ltd. and others v. London
Borough of Tower Hamlets (1976) 3 All ER 462; Harold
Holdsworth & Co. (Wake.field) Ld. v. Caddies (1955) 1
WLR 352; Central Coal.fields Ltd. v. SLL-SML (Joint
Venture Consortium (2016) 8 SCC 622;
Ba/want Rai
Saluja and another v. Air India Ltd. and others (2014)
9 SCC 407; Rohde and Schwarz Gmbh and Co. K.G v.
Airport Authority of India (2014) 207 DLT 1; Cure
Projects and Technologies Ltd. v. State of Bihar and
another 2011 (59) BLJR 183; Mrs. Bacha F Guzdar,
Bombay v. Commissioner of Income Tax, Bombay AIR
1955 SC 74 : [1955) SCR 876; Life Insurance
Corporation of India v. Escorts Ltd. and others (1986)
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
341
NMRCL
1 SCC 264 : [1985) 3 Suppl. SCR 909; Western
A
Coalfields Limited v. Special Area Development
Authority, Korba and another (1982) 1 SCC 125 :
[1982) 2 SCR 1; Nazir Ahmad v. King Emperor AIR
' 1936 PC 253 - referred to.
Case Law Reference
B
[1994) 5 Suppl. SCR 310
relied on
Para4
[1994) 2 Suppl. SCR 122
relied on
Para4
(2016) 8 sec 622
referred to
Para 4
2016 (8) SCALE 765
relied on
Para4
c
(2014) 9 sec 407
referred to
Para 11
(2014) 207 DLT 1
referred to
Para 11
2011 (59) BLJR 183
referred to
Para 11
[1988) 1 Suppl. SCR 627
relied on
Para 12
D
2016 (10) SCALE 50
relied on
Para 13
[2012) 8 SCR 128
relied on
Para 13
[2006) 10 Suppl. SCR 606
relied on
Para 13
[1955) SCR 876
referred to
Para 15
[1985) 3 Suppl. SCR 909
referred to
E
Para 26
[1982] 2 SCR 1 .
referred to
Para 26
~-
AIR 1936 PC 253
referred to
Para 26
[2005] 3 SCR 666
relied on
Para 27
F
[2006] 8 Suppl. SCR 11
relied on
Para 27
2016 (10) SCALE 69
relied on
Para 28
2017 (1) SCALE 453
relied on
Para 29
[1996] 10 Suppl. SCR 209
relied on
Para 29
[2001) 1 SCR 352
referred to
Para 30
G
(1969) 3 All ER 855
referred to
Para 32
(1976) 3 All ER 462
referred to
Para 32
(1955) 1 WLR 352
referred to
Para 32
H
342
SUPREME COURT REPORTS
[2017] 5 S.C.R.
A
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 13531354 of2017.
From the Judgment and Order dated 05.10.2016 and 22.11.2016
of the High Court of Bombay at Nagpur Bench in W. P. (C) No. 5818 of
2016 and M.C.A. (Review) No. 1087 of2016.
B
WITH
c
Civil Appeal No. 1355 of2017.
Dr. A. M. Singh vi, Raju Ramachandran, Sr. Advs, Saurabh Kirpal,
Pradeep Agarwal, Deepak Biswas, Nishith Mishra, Arjun Minocha,
Sourav Vig, Ms. Anannya Ghosh, Dhananjaya Mishra, Arnav Dash
Ramendra Mohan Patnaik, Advs. for the Appellant.
Mukul Rohatgi, AG, Gopal Subramanian, Dhruv Mehta, S. K.
Mishra, Shyam Divan, Sr. Advs, Mehul M. Gupta, Pavan Bhushan, R. P.
Gupta, Prabhjit Jauhar, Ms. Anumpa K, N. P. Singh, S.S. Jauhar,Advs.
D
for the Respondents.
E
F
The Judgment of the Court was delivered by
DIPAK MISRA, J. I. Nagpur Metro Rail Corporation Ltd., the
I'' respondent herein, issued a Notice Inviting Tender (NIT) on 25.01.2016
for the work of design, manufacture, supply, testing, commissioning of
69 passenger rolling stock (Electrical Multiple Units) and training of
personnel at Nagpur Metro Rail Project. The said project is being funded
by KfW Development Bank, Germany. As per the clause ITS 35.8 at
all stages of bid evaluation and contract, award would have to be subject
to no-objection from KfW Development Bank.
