V.V.S. Rao, J.
1. In the process of implementation of 'Policy of Public Enterprises Reforms', the Government of Andhra Pradesh (GoAP) decided to accept the proposal of Delta Paper Mills Limited (DPML), fourth respondent herein, for a joint venture in respect of three sugar units and a distillery unit as recommended by two Committees. The decision of the first respondent in preferring the fourth respondent to the petitioners' consortium is assailed in the writ petition. The matter was heard at length on 22.4.2002, 25.4.2002, 26.4.2002, 3.6.2002, 4.6.2002, 5.6.2002, 6.6.2002, 11.6.2002 and 13.6.2002 at the admission stage itself as the contesting parities filed their counter-affidavits and made detailed submissions.
Background facts in brief:
2. The lengthy pleadings and voluminous documents filed in the case reveal the following factual position.
(i) Unsolicited proposals of GELCON
3. Nizam Sugars Limited (NSL), which is a Government owned public enterprise, had five sugar units and two distillery units. In furtherance of a policy to implement economic reforms, the GoAP decided in 1996-97 or thereabout to disinvest/ privatise various industrial units of NSL. In February, 2001 sale of seven units of NSL was advertised. Initially, acceptable bids were received for two sugar mills and one distillery unit, namely, Madhunagar Sugar Mill, Latchayyapeta Sugar Mill and Mombojipalli Distillery. While the finalisation of the transaction in relation to these three units was in the process, the petitioners herein (except Ganapathi Sugars Limited, seventh petitioner herein), led by the first petitioner, namely, Goldstone Exports Limited (GEL) formed into a consortium (special purpose investment company) styled as GELCON and entered into discussions and negotiations with the GoAP. This appears to have culminated in the petitioners (except seventh petitioner) submitting unsolicited proposal on 12.10.2001 in respect of four units of NSL including the distillery unit, namely, Shakarnagar Sugar Mill, Shakarnagar Distillery, Mombojipalli Sugar Mill and Metpally Sugar Mill in Andhra Pradesh. The proposal envisages that the Government/NSL will incorporate a new company (NEWCO) under the Companies Act, 1956 in the name and style of 'NSF LIMITED' at an appropriate time and transfer four unsold undertakings along with identified assets to NEWCO. Initially, the Government/NSL will hold 100% share-holding of the Company, which will have paid-up equity capital of Rs.20 crores The value of the transferred assets to NEWCO would be taken as Rs.45 crores for the purpose of issuing equity/ preference shares and Optionally Convertible Debentures. GELCON will contribute Rs.9.50 crores as equity capital and Rs.0.05 crores as preference capital immediately on signing a sale and purchase agreement and raise Rs.0.70 crores as equity and Rs.14.3 crores as preference capital within six months thereafter The unsolicited proposal ,'submitted by GELCON also gave a brief history of the GEL and its associates who formed consortium as well as their financial position
(ii) Implementation Secretariat; structure and process of bids evaluation
4. Before proceeding with further narration, it is necessary to notice the genesis of various committees and bodies and their role in privatisation of State Level Public Enterprises/Co-operative Enterprises The GoAP in General Administration (Public Enterprises) Department issued orders in G.O. Ms. No.150, dated 30.4.1998 establishing an Implementation Secretariat (IS), the second respondent herein, in the Department of Public Enterprises as an autonomous body. It is required to plan and recommend the strategy for the reform programme to the Cabinet Sub-Committee (CSC) which was initially constituted in G.O. Ms. No.514 dated 2.12.1997 and later reconstituted by G.O. Ms. No.473 dated 17.11.1999 as a monitoring and implementing authority in respect of decisions taken by the Government on Public Enterprises reforms. The IS includes (i) Chairman, who is Principal Secretary to Government in the Department of Public Enterprises; (ii) two Transaction Managers; (iii) a Legal Consultant; (iv) a Financial Consultant; (v) a Media Expert; (vi) a Labour Expert and (vii) a Research Associate/Computer Specialist. In the annexure to the said G.O., duties and functions of the core staff of IS were indicated. The IS was required to prepare a plan of action for implementing phase-I of reform process based on the decisions of the CSC and make recommendations to the CSC. It was further required to perform the implementation tasks like coordination of preparation of the enterprises for restructuring/privatisation/ disinvestment; selecting and managing the various teams of technical experts and external advisers; managing the marketing efforts, including promotional activities; and undertake negotiations with various groups of stakeholders (enterprises management, labour unions, sector departments).
5. The Government issued further orders in G.O. Ms. No. 137 Public Enterprises (II) Department, dated 20.11.2001 constituting two Committees to evaluate the bids for sale of assets and business of State Level Public Enterprises/Co-operatives as a part of privatisation process. One Committee is known as Commercial and Technical Bid Evaluation Committee (CTBEC). This Committee consists of Transaction and Legal Adviser, Transaction and Financial Adviser, Transaction Adviser of IS and Senior Legal Adviser of Adam Smith Institute. The other Committee is known as Finance and Price Bid Evaluation Committee (FPBEC). This Committee consists of Chairman and Transaction Adviser of IS, Secretary to Government in Finance Department and Managing Director of State Level Public Enterprise/Co-operative.
6. As per G.O. Ms. No.137 dated 20.11.2001 the CTBEC shall examine whether the bids received are responsive and compliant in all respects and evaluate the bids with reference to bidder's general, commercial and technical capability and credibility The Committee shall have to submit the report to the Principal Secretary to Government in Public Enterprises Department, who shall arrange to place it before FPBEC. The function of identifying a preferred bidder on the basis of the criteria laid down in Information Memorandum and Bid documents is entrusted to FPBEC. After doing so, the FPBEC shall submit its report to the Principal Secretary, Public Enterprises Department for placing the same before the CSC reconstituted vide G.O. Ms. No.473 dated 17.11 1999.
(iii) Invitation for Proposals for Privatisation of NSL Units
7. On 16.10-2001 an advertisement was issued by IS in National Dailies like THE HINDU, inviting innovative proposals for privatisation of four NSL units. It was indicated therein that an Unsolicited Proposal sponsored by GEL proposing a joint venture to own and operate four undertakings with NSL/GoAP either as a minority or as a sole owner was received. In view of this, competing proposals are sought from investors who may be able to provide more attractive investment proposals to GoAP than unsolicited proposal. The information on the unsolicited proposal and proposal process was made available by the IS only to those who complete certain formalities These were (i) investor registering interest with IS; (ii) signing confidentiality agreement; and (iii) paying a non- refundable fee of Rs.5,000/- by way of DD/Banker's Cheque in favour of the IS.
8. The invitation for proposals (IFP) relating to four sugar units is a lengthy and self-contained document giving all details regarding pre-invitation background of the proposal, procedures, terms and conditions, modalities for evaluation of bids by the CTBEC and FPBEC etc. It also mentions about unsolicited proposal sponsored by GEL on behalf of consortium: GELCON. It also requires investors to structure their proposals as they wish and advised that the proposal may include agreements between consortium of persons or creation of legal entity for joint economic management of the private sector partners of NSL/GoAP. It also enables the persons interested in one or more, but not all of four undertakings to form a team with others to submit competing proposals for the ownership and management of the four undertakings The proposals are to be evaluated against unsolicited proposal on the basis of criteria and weightage set out in Part-II of lFP.
9. The procedure as per IFP is that the competing proposals submitted pursuant to advertisement dated 16.10.2001 and in accordance with the IFP will be evaluated against unsolicited proposal as per the guidelines contained in Part-II of the IFP and competing proposals evaluated as superior to the unsolicited proposal will be ranked. The investor with best superior competing proposal and GELCON will compete directly by submitting Best and Final Proposals. GELCON will also be required to submit its Best and Final Proposal. The Best Competing Proposal of investor pursuant to the advertisement and Best and Final Proposal submitted by GELCON will then be subjected to same requirements. It is made clear that GELCON is not privileged in any manner except opportunity to submit Best and Final Proposal to compete with the best of the superior competing proposals submitted by an investor. A further reference to various clauses/guidelines in the invitation for proposals will be made as and when necessary.
(iv) Events leading to filing of writ petition
10. The GELCON, consortium of GEL, its promoters, group associates and controlled companies (except seventh petitioner), as noticed, submitted its unsolicited proposal on 12.10.2001. This led to advertisement/IFP on 16.10.2001 inviting innovative proposals from investors to provide more attractive investment proposals to GoAP than the unsolicited proposal which were to be evaluated against unsolicited proposal. In response to invitation for competing proposals, three proposals were received from DPML, Kundan Rice Mills Ltd., and Sri K.Hanmantha Rao, President of Nizamabad District Cane Growers Association. The two competing proppsals found substantially responsive and compliant were evaluated. Finding the proposal of DPML superior to unsolicited proposal, GELCON and DPML were invited to submit their Best and Final Proposal before 11.1.2002. Accordingly, GELCON and DPML submitted their Best and Final Proposals. In a sense the proposals were as under. __________________________________________________________________
Name of the Bidder Nature of Proposal Value offered for Transfer/Sale of Assets
1.GELCON (Consortium of petitioners) Option (A) Joint Venture Option (B) Out Right Purchase Rs.53.00 Crores
2.DPML (Fourth respondent) Joint Venture Rs.65.40 Crores __________________________________________________________________
11. CTBEC evaluated the Best and Final Proposals in accordance with the procedures and requirements (Part-II and Part-Ill of IFP) and submitted its report dated 1.2.2002. In the said report, the CTBEC found the proposal of DPML to be substantially responsive and compliant and that the proposal contains sufficient information to be evaluated. However, on the compliance and responsiveness of GELCON, CTBEC found that GEL does not have a substantial ownership interest in GELCON as required under IFP, that though half of the burden of transaction rests on GR Cables (third petitioner herein), one of the members of the consortium, the information on or from GR Cables on the proposal is extremely limited, that when IFP requires participant to submit one proposal, GELCON submitted two proposals for Joint Venture and Out Right Purchase, and that submitting two proposals results in disqualification. It concluded that there is absence of GEL's substantive ownership interest in GELCON as mandated, and there is no evidence of GR Cables' commitment to participate reflected at the evaluation stage. The CTBEC also concluded that the Best and Final Proposal of GELCON should nevertheless be admitted for evaluation although level of compliance and responsiveness was significantly lower.