2. In response to the said NIT, three bidders submitted their bids.
One was found technically disqualified and thus, only the appellant and
the respondent No. 2 remained in contest. Upon opening of financial bid
on29.09.2016, it was found that the appellant had given a bid of Rs. 852
crores whereas the bid of the respondent No. 2 was Rs. 851 crores.
The Director Level Tender Committee of the l" respondent agreed with
G
the report of the tender evaluation committee and recommended to accept
the lowest offer of respondent No. 2 and the work order was to be
issued after compliance of certain technical requirements. Before issue
ofworkorder, the appellant filed Writ Petition No. 5818 of2016 before
the High Court contending that respondent No. 2 was not technically
qualified and, therefore, its financial bid could not have been opened.
H
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
NMRCL [DIPAK MISRA, J.]
3. It was contended by the appellant herein before the High Court
that Clause 26 of the tender document prevented a person from getting
any information about the technical qualification of the competitor, till
the contract is awarded, which is arbitrary, unreasonable and violative
of Article 14 of the Constitution; that the respondent No. 2 is not having
the requisite experience as required under the NIT, for it does not meet
the eligibility criteria on its own, but was relying on the experience of its
subsidiary.
4. The Division Bench rejected the contention to go into the legality
or otherwise of clause 26 observing that the appellant had participated in
the tender bid knowing very well that such a clause existed and it was
not open to it to contend that the said clause is onerous and lacks
transparency and, therefore, violative of Article 14 of the Constitution;
and it had challenged the same only after it is found that its financial bid
was higher than that of respondent No. 2. It further observed that the
matter would have been different had the appellant, immediately after
the tender notice was published, challenged the said condition after NIT
was issued. The High Court placing reliance upon the decisions in New
Horizons Ltd. v. Union oflndia1, Tata Cellular v. Union of India0,
Central Coalfields Ltd. v. SLL-SML (Joint Venture Co11sortium)3 and
Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. 4
dismissed the writ petition. Be it noted, though the High Court felt that it
could have non-suited the writ petitioner only on the ground that it had
participated in the tender process knowing fully well that stipulation in
nature of the clause 26.1 existed, yet proceeded to address the controversy
and directed the owner to produce the record solely for the further
purpose of being satisfied as to whether the decision making process by
the employer/owner is legally valid or not and further to examine as to
whether the decision arrived at by the owner that the respondent No. 2,
the lowest bidder, possessed requisite experience. After perusing the
entire documents on record, the High Court came to hold that:-
"15. It is to be noted that the tender evaluation committee consists
343
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of Chief Project Manager/RS,. General Manager/Procurement,
G
Chief Project Manager/Signaling and the General Manager/
Finance. The said Committee has evaluated the documents with
1 (1995) 1 sec 478
'(1994) 6 sec 651
3 2016 (8) SCALE 99: (2016) 8 sec 622
'2016 (8) SCALE 765
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344
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SUPREME COURT REPORTS
[2017] 5 S.C.R.
regard to the technical qualification of the petitioner as well as
respondent no.2. The Committee has noted that respondent no.2
was formed in June 2015 by merger of CRC Corporation and
CNR Corporation limited. The documents relating to the merger
has been submitted along with the bid. The Evaluation Committee
has also noted that after the incorporation of the respondent no.2,
upon the merger of CSR Corporation and CNR Corporation,
respondent no.2 was awarded contract for supply of 76 cars for
Naida Metro Project by Delhi Metro Rail Corporation Ltd. The
Committee found that insofar as Clause No.12 is concerned, though
the minimum requirement was that the bidder must have an
experience of total 60 metro cars and out of which 30 cars should
be either stainless steel or aluminium, respondent no.2 was having
an experience of total 594 metro cars and all the cars were of
stainless steel. Insofar as clause 12.1 is concerned, which requires
that out of the number of cars manufactured, there has to be
completed satisfactory revenue operation at least in one country
outside country of origin/manufacturer or in India or at least one
in GS country of 30 metro cars, respondent no.2 was having an
experience of 432 outside country of origin. It could thus be seen
that the perusal of the document placed on record would reveal
that the decision making process of the technical evaluation
committee has been guided by the relevant factors and it cannot
be said that they have not taken into consideration any of the
relevant factors. We are, therefore, of the considered view that
the decision of the technical evaluation committee would fall within
the ambit of'rationality'.
16. It is further to be noted thatthe minutes of the tender evaluation
committee was further placed for approval before the Director
Level Tender Committee consisting of Director (Rolling Stock
and Systems), Director (Projects) and Director (Finance). It could
thus be seen that the matter has not been examined at only one
level of expert committee, but has gone through examination at
two levels of experts."
5. Thereafter, the High Court referred to the authorities mentioned
hereinbefore and appreciated the principles stated therein and eventually
dismissed the Writ Petition.
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
345
NMRCL [DIPAK MISRA, J.]
6. It is pertinent to mention that in the course of hearing of the
A
matter before the High Court, learned counsel for the writ petitioner
sought permission to withdraw the Writ Petition with further liberty to
approach the High Court after award of the contract. The Court, though
expressed its willingness to grant permission to withdraw the Writ Petition,
it was not inclined to grant liberty as sought by the learned counsel for
8
the petitioner. Simpliciter withdrawing was not accepted and grant of
liberty was insisted upon. Dealing with the said fact, the Division Bench
referred to a passage from Central Coalfields Ltd. (supra) and expressed
thus:-
"24. We find that if we accept the prayer as made by the petitioner,
it will be giving leverage to the petitioner to again approach this
Court and delay the project further. Taking into consideration the
public interest, we have ourselves scrutinised the entire minutes
of the Tender Evaluation Committee and Director Level Committee
to find out as to whether the decision making process, answers
the test as laid down by Their Lordships of the Apex Court. We
have found that the decision making process cannot be termed to
be vitiated on the ground of arbitrariness, irrationality or mala tides.
Accepting the request of the learned senior counsel for the
petitioner would further permit the project to be delayed. Needless
to state that the project is an important project for the city of
Nagpur. In that view of the matter, though the prayer which on
first impression appears to be innocuous, is liable to be rejected."
7. After dismissal of the Writ Petition, an application for review
(M.C.A. [Review] No. 1087 of2016) was filed. The High Court, while
dealing with the application for review, noted the two grounds on which
the review was sought. It is worth reproducing:-
"i. While exercising the principle ofWednesbury reasonableness,
the order in review failed to take into account relevant omission in
the process of scrutiny, like (a) how rate discount cannot be granted
and (b) improper calculation of service tax which renders the
applicant bid lowest.
ii. that there was suppression ofrelevant facts by respondent No.
2 before the authorities."
8. Dealing with the said aspect, the Division Bench held:-
"13. Shri S.G. Aney, learned senior counsel appearing on behalf
c
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of the petitioner, submitted that when an action would fall in the
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SUPREME COURT REPORTS
[2017] 5 S.C.R.
ambit of malice in law, it may not be necessary to implead the
persons against whom malafides are attributed as a party
respondent. We find that by no stretch of imagination the present
case would fall in the ambit of malice in law. If it is a case of
applicant that the tender processing authorities in order to favour
the respondent No. 2 have deliberately made some omissions or
have committed some malafide act in order to help the respondent
No. 2 to get the contract, then in that event such of the officers of
the respondent No. 1 who are attributed with such an act or
omission, were necessary parties. So also it was necessary for
the petitioner to make specific averments against those individuals.
As already discussed hereinabove, though a specific query was
made in that regard, the learned Senior Counsel appearing on
behalf of the petitioners, as that stage, fairly stated that no .such
malafides are attributed in the memo of petition. In the light of
this factual position, seeking review on the ground that there was
a wrong deliberate evaluation of price bids by respondent No. I
and the same act was malafide in order to favour the respondent
No. 2 and to illegally oust the petitioner, in our view, is an
imagination ofa fertile brain of the draftsman.