12. Be it noted that Clause 25 of the IFP provides criteria for evaluation of proposals. The proposals were evaluated under eight criteria (maximum 100 points). These include (i) Rating of financial strength and evidence of capacity to commit to complete the purchase (15 points); (ii) Rating of financial strength and evidence of capacity to commit to finance the business (10 points); (iii) Rating of proofs of management and technical skills to carry out the business plan (15 points); (iv) Present value of transaction to NSL/GoAP (25 points); (v) Rating of risks in payments, timing and methods, degree of certainty of payment (10 points); (vi) Present value of revenue foregone to GoAP from incentives and other exemptions or privileges sought by participant (10 points); (vii) Rating of proofs of financial and technical feasibility of the business plan etc., (5 points); and (viii) Rating of impact of employee issues at each of the four undertakings (10 points).
13. The report of the CTBEC was considered by the FPBEC in its meeting held on 7.2.2002. After considering the report, it came to the conclusion that there are several compliance and responsiveness matters which require legal view. It was decided that the IS should obtain legal opinion on the question whether GELCON proposal should be considered and whether it is in accordance with IFF. FPBEC also pointed out that the Best and Final Proposal of GELCON suffers from infirmities. The pointed disqualifying infirmities were; (i) GEL, which submitted the bid has not filed any authorisation from the constituents of consortium like GR Cables etc., (ii) GEL holds only 1% of the consortium company proposed to be formed whereas the person submitting tender should have substantial stake in the entity on whose behalf tender is submitted; (iii) One party should not give two proposals inasmuch as GELCON proposals contain two proposals by single participant; (iv) Ganapathi Sugars (seventh respondent herein) which is a member of consortium applied for tender documents and executed confidential agreement and therefore joining of Ganapathi Sugars with GELCON is clear breach of confidential agreement.
14. The matter was then sent to Advocate General for the State vide letter dated 8.2.2002 of Principal Secretary to Government. The learned Advocate General was requested to give opinion whether Best and Final Proposal submitted by GELCON is responsive and can be evaluated in accordance with the criteria set out in the IFP. After receiving the opinion of the Advocate General sent vide letter dated 10.2.2002, FPBEC again met on 12.2.2002 and decided that CTBEC be advised to take opinion of the Advocate General also into consideration and finalise its report. The matter again went before the CTBEC which submitted its final report dated 25-2-2002.
15. The CTBEC examined the proposals of GELCON and DPML and concluded that Best and Final Proposal of DPMI is substantially responsive and compliant and eligible for evaluation The CTBEC evaluated responsiveness and compliance of GELCON Best and Final Proposal with reference to (i) GEL's ownership, participation, interest in GELCON, (ii) GEL's authority to submit proposals on behalf of members of GELCON, (iii) alleged breach of confidentiality and non-interference agreement executed by GEL and Ganapathi Sugars. Other issues related to responsiveness and compliance of GELCON proposal like inadequate business and investment plan for outright purchase option and alleged failure to quote for additional assets at Shakarnagar. Ultimately, the CTBEC concluded that GELCON Best and Final Proposal is not substantively compliant and responsive with IFP and that as per Clause 24 (v) GELCON Best and Final Proposal is not eligible to be evaluated. It also observed that the breach of specific undertakings with reference to conduct during the proposal process is separate and distinct from responsiveness and compliance to IFP and that breach of undertaking would result in disqualification of the proposal even if it is substantially responsive.
16. CTBEC also evaluated (for commercial and technical responsiveness and compliance) the Best and Final Proposals of DPML and GELCON - though GELCON proposals were not eligible for' evaluation; as illustrative evaluation of the proposals. After doing so, DPML got 68 points and GELCON got a rating of 58 points (Option-I, Joint Venture). Be that as it may, it was concluded that GEL's proposal rendered itself ineligible for evaluation as it was not found to be substantially responsive and compliant and that DPML proposal was found to be substantially responsive and compliant.
17. The matter was again placed before FPBEC on 14.3.2002. After considering the final report of CTBEC comprising examination of Best and Final Proposals for responsiveness and compliance and commercial and technical evaluation, it was concluded that GELCON Best and Final Proposal is not substantially responsive and compliant mainly for the following reasons.
(a) GEL's 1% shareholding in GELCON is not a substantial ownership interest directly in GELCON as required at para 31 and Part-Ill (Page 41) of the invitation for proposals.
(b) GELCON has failed to include in its proposal the requited evidence of agreements and authorities from the members of the consortium and fails to satisfy the requirements at para 19 of the invitation for proposals.
(c) GELCON's submission contains two separate and distinct proposals, which is contrary to provisions at para 21 of the invitation for proposals and as a result both proposals in the GELCON Best and Final Proposal are not eligible to be admitted for evaluation.
(d) The involvement of Ganapathi Sugar Industries Ltd. in the consortium of GELCON, the approach made by GEL to Ganapathi Sugars to join the GELCON consortium and the GEL's failure to advise IS in advance of the approach to Ganapathi Sugars breach the undertakings given at para 5 in the Confidentiality and Non-interference Agreements.
(e) GELCON's proposal fails to specify additional assets at Shakkarnagar as required at para 1.6 and other clauses of invitation for proposals. The GELCON's proposal states vaguely that 'any additional assets required will be taken on 5 years lease at market rates'.
18. The proposal of DPML was found to be substantially responsive and compliant. The matter was considered by CSC on public enterprises on 1.4.2002. The Best and Final Proposal of DPML was considered by the Committee under the Chairmanship of Minister for Finance. The CSC approved the Best and Final Proposal of DPML by the Joint Venture for four sugar mills as recommended by CTBEC and FPBEC. The petitioners came to know about the disqualification of GELCON as not responsive and compliant through media. Further the IS through its Transaction and Financial Adviser addressed a letter informing that the evaluation of the Best and Final Proposals is completed and that DPML was approved as preferred participant The amount of Rs.1.00 crore (rupees one crore only) paid by the petitioners as Earnest Money Deposit (EMD) was also refunded by way of pay order.
19. The writ petition was filed on 15.4.2002 seeking a declaration that the action of the IS in disqualifying the proposal of the petitioners for the purchase of four sugar units and also the selection of DPML as the successful bidder is arbitrary and unreasonable and to hold that GELCON bid to be superior and responsive and to give consequential directions to respondents 1 to 3 to award contract to GELCON. When the matter was listed before this Court on 18.4.2002, learned Counsel for the petitioners, learned Additional Advocate-General for respondents 1 and 2 and learned Standing Counsel for the third respondent and the learned Senior Counsel for the fourth respondent requested the Court to finally hear and dispose of the matter at the admission stage itself. The matter was finally heard on five days as mentioned earlier.
Summary of submissions of Counsel for the Petitioners
20. Sri S. Ravi, learned Counsel for the petitioners, submits that the petitioners are not disputing the Government's freedom to enter into contract nor praying this Court to sit in appeal over the decision taken by respondents 1 and 2. He would urge that the entire decision making process leading to accepting the Best and Final Proposal of the fourth respondent as responsive and compliant and accepting the fourth respondent as Preferred Participant is vitiated by illegality and irrationality. He would further submit that the five grounds on which the petitioner was disqualified would show that the second respondent evaluated the Best and Final Proposal of the GELCON ignoring various conditions/guidelines in the IFP which are binding on the petitioners as well as respondents.
21. The learned Counsel also made submissions to the following effect. Sale of four units of NSL was advertised based on unsolicited proposal of GELCON and therefore it was illegal and improper for respondents 1 and 2 to disqualify the Best and Final Proposal of GELCON as non-responsive and non-compliant. As per the scheme of the IFP, petitioners' proposal was acceptable as responsive and compliant and the evaluation of the Best and Final Proposal of GELCON could not have been required to satisfy again the conditions relating to responsiveness and compliance. If the intention had been such, GELCON ought to have been required to bid along with competing proposals, instead of after superior competing proposal was identified. The IS sent a communication on 3-1-2002 informing GELCON that the competing proposal of DPML was superior to unsolicited proposal of GELCON and therefore GELCON reasonably believed that it had to improve upon their unsolicited proposal. Hence, again subjecting Best and Final Proposal of GELCON to commercial and technical evaluation is illegal and not in accordance with IFP. Apart from general submissions, the learned Counsel also made submissions with reference to each of the grounds on which CTBEC and FPBEC and CSC rejected the Best and Final Proposal of GELCON. It would be better to refer to these submissions as and when each of the ground based on which the GELCON proposal is rejected.
Substance of submissions of Counsel for the Respondents
22. The learned Additional Advocate-General Sri Ramesh Ranganathan appearing for respondents 1 and 2 submits that the method adopted by respondents 1 and 2 is akin to Swiss Challenge Process. In the IFP it is specifically mentioned that the Best and Final Proposal of GELCON as well as the best competing proposal would be evaluated for responsiveness and compliance in accordance with the guidelines/ conditions contained in bid document. The GELCON was never informed that their Best and Final Proposal would not be subjected to further evaluation along with the proposal of bidder who made superior Competing Proposal pursuant to advertisement. He has placed reliance on various clauses of IFP.
23. The learned Additional Advocate-General further contends that CTBEC and FPBEC have evaluated the Best and Final Proposals of GELCON and DPML strictly in accordance with IFP and found GELCON proposal as not responsive and not compliant. Nonetheless, after examining the proposal with reference to responsiveness and compliance by way of illustration and for the purpose of comparison the proposal of GELCON in Option-A was evaluated applying the criteria and weightage set out in the IFP when it was found that the proposal of the DPML is to be preferred to that of GELCON. All efforts were taken to evaluate the proposals in a fair and unarbitrary and nondiscriminatory manner and that when the tender is disqualified as non-compliant and non-responsive the scope for interference under Article 226 is very limited. The learned Additional Advocate-General has also justified the grounds based on which the CTBEC and FPBEC found the GELCON proposal non-responsive and non-compliant.
24. The learned Standing Counsel for NSL adopted the arguments of the learned Additional Advocate-General. He further added that the decision of the CSC was informed to NSL by letter dated 4.5.2002 and that the Principal Secretary to Government in Public Enterprises Department addressed a letter dated 13.5.2002 advising NSL to file an application for formation of new Public Limited Company as a subsidiary of NSL. Accordingly, NSL obtained availablility letter dated 22.5.2002 from the Registrar of Companies, Hyderabad for registration of a NEWCO under the name and style of "Nizam Deccan Sugars Limited". NSL also filed required documents with the Registrar of Companies on 31.5.2002 by paying necessary fees for registration of the NEWCO and certificate of registration is awaited.