14. We further find that the Review Application depicts total nonapplication of mind. In paragraph No. 6.8 of the application, the
draftsman of the Review Application, has averred that the
respondent No. 2 has not formed any JV /Consortium and as such,
it was not eligible to bid in the tender process. We do hope that
the draftsman of the Review Application understands the basic
distinction between a Joint Venture/Consortium and an
incorporation of a new company after merger of two companies
into one.
15. It is further to be noted that though the memo of petition. runs
into 22 pages, the review application runs into 39 pages. We have
no hesitation to say that the Review Application has been drafted
without application of mind. The rules require that while filing a
Review Application, a lawyer should certify that good grounds
exist for seeking review of the order. We are at pains to say that
in the present case the said certification has been done in the
most casual manner, only to show compliance with the
requirements of the rules."
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
NMRCL [DIPAK MISRA, J.]
9. On the basis of the aforesaid analysis, the High Court dismissed
the application for review with costs of Rs. I lakh (Rupees One Lakh).
10. We have heard Dr. Abhishek Manu Singhvi, learned senior
counsel with Ms. Anannya Ghosh, learned counsel for the appellant in
Civil Appeal Nos. 1353-1354 of 2017 and Mr. Raju Ramachandran,
learned senior counsel with Mr. Ramendra Mohan Patnaik, learned
counsel for the appellant in Civil Appeal No. 1355of2017, Mr. Mukul
Rohatgi, learned Attorney General for India, Mr. Gopal Subramaniam,
learned senior counsel with Mr. R.P. Gupta, learned counsel appearing
for the I" respondent, Mr. Shyam Divan, learned senior counsel with
Mr. S.S. Jauhar, learned counsel for the respondent No. 2.
11. Assailing the defensibility of the order passed by the High
Court, learned senior counsel for the appellant submitted that the bid of
the respondent No. 2 is not that of a 'single entity' and it had relied on
the experience of its subsidiaries; that it has not submitted the bid on the
basis of its own experience but on the strength of the experience of the
subsidiaries of the erstwhile parent/original companies, upon the merger
of which respondent No. 2 came into existence, which is not only contrary
to the eligibility and qualification criteria but also to the settled position of
law which provide that unless the subsidiaries are constituents of the
Joint Venture (JV), their experience cannot be taken into consideration
for the purpose of considering the experience of the holding company;
that the respondent No. 2, on a standalone basis, does not possess the
requisite experience as provided under the tender conditions; that the
respondent No. 2 should have given its bid either as a JV or as a
consortium together with its subsidiaries to avail the benefit of the
experience of its subsidiaries; that there is a specific restriction on the
bidder to take the experience of its subsidiaries, which are separate
legal entities, without forming a consortium or JV; that the subsidiaries
of respondent No. 2 are separate and independent legal entities and the
supplies in respect of which experience is claimed by respondent No. 2
were supplies not made by respondent No. 2 but by other independent
legal entities; that respondent No. 2 does not have requisite facilities for
manufacture of the car body on its own and it shall have to sub-contract
the same to its subsidiary companies, which is violative of Clause 4.4 of
the tender conditions of contract. In support of his submissions, learned
senior counsel for the appellant has placed reliance on Ba/want Rai
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Saluja and anotlzer v. Air India Ltd. and otlters5, Roltde and Schwarz
Gmhli and Co. K.G. v. Airport Authority of lndia6 and Core Projects
and Technologies Ltd. v. State of Bi/1ar and anotlter7•
12. Mr. Gopal Subramaniam, learned senior counsel for the I st
respondent, before placing his submissions, put forth the facts and
canvassed that the project was funded by KfW Development Bank,
Germany and as per clause lB 35.8, all stages of bid evaluation and
contract award would have to be subject to a No Objection from KfW:
that the appellant wrote to the l" respondent seeking amendment to
clause 12.l of Annexure Ill-A (PQ-lnitial filter) i.e. "Operation
Performance" clause according to which, as it then was, the bidder had
to have satisfactorily delivered at least 30 metro cars outside the country
of manufacture or delivered in India and sought inclusion of the condition
that delivery to any of the G8 countries should also be treated as
acceptable; that the request of the appellant was accepted and it became
eligible to bid; that the l ''respondent extended the date of submission of
tender from 141h June to 241h June at the request of the appellant; that all
the bid documents were given to the independent General Consultant of
the I" respondent consisting of Mis. Systra, Mis. RITES, Mis. AECOM
and Mis. Egis for Pre-qualification (PQ) and Technical approval which
held respondent No. 2 as qua! ified and Appraisal and Tender Committee
of the I SI respondent also gave their reports which were forwarded on
29.8.2016 to Ktw Germany for its no-objection; that the bids, which
were made on e-portal which is managed by the Government of
Maharashtra, were opened on 29.9.2016 and the bid of respondent No.
2 was found to be the lowest at Rs.851 crores, whereas the bid of the
appellant was Rs.852 crores; that on 29.9.2016 and 3.10.2016, the
appellant made representations to the I SI respondent stating that
respondent No. 2 was not qualified as a holding company and could not
have claimed benefit of experience of a subsidiary and sought documents
relating to eligibility of respondent No. 2 vis-a-vis its experience; and
that on 4.10.2016 the appellant filed the Writ Petition before the High
Court contending, inter alia, that the appel !ant was not allowed to check
the technical documents of respondent No. 2, clauses 25.1 and.25.3
were not followed, bid -price being so close to the appellant's should
have been re-evaluated and evaluation process and grant of tender in
'(2014) 9 sec 407
6(2014) 207 DLT I
72011 (59) BUR 183
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
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favour of respondent No. 2 was ma la fide, which was dismissed by the
A
High Court vi de order dated 05.10.2016 holding that the evaluation of
the bid was proper and appellant could not challenge clause 26, which
mandated confidentiality of technical bids till grant of contract.
13. Learned senior counsel would further contend that the
respondent No. 2, being a company owned by Government of People's
Republic of China, it clearly came within the ambit of clause 4.1 of the
bid-document as a 'government-owned entity'. Learned senior counsel
would urge that a single entity can bid for itself and it can consist of its
constituents which are wholly owned subsidiaries and they may have
experience in relation to the project and all the subsidiaries form a
homogenous pool under its immediate control in respect of rights, liabilities,
assets and obligations, that in view of Article 164 of the Articles of
Association of respondent No. 2, its Board of Directors have been
entrusted with the authority and responsibility to discharge all necessary
and essential decisions and functions for the subsidiaries and, therefore,
the experience of respondent No. 2's l 00% wholly owned subsidiaries
ought to be considered as part of the parent company's experience; and
that the term 'government owned entity' includes no bar against· a
government owned entity and its subsidiaries. Learned senior counsel
referred to the history of doctrine oflifting the corporate veil and submitted
that this Court has relaxed the principles governing lifting of corporate
veil and relied on the authorities in State of U.P. v. Renusagar Power
Co. 8 and New Horizom Ltd. (supra). Mr. Gopal Subramanium would
further contend that the bid documents have been thoroughly examined
by the !"respondent and it satisfied itselfofthe capability, ·experience
and expertise of the successful bidder, i.e., respondent No. 2. and the
thorough analysis of the technical qualification of respondent No. 2 is
clear from the report of the independent General Consultant; that the
experience of respondent No. 2 in supplying metro trains across the
world exceeds the appellant's experience by a huge margin; that treating
respondent No. 2 along with its 100% subsidiaries as one entity is
supported by the fact that Delhi Metro Rail Corporation Ltd., which has
on a similarly, if not same, worded bid-document granted the tender to
respondent No. 2, who had also bid there as.a parent company claiming
experience of and execution through I 00% wholly owned subsidiaries;
that there is no bar whatsoever, express or implied, in the tender document
'(I98&J4 sec 59
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to treat the parent company along with its I 00% wholly owned
subsidiaries as one entity; that the scheme of the bid document is such
that which itself provides that parent company would have to perform
the works under the agreement in case the subsidiary failed and in view
of this, the objections raised by the appellant are hyper-technical. Learned
senior counsel would further submit that this Court has consistently held
that interference by the courts is required only when the decision taken
by the owner is irrational or arbitrary, or is vitiated by bias, favouritism
or malafide. He has placed reliance upon on the authorities inMontecar/o
Ltd. v. NTPC Ltd. 9 , Michigan Rubber (India) Ltd. v. State of
Karnataka' 0, Jagdish Manda/ v. State of Orissa & Ors." and Afcons
Infrastructure Ltd. (supra).