25. Sri E.Manohar, learned Senior Counsel appearing for the fourth respondent submits that GELCON submitted unsolicited proposal proposing to purchase four units at Rs.45 crores, the present value of which worked out to Rs.17 crores adopting a discount rate of 18% per annum. The second respondent invited better proposals from investors than that of unsolicited proposal. Accordingly, DPML submitted proposal to purchase the units for down payment of Rs. 17.61 crores. In accordance with the conditions of the IFP, the second respondent by letter dated 3.1.2002 invited GELCON and DPML to submit Best and Final Proposals on or before 11.1.2002. DPML offered 65.40 crores under joint venture arrangement and also agreed to take additional assets at Shakar Nagar over and above Rs.65.40 crores at extra cost on fresh valuation by the District Collector/professional valuer. The GELCON submitted the Best and Final Proposal for Joint Venture offering Rs.53.00 crores. He also would submit that GELCON made two proposals, one for outright purchase and another for joint venture which itself is a ground for disqualification.
26. While justifying the five grounds based on which the Best and Final Proposal of the GELCON was rejected as non-responsive, the learned Senior Counsel also submits that the Proposal of GELCON was also rejected for making a Member of Parliament to address letters in favour of GELCON to the Minister for Industries who is member of CSC. As the GELCON attracted disqualification, it cannot challenge the action of respondents 1 and 2 in holding the proposal of DPML as substantially responsive and compliant. Respondents 1 and 2 did not deviate from the terms and conditions of tender document and therefore the decision making process is fair and rational. It does not suffer from any vice much less discrimination. He would also submit that the decision of the Government has been duly informed to DPML by the second respondent on 8.4.2002 advising to finalise agreement on or before 18.4.2002. Necessary steps were also taken for incorporating Nizam Deccan Sugars Limited. He also submits that the submission of GELCON that second respondent ought to have given an opportunity to give necessary clarifications with regard to the participation of various members of consortium etc., cannot be countenanced having regard to the conditions in Part-I of IFP. He would submit that the tender document requires strict compliance at the stage of Best and Final Proposal and submitting addenda or supplementary details is not permissible.
Points for Consideration
27. In the light of the rival submissions and having regard to the pleadings and other documents, certain General Issues as well as Special Issues arise for consideration. General Issues that arise for consideration are-
(i) Whether the Invitation for Proposals does not require strict compliance of the conditions of tender ? and
(ii) Whether the Implementation Secretariat was justified in again evaluating the Best and Final Proposal of GELCON submitted on 11.1.2002?
Special Issues that arises for consideration are-
(i) Whether the second respondent was justified in holding that GEL's shareholding in GELCON is not substantive ownership interest as required by Clause - 2 (definitions) of lFP?
(ii) Whether GELCON failed to include its proposal, required evidence of agreement and authorities from members of the consortium and thereby failed to satisfy the requirements of IFP?
(iii) Whether GELCON submitted separate and distinct proposals contrary to the provisions of IFP?
(iv) Whether there is failure on the part of the GEL to advise IS in advance about involvement of Ganapathi Sugars Limited in the consortium and the approach made by GEL to Ganapathi Sugars to join consortium and whether such failure contradicts the undertaking given at paragraph five of the confidentiality and noninterference agreement? And
(v) Whether GELCON failed to satisfy its offer for additional assets at Shakar Nagar as required by IFP which rendered its Best and Final Proposal non-responsive?
28. In addition to these, additional issues also would arise having regard to the submissions of the learned Additional Advocate-General. These relate to the effect of IS evaluating GELCON proposal with reference to Clause-25 of IFP as well as question of fairness in evaluating for responsiveness and compliance.
Judicial review of contractual powers of the Government and the public authorities
29. Before examining the various issues that arise for consideration it is necessary to recapitulate the settled principles of law of judicial review under Article 226 of the Constitution, in matters of contracts/tenders between the Government and the citizen. In Rasbihari Panda v. State of Orissa, , Siemens Engg. & Mfg. Co. v. Union of India, , Radha Krishna Agarwal v. State of Bihar, , R.D. Shetty v. International Airport
Authority, , Kasturi Lal v. State of J & K,
, Fertilizer Corpn. Kamagar Union v. Union of India, AIR 1981 SC 344, Gujarat State Financial Corpn. v. M/s. Lotus Hotels Pvt. Ltd., , Ram and Shyam Co. v. State of Haryana, , C Rami Reddy v. Government of Andhra Pradesh,
, Sri Sachidanand Pande v. State of West Bengal,
, Srilekha Vidyarthi v. State of Uttar Pradesh,
, Food Corporation of India v. M/s. Kamadhenu Cattle Feed Industries, , Sterling Computers Ltd. v. M & N. Publications Ltd., , Union of India v. Hindusthan
Development Corpn., , Tata Cellular v. Union of India, , New Horizans Ltd., v. Union of India,
, State of Himachal Pradesh v. Ganesh Wood Products, , Delhi. Science Forum v. Union of India,
, Raunaq International Ltd. v. I.V.R. Constructions, , AIR India Ltd. v. Cochin International Airport Ltd., , Monarch Infrastructure Pvt. Ltd., v. Commr.,
Ulhasnagar. Municipal Corpn., , Duncan Industries v. State of Uttar Pradesh, , Centre for Public Interest Litigation v. Union of India, , West Bengal
Electricity Board v. Patel Engg. Corpn., , Balco
Employees Union v. Union of India, , the Hon'ble
Supreme Court laid down various principles in this branch of administrative law.
30. A reference may also be made to a few judgments delivered by this Court relied on by the learned Additional Advocate-General in Srinivasa Constructions Ltd. v. BHEL, , Giridharilal
Constructions Pvt. Ltd. v. Union of India, , Hindustan Dorr-oliver Ltd. v. Godavari Fertilizers and Chemicals Ltd., , G. Venkataramana v. District Level Committee,
, Bajaj Electricals Ltd. v. State of A.P.,
, V. Mohan Rao v. Implementation Secretariat,
(DB), and Association of Drugs and Pharmaceuticals v. A.P.Health, Medical, Housing and Infrastructure Development Corpn., .
31. The following principles (be it noted these are not exhaustive) are well settled by reason of various decisions of Apex Court referred to above and other authorities.
(i) There is na mandatory principle of law, convention, custom, or administrative precedent requiring the Government or public authority to call for tenders while undertaking various governmental activities. [See R.D.Shetty v. International Airport Authority (supra)].
(ii) The Government is free to enter into contract with citizens either for the sale of immovable property like land/buildings or movable property, sell industrial units or its shares and stocks in public limited companies or in the companies of Government participation. [See R.D. Shetty v. International Airport Authority, and Sri Sachidanand Pandey v. State of West Bengal (supra), Life Insurance Corporation of India v. Escorts, Sterling Computers Ltd. v. M & N Publications Ltd., New Horizans Ltd. v. Union of India, Monarch Infrastructure Pvt. Ltd. v. Commr. Ulhasnagar Municipal Corpn. (supra)]
(iii) The Government's exercise of contractual powers must adhere to principles of equality before law and equal protection of laws keeping in view Articles 14, 15(1), 298 and 299. [See. R.D.Shetty v. International Airport Authority, New Horizans Ltd. v. Union of India and Monarch Infrastructure Pvt. Ltd v. Commr. Ulhasnagar Municipal Corporation (supra)]
(iv) All the eligible, qualified and suitable persons are entitled to claim right to be treated equally in the matter of awarding contract by the Government and public authorities. [See R.D.Shetty v. International Airport Authority, Tata Cellular v. Union of India, and Monarch Infrastructure Pvt. Ltd. v. Commr., Ulhasnagar Municipal Corporation (supra)]
(v) No citizen however can have an enforceable right to compel the State to enter into contract with him or her. The Court of judicial review cannot either declare or enforce such a nebulous right. [See Harvinder Singh v. Union of India and Assn. of Drugs and Pharmaceuticals v. A.P. Health, Medical, Housing and Infrastructure Development Corpn. (supra)]
(vi) The Court of Judicial review cannot interfere with the Government's absolute right to enter into contract with citizens unless such action is contrary to public interest, arbitrary and/or discriminatory. [See Sri Sachidanand Pande v. State of West Bengal, Food Corporation of India v. Kamadhenu Cattle Feed Industries, AIR India Ltd v. Cochin International Airport Ltd. and Monarch Infrastructure Pvt. Ltd., v. Commr. Ulhasnagar Municipal Corporation (supra)]
(vii) When the award of contract by a public authority or State is challenged before the Court, ordinarily the decision cannot be interfered with, unless the Court is satisfied that there is some element of public interest involved in entertaining such writ petition. By award of the contract, if the best price or best service is procured the same generally would subserve public interest and mere price difference between two tenderers may or may not be decisiye in deciding whether any public interest is involved. [See Raunaq International Ltd. v. IVR Constructions (supra)]
(viii) State owned/public owned property cannot be dealt with at absolute discretion of the executive. Public interest is a paramount consideration and one of the methods of securing public interest when it is considered necessary to dispose of the property is to sell property by public auction or by inviting tenders. This rule of disposing of property by public auction or by inviting tenders can only be relaxed in a situation intended to achieve goals set out in Part-IV of the Constitution. [See R.D.Shetty v. International Airport Authority, Ram and Shyam Co. v. State of Haryana, C. Rami Reddy v. Government of Andhra Pradesh and Sri Sanchidanand Pande v. State of West Bengal (supra)].
(ix) When the property is disposed of by public auction or by public tender the standards and guidelines set out in the invitation to tender or tender document must be scrupulously adhered to and the method of private negotiations is not ordinarily permissible unless there is sufficient indication in notice inviting tenders for such negotiations. [See Food Corporation of India v. Kamadhenu Cattle Feed Industries (supra)]
(x) Tender conditions are in the nature of administrative guidelines or instructions. Thus, the principle in Vitarelli v. Seaton, 359 US 535 = 3L Ed 2nd 1012 (1959), that an executive agency must be rigorously held to the standards by which it professes its actions to be judged and if the tender conditions require strict compliance there can be no relaxation of tender conditions. This, however, is not the case if the tender document or tender conditions require only substantial compliance with the tender conditions. [See R.D.Shetty v. International Airport Authority, Poddar Steel Corpn. v. Ganesh Engg. Works and West Bengal Electricity Board v. Patet Engg. Corpn. (supra)].
(xi) When the offers/proposals by bidding parties are evaluated by committee of experts with special knowledge, the decision plays an important role and price offered is only one of the criteria. The past record of the tenderers, quality of goods or services which are offered, its market reputation etc., play important role in deciding to whom the contract should be awarded [See Raunaq International Ltd. v. IVR Constructions and Centre for Public Interest Litigation v. Union of India (supra)]
(xii) The decision of public authority or the State especially when it is founded on the decision of experts committee cannot be subjected to appeal before the Court and ordinarily the decision of experts committee should receive approval of the Court unless it is grossly arbitrary and discriminatory. [See Fertilizers Corpn. Kamagar Union v. Union of India, Raunaq International Ltd. v. IVR Constructions, and Centre for Public Interest Litigation v. Union of India (supra)]
(xiii) So as to get the best price, best goods or best services, even if the Government enters into negotiations with all the eligible tenderers, there should be equality in the process, in that all the tenderers should be given an opportunity to participate in the negotiations. If the process is fair and not arbitrary, the absence of power to negotiate would not vitiate the decision-making by the public authority [See Food Corporation of India v. Kamadhenu Cattle Feed Industries, Union of India v. Hindustan Development Corpn. and Tata Cellular v. Union of India (supra)].
(xiv) Each and every lapse, breach or contravention, unless contrary to public interest, would not give rise to a ground for interference in a petition for judicial review. Administrative law recognises that fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere while making decisions in the tender process (See Sri Sachidananda Pande v. State of West Bengal, Food Corporation of India v. Kamadhenu Cattle Feed Industries, Sterling Computers Ltd. v. M & N Publications Ltd., Tata Cellular v. Union of India and Raunaq International Ltd. IVR Constructions (supra)]
General Issue No.(i)
Whether the Invitation For Proposals (IFP) does not require strict compliance of the conditions of tender?
32. The IFP is in four parts. Part-I deals with introduction and overview of the proposal. Part-II deals with procedures, terms and conditions, including important aspects of examination of the proposal for responsiveness and compliance and commercial/financial evaluation. Part-Ill deals with the modalities required for submission of the proposal and Part-IV contains the form for submission of proposals. The offer for privatisation of four undertakings of NSL, as seen from Part-IV of IFP, is to be addressed to IS. It inter alia contains a condition whereby the Participant or Proposed Purchaser acknowledges that it is bound by the provisions of IFP. Applying the principles in R.D. Shetty v. International Airport Authority (supra), it would not require an extended argument to conclude that all the participants and proposed purchasers have to strictly adhere to the provisions of IFP. This is not denied by the contesting parties. Indeed, Clause 1.10 of Part-I of IFP declares that to be eligible for evaluation of proposals, one must comply with the procedures, terms and conditions and requirements set out in IFP. The adherence to the procedures and requirements as well as terms and conditions, is altogether different from the process of evaluation. In this case, the evaluation took place at three levels, namely by CTBEC, FPBEC and Cabinet Sub-Committee.
33. Sri. E. Manohar, the learned Senior Counsel appearing on behalf of 4th respondent submits that the IFP requires strict compliance with all the terms and conditions and respondents 1 and 2 were justified in treating GELCON as non-responsive and non-compliant. Per contra Sri S. Ravi, placed reliance on the terms and conditions themselves in support of his contention that the Best and Final Proposal of a participant has to be evaluated on the test of substantive compliance and not strict compliance.
34. The requirements of tender notification may be classified into two categories. The first category is strict compliance category. Under this category, the essential conditions of eligibility are required to be enforced strictly, and it is not open to the authority to relax the conditions. The second category is substantial compliance category. Under this category, the ancillary and subsidiary conditions are required to be followed for achieving the main object of the conditions. Any technical condition can be relaxed or deviated, and rigid compliance is not required. Thus, tenders are subjected to substantive compliance test. If strict compliance test is to be applied in accordance with the tender documents, the law treats all the conditions as mandatory, whereas if substantial compliance test is to be applied, all the conditions are treated as valid, leaving it to the decision-making authority to treat whether the contesting tenderers have complied with the tender conditions or not.
35. In R.D. Shetty v. International Airport Authority (supra), it was observed that rule of interpretation applicable to statutes is equally applicable to documents, save for compelling necessity. The Court should not be prompt to ascribe superfluity to the language of a document and should be rather at the outset inclined to suppose every word intended to have some effect or be of some use. To reject words as insensible should be the last resort of judicial interpretation, for it is an elementary rule based on common sense that no author of a formal document intended to be acted upon by others should be presumed to use words without a meaning. The Court must, as far as possible, avoid a construction which cannot render words used by the author of the documents meaningless and futile or reduce to silence any part of the document and make it altogether inapplicable.
36. In Ram Gajadhar Nishad v. State of Uttar Pradesh (supra), the tender conditions required the tenderer to submit solvency certificate to the Collector. The Supreme Court interpreted the condition as requiring strict compliance and that non-compliance with the condition would lead to non-acceptance of the tender. In G.J. Fernandez v. State of Karnataka (supra), the Supreme Court considered a case where the notification inviting tenders by Karnataka Power Corporation Limited, was in XII paras, and the question was whether the conditions in Para-I and V are mandatory. Part-I laid down pre-conditions of eligibility for submitting a tender. Para-V requires the tenderers to supply the details called for. The Supreme Court held that the preconditions of eligibility for submitting tender must be considered as mandatory, and that omission to supply every small detail referred to in Para-V will not affect the eligibility under Para-I and disqualify the tenderer. It was also indicated that the various conditions should be considered in a harmonious and practical manner. Be it noted that Para-I laid down the pre-conditions of eligibility and Para-V required supplying of details for assessing the fulfilment of conditions in Para-I. The Supreme Court referred to the ratio in R.D. Shetty v. International Airport Authority (supra) in support of the view that all conditions of tender cannot be interpreted as requiring strict compliance. The following observations are apt and may be extracted.
.....It is true that the relaxation of the time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramana case will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the applicant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits.
37. G.J. Fernandez v. State of Karnataka (supra) is an authority for the proposition that pre-conditions of eligibility cannot be deviated from and strict compliance test should be applied, whereas the conditions requiring formalities in relation to the pre-conditions can be deviated from without causing prejudice to the rival competitors as they require a substantial compliance only. G.J. Fernandez v. State of Karnataka (supra) was followed in Poddar Steel Corpn. v. Ganesh Engg. Works (supra), and it was held thus :
...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...
38. In West Bengal Electricity Board v. Patel Engg. Corpn (supra), the respondent requested permission to correct a 'repetitive systematic computer typographical transmission error' in their tender submitted by it pursuant to the tender notification issued by the West Bengal Electricity Board. The appellant evaluated the bid and pointed out a number of arithmetical errors. Challenging the same, a writ petition was filed in the High Court at Calcutta. A learned single Judge of the High Court directed the West Bengal Electricity Board to reconsider the representation of the respondent and pass a reasoned order. A Division Bench of the High Court in writ appeal agreed with the learned single Judge and further directed the West Bengal Electricity Board to correct the errors in the tender documents. In appeal by the West Bengal Electricity Board, the Supreme Court reversed the judgment of the High Court at Calcutta holding that the instructions to bidders have to be strictly complied with, and there can be no departure therefrom. It is apposite to quote the following:
... The degree of the care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract The appellant-respondent Nos.l to 4 and respondent Nos.10 and 11 are all bound by the ITB which should be compiled with scrupulously. In a work of this nature and magnitude where bidders who fulfil pre-qualification alone are invited to bid, adherence to the instructions cannot be given a go-bye by branding it as a pedantic approach otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our constitutional values. The very purpose of issuing rules/ instructions is to ensure their enforcement lest the Rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provided under ITB, by the State or its agencies (the appellant) in favour of one bidder would create justifiable doubt in the minds of other bidders, would impair the rule of transparency and fairness and provide room for manipulation to suit the whims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity. In our view such approach should always be avoided. Where power to relax or waive a rule or a condition exists under the Rules, it has to be done strictly in compliance with the Rules. We have, therefore, no hesitation in concluding that adherence to ITB or Rules is the best principle to be followed, which is also in the best public interest.
39. The process of privatisation of NSL units was Swiss Challenge Process by invitation method. The IFF was 'issued inviting competing proposals requiring investors to submit more attractive investment proposals than unsolicited proposal of GELCON. After receiving the competing proposals, the action required to be taken was in accordance with para 1.10.10 and 1.10.11. As per para 1.10.10, competing proposals that are substantially responsive and compliant are evaluated and compared with the evaluation of the unsolicited proposals on the basis of criteria of weightings set out in the IFF. After finding out the competing proposal superior to the unsolicited proposal of GELCON, the second respondent required GELCON as well as the other qualified competing purchasers to submit the Best and Final Proposals (Para 1.10.11). These were then subjected to evaluation by the second respondent in accordance with Conditions 24, 25 and 26 of Part-II of IFP. A reading of these conditions would show that the test of substantial compliance is required to be applied. Condition 24(iii) defines a substantial responsive proposal as one that conforms to the aims of the proposal process, the procedures, the terms and conditions and requirements for submission of proposals without material deviation or reservation. The said condition No 25 reads:
(iii) A substantially responsive proposal is one that conforms to the aims of the proposal process, the procedures, terms and conditions and the requirements for submission of proposals without material deviation or reservation. A material deviation or reservation is one which:
(a) affects the proposal and the proposed transaction in a substantial way so that the aims of the proposed process are not fulfilled;
(b) introduces inconsistency with the Invitation for Proposals;
(c) limits in a substantial way GoAP/NSL's rights or the participant's obligations under the proposal process and the proposed transaction.
(iv) A proposal that is not substantially responsive will be rejected by the IS and no opportunity will be given to make the proposal responsive by correction or withdrawal of the non-conforming deviation or reservation.
(v) Only those proposals determined to be substantially responsive shall he evaluated.
(vi) A deficiency, informality or other irregularity in any proposal may be waived during the evaluation by the IS, if the substance of the proposal is not affected, or the matter is subsidiary or ancillary to the main aims of the proposal process or the object to be achieved by the procedures, terms and conditions or requirements concerned.
(vii) The IS may make a written request to participants to clarify arithmetic errors, ambiguities or inconsistencies in the proposal. No change in the scope of the proposal shall be sought or accepted. The responses from participants shall be in writing. Correction will not be permitted where it unfairly affects the competitive position of other participants that presented substantially responsive proposals.
40. The condition 25 clinchingly shows Best and Final Proposal has to be evaluated for its substantial compliance but corrections will not be permitted where it unfairly affects the competitive position of other participants who presented substantially responsive proposals. It is also to be remembered that as per Condition 1.10, to be eligible for evaluation of proposals, participant must comply with the procedures, terms and conditions and requirements set out in the IFP.