14. Mr. Shyam Divan, learned senior counsel for the respondent
No. 2, submitted that the respondent No. 2, being a government entity,
participated in the tender and gave all the details, which were duly
accepted by the respondent No. I and after examining the entire details
of supplies and commissioning of various contracts executed by the
respondent No. 2 and its I 00% wholly owned subsidiaries issued Letter
of Acceptance dated 5.10.2016 in its favour to execute the contract.
Learned senior counsel further submitted that for the purposes of their
experience in the present tender, respondent No. 2 had provided the
details in Form 4.4 Attachment-I to the effect that it had supplied 606
metro cars in the last I 0 years which is much higher than the appellant's
experience which would be beneficial for the project and would further
public interest. Mr. Divan, strongly relied on Article 164 of the Articles
of Association of respondent No. 2, which was submitted along with the
bid, and argued that the Board of Directors of respondent No. 2 has
been entrusted with the complete right to make decisions for the company
including subsidiaries and, therefore, as long as the entity is a government
owned entity, it should include both the parent and its wholly owned
subsidiaries.
15. In reply to the submissions advanced by the respondent No. 1,
Dr. Singhvi, learned senior counsel appearing for the appellant in Civil
Appeal Nos. 1353-1354 of 2017 would submit that Clause 4.1 treats a
government owned entity like any other bidder and does not give any
9 2016 (10) SCALE 50
"(2012) s sec 216
11 (2007) 14 sec 517
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
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NMRCL [DIPAK MISRA, J.]
concession or preferential treatment to it and if a company cannot include
its subsidiaries and count their experience as its own experience for the
purpose of submitting a bid (without forming a consortium/JV), the same
criteria applies to the government owned entity. He further referred to
Clause !TB 43, 43.1to43.4, 39.3, 42.1, 42.2 and Clause 1.14 of the
General Conditions of contract and submitted that in case of award of
work, the joint and several responsibility and liability on all the members
of the proposed JV/consortium in the event of default has to be fixed
and such purpose would be defeated in the event if it is found that
·respondent No. 2, having placed its bid as a single entity, is entitled to
rely upon and surreptitiously include the experience of its subsidiary
companies and it would be impossible to place responsibility and liability
on the subsidiaries in the event the respondent No. 2 or its subsidiaries
default in their obligations under the tender documents. Criticizing the
letter dated 22.6.2016 written by respondent No. 2, it is submitted by
learned counsel for the appellant that the letter is a unilateral
communication to the 1" respondent and does not legally constitute a
binding agreement and in the absence of adherence to prescribed formats
under the tender documents, such a letter has no sanctity and cannot be
treated as a substitute to be a legally valid and binding agreement between
the respondent No. 2 and its subsidiary companies inasmuch as the letter
wrongly states that the experience of its subsidiaries is the experience
of the parent as the holding company owns only shares in its subsidiary
and being the owner of shares does not mean that the holding company
owns the assets, liabilities and experience of the subsidiary and placed
reliance on Mrs. Bacha F. Guzdar, Bombay v. Commissioner of
Income Tax, Bombay' 2•
16. Learned senior counsel would further contend that the
respondent No. 2 has tried to couch within its own ambit, the experience
of six of its subsidiaries and the entity designated by respondent No. 2 as
the entity responsible for completion of work under the present tender
i.e. Mis. CRRC Dalian Co. Ltd. does not have any prior experience at
all, while the remaining five entities/subsidiaries may have had prior
experience; that there is gross and manifest arithmetical error in service
tax payable which results in the appellant's bid being lower than Rs.32.82
crores; that there is suppression of serious material facts by respondent
No. 2 regarding supply of defective metro cars by their subsidiaries in
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Singapore and Hong Kong which had to be recalled and allegation of
payment of kickbacks in Phillipines and these disclosures were required
to be made in terms of Annexure lil of the tender documents, which
would have required the I" respondent to disqualify respondent No. 2
from the tender process.
I 7. To appreciate the rival submissions raised at the Bar certain
relevant conditions from the NIT are required to be appreciated. Clause
4.1 deals with the eligibility criteria. It reads as follows:-
"4. I A bidder may be a firm that is a private entity, a governmentowned entity - subject to !TB 4.3 - or any combination of such
entities in the form of a joint venture (JV) under an existing
agreement or with the intent to enter into such an agreement
supported by a letter of intent. In the case of a joint venture, a II
members shall be jointly and severally liable for the execution of
the contract in accordance with the contract terms. The JV shall
nominate a representative who shall have the authority to conduct
all business for and on behalf of any and all the members of the
JV during the bidding process and, in the event the JV is awarded
the contract, during contract execution. Unless specified in the
BOS, there is no limit on the number of members in a JV."
4.3 The Agency's eligibility criteria to bid are described in Section
V - Eligibility criteria and social and environmental responsibility."
18. Placing reliance upon Clause4.1, it is contended by the learned
senior counsel for the appellant that conditions embodied in the said
clause clearly stipulate the conditions precedent to fulfil to earn the status
of a consortium or a Joint Venture and the said postulates provide the
distinctions, as regards the obligations, responsibilities, etc. to be fulfilled
by a bidder who is a "'single entity" and a bidder who is a consortium or
a Joint Venture. For the aforesaid purpose, our attention has been drawn
to Clauses 4.7. 4.8 and 4.11. We have also been invited to peruse the
Clauses 11.3.1.3, 11.3.1.4, 11.3.1.9, 12.2and43.3.
I 9. Clauses I2 and 12.1 being relevant are reproduced below:-
"12. Delivery Record
Has the bidder/consortium/joint venture ofits members, individually
or jointly as a member of other consortia/joint venture have
CONSORTIUM OF TITAGARH FIREMA ADLER S.P.A. v.
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experience of and carried out vehicle design, interface (with other
A
designated contractors such as signaling, track, traction, etc.)
assembly & supply, testing and commissioning of minimum of total
60 metro (i.e. MRT, LRT, Suburban Railways or High Speed
Railways) cars out of which minimum 30 cars shall be either
stainless steel or aluminium in the last ten (I 0) years.
12.1. Operation Performance
Out of 60 or more cars commissioned in accordance with SN 12
above, have minimum of total 30 metro (i.e. MRT, LRT, Suburban
Railways or High Speed Railways) cars completed satisfactory
revenue operation.
*
At least in one country outside the country of origin/
manufacture.
*
Or in India
*
Or at least in one G8 country viz. Canada, France, Germany,
Italy, Japan, United Kingdom and United States in the last three
(3) years".
20. Relevant portion of Section V -Eligibility criteria and social
and environmental responsibility is extracted below:-
"Bidders that are government-owned enterprises or institutions
may participate only if they can establish that they (i) are legally
and financially autonomous (ii) operate under commercial law.
To be eligible, a government-owned enterprise or institution shall
establish to the Agency's satisfaction, through all relevant
documents, including its Charter and other information the Agency
may request, that it: (i) is a legal entity separate from their
government (ii) does not currently receive substantial subsidies or
budget support; (iii) operates like any commercial enterprise, and,
inter alia, is not obliged to pass on its surplus to their government,
can acquire rights and liabilities, borrow funds and be liable for
repayment of its debts, and can be declared bankrupt."
21. Clause 27 that deals with clarification of bids and Clause 29
that deals with determination of responsiveness, being relevant, are
reproduced below:-
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27. Clarification of Bids
27.1 To assist in the examination, evaluation, and comparison of
the bids, and qualification of the Bidders, the Employer may, at its
discretion, ask any Bidder for a clarification of its bid, given a
reasonable time for a response. Any clarification submitted by a
Bidder that is not in response to a request by the Employer shall
not be considered. The Employer's request for clarification and
the response shall be in writing.