41. The investors, it must be held, are required to strictly comply with the procedures, terms and conditions, but at the time of evaluation, the Best and Final Proposals have to be evaluated if proposals are substantially responsive and compliant, and there cannot be any deviation from the essential requirements. The submission of Sri E. Manohar, the learned Senior Counsel for the fourth respondent is, therefore, rejected.
General Issue No.(ii)
Whether IS was justified in again evaluating the Best and Final Proposal of GELCON submitted on 11-1-2002?
42. According to the petitioners, based on the unsolicited proposal of GELCON, the sale of NSL units was advertised, and after receiving the bid proposals, the unsolicited proposal was evaluated. Therefore, it is contended that the evaluation of the Best and Final Proposal for responsiveness and compliance is not required. Elaborating further he submits that if any such responsiveness and compliance was required, even GELCON would have been asked to submit the proposal at the stage of inviting competing proposals. As GELCON was asked to send best and competing proposals after determining superior competing proposal, the evaluation of GELCON Best and Final Proposal for responsiveness and compliance is not in accordance with IFP. It is submitted that after evaluating three competing proposals received pursuant to the advertisement, the 2nd respondent addressed a communication dated 3-1-2002 inviting GELCON to submit a fresh Best and Final Proposal on or before 11-1-2002. GELCON believed that it had to improve upon the unsolicited proposal submitted initially, which was acceptable as responsive and compliant to respondents 1 and 2. There was, therefore, no necessity to again evaluate the Best and Final Proposal for responsiveness and compliance as well as for commercial and technical aspects.
43. The learned Additional Advocate General for respondents 1 and 2 strongly refuted the allegation that GELCON proposal was accepted as responsive and compliant. It is the contention that unsolicited proposal was taken as the benchmark for inviting competing proposals, and after deciding the superior competing proposal, GELCON was advised to compete on the basis of superior proposal of DPML and submit the Best and Final Proposal. GELCON submitted Best and Final Proposal as per forms and proposed statement without demur. The Best and Final Proposals of GELCON and fourth respondent were subjected to scrutiny for responsiveness and compliance as well as for commercial and technical aspects.
44. The controversy requires to be resolved by referring to certain conditions/ clauses in Part-I of IFP itself. As noticed earlier, the advertisement was issued clearly mentioning that an unsolicited proposal for joint venture to own and operate NSL units sponsored by the first petitioner was received by the Government of Andhra Pradesh, and that investors were advised to submit competing proposals providing more attractive investment proposal than the unsolicited proposal. Hence, there cannot be any doubt that the unsolicited proposal was indeed treated as a benchmark. Secondly, as per Clause 1.10 of the IFP, all the proposals must comply with the procedures, terms and conditions and requirements set out in the IFP, and all the proposals are to be evaluated among others, in accordance with Clauses 1.10.10 and 1.10.11. Be it noted that as per the definition in Part-II of IFP, the word 'proposal' means the submission in the format, and containing the content required by IFP for competing proposals, and includes unsolicited proposal and Best and Final Proposals. Therefore, the Best and Final Proposal submitted by GELCON being "proposal" within the meaning ascribed to it in IFP is also required to be evaluated as per Clauses 1.10.10 and 1.10.11.
45. The evaluation of the proposals is done in two stages. In the first stage, the competing proposals that are substantially responsive and compliant will be evaluated and compared with the unsolicited proposal on the basis of criteria and weightings in IFP. If there is no qualified competing proposal or none of the competing proposals is superior to the unsolicited proposal, then according to IFP, the report or the evaluation report, as the case may be, is submitted to CSC for decision and approval of preferred participant. In case one or more competing proposals are evaluated as superior to the unsolicited proposal of GELCON, the investor that submitted superior competing proposal will be again asked to submit Best and Final Proposal as per Sub-clause (e) of Clause 1.10.11. The Best and Final Proposal submitted by GELCON and the investor who gave superior competing proposal, shall be evaluated against the same objective criteria and weightings shown in Part-II. Be it also noted that the procedure for evaluating the competing proposals to find out whether or not they are superior to the unsolicited proposal, is contained in Clauses 24 to 27. Clause 28 of Part-II, stipulates that the investor that submitted the best competing proposal superior to the unsolicited proposal of GELCON will be eligible to compete on the basis of Best and Final Proposals that will be evaluated using the same criteria as applied to evaluate competing proposals and unsolicited proposals. Clause 28 needs to be reproduced verbatim, and it reads thus::
28. Eligible Participants for Submission of Best and Final Proposals
The Investor that submitted the best competing proposal that is superior to the unsolicited proposal and GELCON will be eligible to compete on the basis of Best and Final Proposals that will be evaluated using the same criteria as used to evaluate competing proposals and the unsolicited proposal. If the Investor that submits the best competing proposal, superior to the unsolicited proposal, does not submit a Best and Final Proposal, the EMD will be forfeited to GoAP and the Investor that submitted the next best competing proposal, superior to the unsolicited proposal, will be invited to submit a Best and Final Proposal. If that Investor should withdraw the same process will be applied as with the failure to submit of the Investor with the best competing proposal.
GELCON will be provided with a copy of the best competing proposal. After completion of the evaluation of proposals, GELCON may notify IS that it does not wish to submit a Best and Final Proposal without loss of EMD.
46. Yet again, Clause 31 of Part-II lays down that a Best and Final Proposal will be examined to ensure that it is substantially responsive and compliant with IFF and in particular with the procedures, terms, conditions and requirements. Proposals which are not substantially responsive and compliant will be eliminated from evaluation. To the same effect is Sub-clause (v) of Clause 31, which lays down that only proposals determined to be substantially responsive shall be evaluated. All these Clauses would show that unsolicited proposal, which was treated as benchmark and the Best and Final Proposal of GELCON are required to be examined for responsiveness and compliance, and any further evaluation would depend on responsiveness and compliance being satisfied with reference to the terms and conditions contained in IFF. For these reasons, the submission of the learned Counsel for the petitioners that the unsolicited proposal was evaluated and GELCON only submitted Best and Final Proposal so as to improve over the best competing proposal cannot be countenanced.
47. In the communication sent on 3.1.2002 to the first petitioner, IS informed that it has evaluated the bids (competing proposals) and decided that the competing proposal by DPML is superior to unsolicited proposal of GELCON. As GELCON is eligible to compete on the basis of Best and Final Proposal, it was advised to submit fresh Best and Final Proposal by 3-30 p.m., on 11-1-2002. GELCON was also specifically informed that the Best and Final Proposal to be submitted by them shall be evaluated against the same objective criteria and weightings shown in Part-II of IFP. The letter does not anywhere indicate that the unsolicited proposal of GELCON was evaluated for responsiveness and compliance. Indeed, as rightly contended by the learned Additional Advocate-General, the IFP is not required to examine or evaluate GELCON unsolicited proposal for responsiveness and compliance. An averment is made in para 44 of the counter-affidavit filed on behalf of respondents 1 and 2 that in November, 2001, competing proposals were examined for responsiveness and compliance, but GELCON unsolicited proposal was not examined. GELCON unsolicited proposal was scrutinised along with two comporting proposals only to find out whether or not any competing proposal is superior to the unsolicited proposal of GELCON.
48. The CTBEC report dated 25.2.2002 does not make reference to responsiveness and compliance of GELCON unsolicited proposal as it was not examined for responsiveness. The averment made in the counter has not been specifically denied in the reply affidavit What all the petitioner alleges is that in para 1.10 of IFP, there is a categorical statement that GELCON has complied with all the requirements, and therefore, to disqualify GELCON in phase-II is mala fide exercise of power. After perusing the various Clauses in Part-I of IFP, including Clause 1.10, it is not possible to accept the submission that unsolicited proposal was evaluated for responsiveness and compliance and was, as alleged, found to be responsive and compliant The General Issue (ii) is accordingly answered against the petitioners and in favour of the respondents.
Special Issues (i) and (ii)
(i) Whether the second respondent was justified in holding that GEL's shareholding in GELCON is not substantial ownership interest as required by Clause 2 (definitions) of IFP? And
(ii) Whether GELCON failed to include its proposal, required evidence of agreement and authorities from members of the consortium and thereby failed to satisfy the requirements of IFP?
49. These two issues can be considered together. As seen from the narration of events, CTBEC in its final report dated 25.2.2002 concluded that the Best and Final Proposal of GELCON is not responsive and compliant, and therefore, cannot be evaluated further for various grounds. In its meeting held on 14.3.2002, to consider the report of the CTBEC, the FPBEC accepted these grounds and further pointed out yet another disqualification. Be that as it may, insofar as these two grounds are concerned, the criticism of the learned Counsel for the petitioners Sri S. Ravi, is as summarised in next paragraph.
50. IFP defines 'investor' as the person submitting a competing proposal on his own behalf or on behalf of separate legal entity or consortium in which the investor must have a substantial ownership or participant interest. The assumption by the second respondent that the first petitioner had one per cent shareholding in GELCON was wrong. GR Cables (third petitioner) is a member of the consortium in which GEL has 43.63% of the shares, and therefore, the submission of Best and Final Proposal led by GEL satisfies the requirements of IFP. The learned Counsel also places reliance on letter dated 30-10-2001 addressed by the first petitioner to the second respondent wherein it was informed that GEL would have 20% shareholding (Rs.5 crores) in GELCON. The learned Counsel also placed reliance on the unsolicited proposal submitted by GEL on behalf of the consortium and the Best and Final Proposal to show that all associates of GEL like GR Cables, Goldstone Teleservices Limited, Goldstone Technologies Limited, are compendiously referred to as GEL, and therefore, GEL and its associates have 75% shareholding in GELCON. Even according to the clarification given to GEL, it had full freedom to change the members of the consortium, and to change inter se weightage in allotment of equity in GELCON. This was permissible according to the bid document.
51. Sri Ramesh Ranganathan, the learned Additional Advocate-General refers to the definition 'investor' and submits that the shareholding of GEL is not substantial as per definition and Clause 19 of Part-II of IFP. By letter dated 13-10-2001, GEL communicated its shareholding in the consortium at the stage of unsolicited proposal. The shareholding of GEL at the time of Best and Final Proposal as can be seen from the proposal forms is one per cent in the NEWCO, and therefore, the proposal cannot be treated as responsive and compliant. He further submits that even if GEL had substantial holding in GR Cables, it would not make any difference in Company Law as it is GEL that submitted the proposal on behalf of the members of the consortium, and in the absence of substantial shareholding, it was not a valid proposal.
52. GELCON, as described in the Best and Final Proposal at Column No.43, of proposal forms, is a special purpose investment company to be incorporated after acceptance of the bid by the Government of Andhra Pradesh. As held by me on General Issue No. (i), CTBEC has to evaluate the Best and Final Proposals after scrutinising for substantive responsiveness and compliance. Then only the bids will be evaluated further for commercial, technical, financial and price responsiveness. That does not, however, mean that a bidder is not required to satisfy the conditions in IFP and the various undertakings given at the pre-bid stage. "Investor" is defined in the IFP as person submitting competing proposal on its own behalf or on behalf of a separate entity or consortium in which the investor must have substantial ownership or participation interest. Such investor must have registered with the second respondent, and must have signed confidentiality and non-interference agreement before submitting the Best and Final Proposal. As conceived by CTBEC in its final report "participation interest" refers to interest where there is partnership or where there is joint venture which is based on an agreement between the parties and is not a separate legal entity as proposed for GELCON. As per Clause 3 of Part-I, in the case of unsolicited bid, GELCON is equivalent to 'investor' and GEL and its associates are participants in the process. Therefore, GEL being an investor has to satisfy that it had substantial ownership or participation interest in GELCON. This aspect of the matter is not disputed by the learned Counsel for the petitioners.
53. In its unsolicited proposal submitted on 12.10.2001 by GEL representing its promoters, group, associates and controlled companies, GEL proposed to promote a new public limited company - GELCON, exclusively for investments to be made in NEWCO and the said NEWCO-GELCON would have 51% shares and GoAP/NSL would have 49% Share. Among them, Dhampur Sugar Mills (DSL), its Group and Associates would take 20% stake and GEL and its group of companies would have 80% share. GEL's interest, as 'Such, separately was not mentioned. Further, GEL addressed a letter to the second respondent on 13.10.2001 informing and reiterating their inability to give separate and exact shareholding distribution of various companies in GELCON. However, purporting to act on the suggestion of the second respondent that the shareholding pattern can be altered by invoking Paras 11 and 13 of covering letter to the bid documents, GEL furnished details of shareholding of GELCON which shows that GEL had 20% (Rs 5.00 crores) in the NEWCO to be jointly promoted by GELCON and NSL. They also informed that they have option to interchange the proposed shareholding pattern among various entities constituting GEL and DSL with prior approval of the GoAP. Placing reliance on these documents, the learned Counsel for the petitioners would submit that GEL is a collective term denoting its promoters, group, associates and controlled companies. Therefore, when responsiveness and compliance is evaluated for those purposes, the combined shareholding of the group of companies in GEL is to be taken into consideration. Before appreciating this, it is necessary to refer to the Best and Final Proposal submitted by GEL on behalf of GELCON on 11.1.2002.
54. In the covering letter accompanying the Best and Final Proposal, GEL informed that they are submitting proposal on behalf of the proposed purchaser in which they will have substantial ownership or participation interest. GEL also executed a confidentiality and non-interference agreement on 11.1.2002 inter alia covenanting that they will have a substantial ownership or control over the consortium, and that if they do not have substantial ownership or control of the consortium they would inform the second respondent at least 24 hours before the receipt of proposals on the date of closure, and that the said person with substantial ownership or control of the consortium will register with IS. Coming to the Best and Final Proposal, in page 16 of the same, GEL gave the details of financial participation in GELCON proposed NEWCO and gave shareholding structure. The same shows that GEL was given one per cent, Goldstone Teleservices - one per cent, Goldstone Technologies Services - 24%, Dhampur Sugars - one per cent, Ganapathi Sugars one per cent, EITA India Limited one per cent and GR Cables 49% in the new investment company to be promoted (as proposed) by GELCON and respondents 1 and 3. This would show that GEL's shareholding in GELCON is not substantial, and does not satisfy the condition in IFF.
55. Sri S. Ravi, the learned Counsel for the petitioners vehemently submits that GEL and its associates have 47.63% of equity in GR Cables Limited, which will have 49% in GELCON, and therefore, this is sufficient compliance. This submission cannot be accepted. In its final report, CTBEC gave sufficient reasons for refusing this assumption; that Goldstone Group is not a legal entity; that Goldstone Exports Limited, Gold Stone Teleservices, Goldstone Technologies Limited, are all separate legal entities, and that there is no interchangeability from one company to another by virtue of GEL holding shares in Goldstone Teleservices and Goldstone Technologies Limited etc., are some of the reasons. This Court after anxious consideration is also of the opinion that even if the shareholding of Goldstone Exports, Goldstone Teleservices and Goldstone Technologies and EITA India Limited are taken as belonging to one group, the total shareholding pattern does not exceed 27%, which cannot be said to be substantial interest in GELCON. Nextly, whether GEL's substantial, interest in GR Cables would satisfy the definition of "investor" requires to be seen with reference to the concept of holding company and subsidiary company.
56. Sections 2(19) and 2(47) of the Companies Act, 1956 define "holding company" and "subsidiary company" as described in Section 4 thereof. As per the said Section, a company shall be subsidiary of another if the another company controls the composition of the Board of Directors or where the holders of preferential shares of such company have the same voting rights in all respects as the holders of equity shares or exercises or controls more than half of the total voting power of the company. A company becomes subsidiary of another company also when the other company holds more than half in nominal value of its equity share capital or the company is subsidiary of any other company, which is subsidiary. The expression "control" appearing in Section 4(1 )(a) was interpreted by the Courts as possession of the power by the exercise of voting rights to carry a resolution in general body meeting of a company, and that the control can be said to exist only if holding company has independent power by the exercise of which either directly or through one or more subsidiaries it can appoint or remove the whole or majority of the Board of Directors. In a given case, the control can also be indirect, that is to say, a company may hold shares by itself or can hold shares through its subsidiaries and thereby control the appointment and removal of the Board of Directors. It is also settled law that it is not necessary to have such shareholding as would secure the passing of a special resolution for which special majority is required. It is enough if the company holds majority of voting power in a company to constitute controlling interest. In British American Tobacco Co. v. International Revenue Commr, (1942) 12 Com. Cases 129, it was held that the degree of control resulting from 51% holding is 'control', and a relationship which brings about relationship is sufficient to say that a company has controlling interest in another company.
57. It is not the case of GEL that the other companies, namely, Goldstone Teleservices Limited, Goldstone Technologies Limited and EITA India Limited are its subsidiaries. It is also not its case that GEL has controlling interest in these companies. All the four companies, as rightly found by CTBEC are independent entities and GEL would not either directly or indirectly control the other three companies. The contention that the unsolicited proposal as well as Best and Final Proposal was submitted by GEL, representing its group, associates and controlled companies, and therefore, GEL is a collective term, cannot be accepted. It is too well settled that a Corporation in law is equal to a natural person and has legal entity of its own. As entity it is entirely separate from its shareholders; it has its name and seal of its own, having assets and liabilities distinct from those of its members. The position is well settled since the decision of the House of Lords in Solomon v. Solomon and Co., (1887) AC 22.
58. That all members of consortium are separate companies is supported by the proposal forms enclosed to the Best and Final Proposal statement of GELCON. Be it noted that under Column Nos.43 and 44 of the proposal form, if the participant is different from the proposed purchaser, the bidder is required to name the proposed purchaser and also state the name of the participant who is a substantial owner/ controller in the proposed purchaser. As GEL claims to be substantial owner of GELCON, as per the conditions of IFP, it is required to show its substantial ownership or control in GELCON. Insofar as these aspects are concerned, GEL purporting to represent GELCON has submitted seven sets of separate forms, especially insofar as Column Nos. 43 to 79 are concerned. In the first set, the name of the proposed purchaser is shown as GELCON (to be incorporated). In the second set, the name of the proposed purchaser is shown as EITA India Limited (5th petitioner). In the third set, the name of the proposed purchaser is shown as Ganapathi Sugars (7th petitioner). In the fourth set, the name of the proposed purchaser is shown as Dhampur Sugars (6th petitioner). In the fifth set, the name of the proposed purchaser is shown as GR Cables. In the sixth and seventh sets, the names of Goldstone Technologies Limited and Goldstone Teleservices Limited respectively are shown as proposed purchasers. GEL has no substantial shareholding in the proposed purchase company mentioned in Column 44 of proposal forms. These are found at page Nos.291, 306, 309, 312, 316, 320 and 324 of Paper Book-I. It is also a fact that in Column No.57, a bidder is required to give the particulars of the Controllers of the proposed purchasers. In all sets of forms, GEL has mentioned that there are no Controllers of the respective proposed purchasers. This also supports the view that GEL has no controlling interest in any of seven proposed purchasers.
59. Admittedly, GEL has only one per cent shareholding in GELCON. It is not the case that it has major shareholding in Goldstone Teleservices, Goldstone Technologies and EITA India Limited. Admittedly, Dhampur Sugars and Ganapathi Sugars are not GEL group of companies, and therefore, GEL has no shareholding at all in those two companies. Therefore, the 51% "equity holding test" is not satisfied. In Column No.62 of the proposal form, a bidder is required to give details of Directors of the proposed purchaser, if it is a Company. So far as GELCON is concerned, in para "S" of the proposal statement, it is stated that the Board of Directors of GELCON will be holding 51% of the equity, and NEWCO will have one Director each representing GEL, Ganapathi Sugars and Dhampur Sugar Mills. Likewise in Column No. 62 of other sets of forms also, the details of Directors in other six companies of the proposed purchasers are mentioned. The composition of Directors is wide varying and there are no common Directors in any of the companies who are stated to be proposed purchasers. Therefore, even "the test of majority voting power" in the company to show 'controlling interest' is not satisfied. Therefore, respondents 1 and 2 are justified in coming to a conclusion that GEL with one per cent shareholding has no substantial ownership interest directly in GELCON as required by IFF.
60. A reference may be made to L.I.C. v. Escorts Ltd (supra). In the said case, a group of thirteen companies incorporated in Britain collectively purchased shares of a company in India under a scheme framed under Foreign Exchange Regulation Act, 1973. The said Act permitted investment by non-resident Indians to a certain extent in Indian Companies and to a higher extent in case of companies belonging to non-resident Indians. The Act laid down that if 60% of the shareholding is of non-resident Indians, the company can be said to belong to nonresident Indians. Before the Supreme Court, it was urged that all the thirteen companies belonged to one family trust and represented by one single person, and therefore, they should be treated as satisfying the test. The Supreme Court declined to accept the view and also refused to lift the veil. It was further held:
Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since, that must necessarily depend on the relevant Statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc.
61. The Supreme Court also held that lifting the veil is not permissible to find out the individual identity of each shareholder. It is only done to know as to the true nature of the entity.
62. Insofar as the second ground of rejection is concerned, the learned Counsel for the petitioners does not dispute the fact that GELCON has failed to include in its proposal, the required evidence of agreements and authorities from the members of the consortium. He, however, made twofold submission. He would rely on Clause 1.10 of IFP, the letter dated 3.1.2002 addressed by the second respondent to GEL and the GEL reply dated 24.1.2002 in support of his contention that GELCON satisfies the requirement of responsiveness and compliance as required by IFP as well as para "G" of GEL covering letter dated 11.1.2002 accompanying the Best and Final Proposal. The learned Counsel for the petitioners in effect submits that the evaluation process is flexible, and therefore, even if GELCON has not submitted the agreements and authorisations from the members of the consortium, respondents 1 and 2 ought to have called for clarification. Per contra, the learned Additional Advocate-General placed reliance on Clause 24(1 )(b) of Part-II of IFF as well as Column No. 57 and submits that every bidder is required to comply with all the conditions and any subsequent clarification or communication cannot be entertained.
63. This submission of GELCON does not commend to the Court. The reasons are these. It is mentioned in IFP that GELCON is treated as investor by reason of its unsolicited proposal, and that after the evaluation of the proposals, if any competing proposal is found to be superior to that of unsolicited proposal, GELCON would be asked to submit its Best and Final Proposal, which again would be subjected to evaluation against the same objective criteria and weightings shown in Part-II. Keeping this in view, the purport of Clause 1.10 has to be considered. Clause 1.10 reads as follows:
Summary of Process
1.10. To be eligible for evaluation, all Proposals must comply with the Procedures, Terms and Conditions and Requirements set out here. Proposals will only be accepted from Participants that have registered interest, paid the non-returnable registration fee and signed the Confidentiality and Noninterference Agreement.
In summary the Proposal Process involves the following:
Prior to advertisement of the Invitation to Submit Proposals for the Four Undertakings, GEL acting on behalf of GELCON submitted an Unsolicited Proposal included at Appendix 1, signed the Confidentiality and Non-interference Agreement, paid the EMD of Rs. 1 crore and completed all other requirements from participants.
64. The learned Counsel for the petitioners placed reliance on the above clause and submits that GELCON has completed all other requirements, and therefore, satisfied the condition of submitting agreements also. Reliance is also placed on the letter addressed by the second respondent dated 3-1-2002 wherein it was observed by the Transaction and Financial Advisor of IS that GELCON will be eligible to compete on the basis of Best and Final Proposal. As Clause 1.10 deals with unsolicited proposal of GELCON, which was not evaluated at all for responsiveness and compliance, it would be futile to contend that GELCON proposal is responsive and compliant with reference to the submission of agreements and authorisations. There is no doubt that Sub-clause (7) of Clause 24 enables the IS to make a written request to participants to clarify arithmetic errors, ambiguities and inconsistencies in the proposal. It, does not, however mean that Sub-clause (7) of Clause 24 in any way whittles down the effect of condition 24(1 )(b) which inter alia says that as soon as practicable, following the opening of proposal, IS shall examine the proposals and determine whether the proposal (a) complies with the specified requirements contained in the proposal form of presentation and the manner and method of submission; (b) has been authorised, signed and submitted in the required manner with appropriate powers of authority and letters of authority, (c) is accompanied with the required enclosures that have been authenticated including EMD, and (d) is responsive to the aims and procedures and terms and conditions of the requirements of the proposal. If requirements are not complied with, the proposal has to be disqualified.
65. In West Bengal Electricity Board v. Patel Engg. Corpn. (supra), the Hon'ble Supreme Court laid down that adherence to instructions cannot be given a go-bye by branding it as a pedantic approach and that any relaxation or waiver of a rule or condition unless specifically provided for would encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our Constitutional values. This dicta applies squarely to the facts of this case.
66. The IFP in Part-Ill also gives a format of the covering letter and every participant submitting the Best and Final Proposal is required to give the covering letter on letter head of the participant to the IS. The said covering letter vide para '5.1'. 'G' provides that where the participant is different from the proposed purchaser, a copy of the legally binding agreement between the persons making up the proposed purchaser should be enclosed along with documentary evidence of the substantial ownership, control and voting power in the proposed purchaser held by the participant and voting powers of others. Clause 5.1 'H' of the covering letter also requires the Power of Attorney from the proposed purchaser or persons that form the proposed purchaser authorising the participant to sign and submit the proposal on its behalf. Having regard to this, the communication dated 5.2.2002 sent by GEL to respondent 2 requesting to be called to clarify inter alia deficiencies and infirmities and other irregularities in their Best and Final Proposal dated 11.1.2002 is of no avail. I have held that by reason of various Clauses in the IFP, the proposal has to be evaluated for substantial responsiveness and compliance. Nonetheless, a bidder who has not enclosed the legally binding agreement between the persons making the proposed purchaser and failure to provide documentary evidence of the substantial ownership cannot be allowed to take recourse to Clause 24(7) of Part-II of IFP. Such a proposal of GELCON, cannot be said to be substantially responsive and compliant with the requirements of the conditions in IFP. Accordingly, Special Issue Nos.(i) and (ii) are answered against the petitioners and in favour of the respondents.
Special Issue No. (in)
Whether GELCON submitted separate and distinct proposals contrary to IFP?
67. Clause 2 of part-II of IFP defines "Proposal" as submission in the form and containing the contents required by the IFP for competing proposals and includes the unsolicited proposal and Best and Final Proposals. Under Clause 21, a participant or other person may submit or participate in only one proposal. Where a person submits, participates in or is associated with more than one proposal, either directly or indirectly by itself or through a connected person, it will cause all connected proposals to be disqualified. Respondents 1 and 2 disqualified the Best and Final Proposal of GELCON inter alia on the ground that the proposal submitted by GELCON contains two separate and distinct proposals. Option (A) payment of Rs.53 crores on deferred payment basis, and Option (B) down payment of Rs.25.22 crores. The learned Counsel for the petitioners would rely on (a) the advertisements in the newspapers, (b) Clause 1.1. of IFP and (c) Clause 21 thereof to challenge the conclusion of respondents 1 and 2. The learned Additional Advocate-General, on the other hand, submits that having regard to the language of Clause 21 and the definition of "proposal" and paras 7 and 8 of the proposal form which deal with proposed payments, Option (A) deferred payment, and (B) down payment, submitted by GELCON are two distinct proposals, and therefore, disqualifying GELCON is justified.
68. As noticed earlier, CTBEC submitted its first report dated 1-2-2002 to FPBEC. In the said report, (at page 121, Paper Book Vol. IV) CTBEC doubted whether GELCON submitted two proposals by indicating two options in their proposal and concluded that GELCON submitted one proposal with two methods of paying its value and not two proposals, which could have led to elimination. However, CTBEC opined evaluation of each of the options of GELCON - (A) and (B) has to be carried on the basis of all criteria and not only price/present value as different weightings may be achieved under different criteria and under different options. When the report was considered by the FPBEC in its meeting held on 7.2.2002, the said Committee felt that there are several non-compliance and non-responsive matters which required legal view to decide whether these non- compliances would lead to elimination of the proposals. The FPBEC also pointed out that legal opinion be obtained, inter alia, on the following infirmity:
(b) The person actually submitting the tender should have a substantial stake in the entity on whose behalf the tender is submitted. The figures available with Implementation Secretariat indicate that Goldstone Exports holds only 1% in the Company the Consortium proposes to form, as indicated in their tender and this holding would not satisfy the requirement of 'substantial participation' prescribed in Para 3 of Part-II of the tender notice. It is stated that there is violation of the requirement under Clause 21 that one party should not give two proposals inasmuch as the present proposal contains alternatives and in subsistence amounts to two proposals by a single participant,
69. After obtaining legal opinion, the matter was again considered by CTBEC which submitted final report dated 25.2.2002 The CTBEC concluded as under:
The Committee had earlier interposed a link between a statement in the project report submitted by GEL to Punjab National Bank and the GELCON Proposal. The project report and GELCON proposal are identical except that the former does not show the shareholding structure of GELCON and the description of GELCON's second "option" is different.
The project report stated that the second GELCON "option" is the present value of the joint venture proposal but no sum is given. The GELCON proposal document stated that the second "option" is down payment of Rs.25.22 crores but makes no reference to this being a present value estimate of the joint venture proposal.
From these two statements, the Committee had inferred that GELCON's outright purchase price of Rs.25.22 crores is the present value of the joint venture proposal.
The recently received materials from or on behalf of GELCON show that the Committee's assumption about GELCON's present value estimate of the joint venture proposal and the inference drawn by the Committee cannot now be sustained.
With no sustainable basis for linking the two "options" and as the "options" result in:
- two different transactions - one a joint venture, the other a sale of assets.
- different parties to the contracts - NSL transfers assets to NEWCO in the Joint venture, NSL transfers assets to GELCON in the outright purchase,
- different subjects in the contracts, GELCON subscribes for shares in NEWCO in the joint venture, GELCON purchases assets in outright purchase,
- different methods and timing of payment,
- different outcomes,
- different evaluations,
- different transaction values
the Committee concludes that the GELCON submission contains two separate and distinct proposals,
70. The report was again considered by the FPBEC in its meeting held on 14.3.2002 when it was concluded that the proposal of GEPLCON is not substantially responsive and compliant. Having regard to these circumstances, the tentative observation in the preliminary report of CTBEC dated 1.2.2002 cannot be taken as irreversible conclusion that GELCON has submitted only one proposal and not two proposals. As per Clause 21 of IFP, a participant who submits two proposals is to be disqualified and CTBEC and FPBEC and CSC were justified in concluding that GELCON submitted two proposals.
71. Clause 21 postulates that a participant has to submit only one proposal. The word "one" as an adjective means single, undivided, the same. The word "only" as an adjective denotes, single in number, without others of the kind, without others worthy to be counted. (See Chambers Dictionary). The word "option" as a noun indicates an act of choosing, the power or right of choosing, a thing that may be chosen, or an alternative of choice. When an option is indicated, it means that there is a choice of choosing the alternatives either rejecting one or accepting the other. When GELCON submitted Option (A) deferred payment, and Option (B) down payment, the intention was to give alternative to the IS to choose either of the two. Therefore, Option (A) or (B) being alternative to each other, are two different proposals, and cannot be treated as one proposal. The conclusion of CTBEC as extracted is not arbitrary and unreasonable. Clause 21 also takes in its fold such a situation. Thus, Special Issue No.(iii) is decided against the petitioners and in favour of the respondents.
Special Issue No.(iv)
Whether there is failure on the part of GEL to advise IS in advance about involvement of Ganapathi Sugars Ltd., in the consortium and approach made by GEL to Ganapathi Sugars to join consortium and whether such failure contradicts the undertaking given at para 8 of the confidentiality and noninterference agreement?
72. M/s. Ganapathi Sugar Industries Limited (GSIL), the 7th respondent herein, separately applied for tender documents pursuant to the advertisement dated 16.10.2001. As per the advertisement, an investor who intended to submit proposal for the privatisation of four NSL undertakings can have information on the unsolicited proposal of GELCON, the proposal process of information about four undertakings from the IS on fulfilling certain conditions. As per Clause 1.10 of IFP, proposals will be accepted by IS from participants that they registered interest, paid non-refundable registering fee and signed confidentiality and non-interference agreement. These very same requirements were also mentioned in the advertisement. As per Clause 1.10, GEL acting on behalf of GELCON submitted an unsolicited proposal and signed confidentiality and non-interference agreement with IS. The confidentiality agreement and noninterference agreement executed by GEL and GSIL inter alia containing a covenant that investors will not discuss the proposal or approach any person with the proposal other than professional advisors. Clause (v) thereof reads as under:
We will not discuss our Proposal or our approach to the Proposal with any person other than professional advisers. In particular, we will not do so with any person that is or is potentially interested in the Four Undertakings, at any time during the bid process until the completion of the privatisation of the Four Undertakings. If it is necessary to hold discussions with another registered person or a person potentially interested in the Four Undertakings with a view to forming a consortium we shall notify IS in writing in advance of the discussions.
73. Be it also noted that GSIL executed the confidentiality agreement with IS on 16.10.2001. Likewise, GEL executed confidentiality agreement on 11.1.2002. It is also to be noticed that on 3.1.2002, GEL entered into an agreement with GSIL wherein the latter agreed to subscribe to 24% of equity of the special purpose investment company. These facts are not denied.
74. CTBEC having regard to Clause (v) of the confidentiality agreement signed by GEL and the fact that GSIL is a registered investor for the four undertakings came to the conclusion that GEL and GSIL did not inform IS in advance of the discussions to form consortium with registered persons and that both are bound by the confidential agreement throughout the proposal process, including the stage of evaluation of Best and Final Proposal. As they failed to inform IS, the Committee concluded that involvement of GSIL in the consortium, the approach made by GSIL to join GELCON and GEL failure to advise IS in advance about the approach of GSIL would amount to breach of the undertaking given in the confidentiality and non-interference agreement. The learned Counsel for the petitioners Sri S. Ravi, would contend that GSIL obtained only bid documents and they are not competitors, that there was no objection in Phase-I and that, there was no valid reason as to why GEL approach to GSIL to join the consortium was objected. He would also further contend that even according to the IFP, persons interested in one or more and not all the four undertakings can form a team with others to submit competing proposals for the ownership and management of four undertakings, and therefore, GSIL joining the consortium does not amount to breach of the undertaking. These contentions are refuted by the learned Additional Advocate General.
75. It may be recalled that the bid tender process is akin to Swiss Challenge Rule. However, the process was improvised, presumably to suit the exigencies of NSL privatisation. After unsolicited proposal, the registered investors were asked to submit competing proposals. These competing proposals were evaluated to find out one competing proposal superior to the unsolicited proposal of GELCON. In the second stage, the investor giving Best Competing Proposal and GELCON who had already submitted proposal were again required to give Best and Final Proposals with specific condition that both of them will be evaluated for compliance and responsiveness as well as for financial and price bid evaluation. When the petitioners submitted the unsolicited proposal (Page 37 of Paper Book Vol.1), it was clearly mentioned that the participant is a consortium of GELCON and had associated companies and Dhampur Sugar Mills Limited, sixth respondent herein. At that time, GSIL was nowhere in the picture. When GEL submitted their Best and Final Proposal on 11-1-2002, it was mentioned (Pg. 238 of Paper Book of Vol.I), that the participant is a consortium of GEL representing its promoters, group, associates and controlled companies, Dhampur Sugar Mills Limited, sixth respondent, Ganapathi Sugar Industries Limited, seventh respondent and EITA India Limited, fifth respondent. GEL never informed IS that GSIL is joining the consortium. When GEL and GSIL has executed the confidentiality agreement they were bound to notify IS in writing in advance in the event they hold discussions. It was incumbent on the part of GEL and GSIL to so notify whenever they hold discussions with any other registered person or persons potentially interested in the four undertakings. As per the letter dated 16.10.2001, addressed by GSIL to IS, they specifically expressed that they are potentially interested in quoting for four units of NSL. Therefore, the conclusion arrived at by CTBEC, and accepted by FPBEC as well as CSC, that GEL incurred disqualification by violating the confidentially agreement is justified.
76. It must not be forgotten that it was clearly mentioned in the IFP that (Clause 1.3) of IFP that fairness of standards are required on the part of investors. Participants and those associated with unsolicited proposal or competing proposals were expected to adhere to high standards of behaviour and not to do anything, which could undermine fair and equitable treatment for all participants. It was made clear that IS shall have absolute discretion to eliminate any participant from the process if there is credible ground for suspecting failure to adhere to the terms and spirit of the confidentiality and non-interference agreement. The same was reiterated in Clause 1.10 as well. While stating the principles of law of judicial review of contractual powers of Government and public authorities, this Court already indicated that fairness in the tender process is prime requisite to be immune to judicial scrutiny. Further, the substantial compliance and responsiveness does not mean that a participant who has not complied with the basic requirements of the tender document should be treated on par with those who substantially complied with various clauses in the IFP. This Court, therefore, holds this issue against the petitioners and in favour of the respondents.
Special Issue No.(v)
Whether CELCON failed to satisfy its offer for additional assets at Shakarnagar as required by IFP and thereby rendering its Best and Final Proposal non-responsive?
77. The IFP in Clause 1.6 gave brief description of four undertakings proposed to be privatised. The said clause also mentions that Shakarnagar Sugar Mills and Shakarnagar Distillery buildings are located on a site of Ac.50.00 and another Ac.40.00 for loading and unloading yards and Ac.20.00 for the effluent treatment plants and lagoons are required to operate factory. The participants were notified that additional land over and above the limit of Ac.20.00 provided in these two units was available at Shakarnagar. They were advised to specify which additional land, buildings or other assets are needed for Sugar Mills and the Distillery. They were to clearly state the price offered for each of the additional assets. The proposal forms are to be accompanied by the proposal statement in Part-IV of IFP. Paras 5 and 6 thereof (Pg 68 of IFP) indicate that the participant has to mention the additional assets required at Shakarnagar and the value offered for each asset. Para 6 of proposal statement requires a participant/proposed purchaser to inform the method of paying for the purchase of four undertakings and additional assets at Shakarnagar. In addition to this, Column No. 162 of the proposal form requires that if a new site or additional land is needed, the participant/proposed purchaser has to specify the land at Shakarnagar with reference to the maps provided and survey numbers and the price offered for this land and the additional assets must be stated separately.
78. GEL submitted proposal statements and proposal forms on behalf of the GELCON. Insofar as the proposed purchaser in Column No.44 - GELCON is concerned, the petitioners submitted as many as seven such forms (Column Nos. 44 to 169). In Column No. 162 of all seven sets, it is mentioned as follows:
Please refer to para 'O' of proposal statement.
79. Para 'O' of the proposal statement reads as under:
0. Details of the Assets and Business to be included in the transaction.
Mombojipalli Sugar Mills
Land (including colony) building, plant and machinery at the sugar mills (but excluding distillery and 40 acres of land) as itemised and valued in the asset valuation reports.
Metpalli Sugar Mills
Land (including colony) building, plant and machinery at the sugar mills as itemised and valued in the asset valuation reports.
Shakarnagar Sugar Mills and Distillery
Land, buildings, plant and machinery and effluent treatment facilities as itemized and valued in the asset valuation reports. Any extra assets required will be taken on 5 years lease at market rates,
80. A reading of the above would show that the petitioners have not specified additional assets required and the value offered for each of such items. They only mentioned that any extra assets required will be taken on five years lease at market rate. In contrast, DPML, 4th respondent in their proposal statement at paras 5 and 6 mentioned as under:
5. The values that the participant places on the following additional assets as Shakarnagar is Rs.. Specify the additional assets required and the value of each asset.
The extra land to the extent of 27 acres of factory land within compound wall (the 20 acres land has already been taken into consideration), K-type quarters 7 Nos, Senior Officers bungalows 3 Nos, Parking yard 3 acres 2 guntas, ETP for sugar and distillery 20 acres 30 guntas, Sugar unit buildings and other civil works, Distillery building and other civil works, ETP Bio-earth for distillery 9 acres 25 guntas and Narsapur bore well auxiliary water supply for Shakarnagar distillery 8 acres, 31 acres and 32 guntas will be taken for sugar industry at an additional cost subject to fresh valuation by District Collector/Professional Valuer with mutually agreed price.
6. The Proposed Purchaser shall pay for the purchase of the Four Undertakings and additional assets at Shakarnagar in the following manner.
In respect of Shakarnagar, please refer Item No. 5 above,
81. DPML in their Best and Final Proposal also gave details of additional land required (Page 12, Paper Book Vol. III). The CTBEC came to the conclusion that GELCON proposal fails to satisfy additional assets at Shakarnagar, as required by IFP and that the proposal states vaguely that any additional assets required will be taken on five years lease at market rates. Insofar as proposal of DPML is concerned, CTBEC concluded that DPML Best and 'Final Proposal was examined for responsiveness and compliance and that the proposal was found to be specific, responsive, compliant and eligible for evaluation. The learned Counsel for the petitioners attacks the conclusion of respondents 1 and 2 as discriminatory. He submits that the proposal of DPML does hot contain the offer in terms of money, whereas the petitioners' offer was clear and that they would take the assets, if necessary. He would also further submit that unequals are treated equally. Reliance is placed on Tata Cellular v. Union of India (supra) in support of the submission that an opportunity ought to have been given to the petitioners to clarify the so called vagueness. The petitioners were discriminated, it is urged, while examining the final proposal for its responsiveness and compliance and two sets of standards were applied.
82. The learned Additional Advocate General invited the attention of the Court to the proposal statement and proposal form submitted by the petitioners as well as the Best and Final Proposal submitted by DPML and submitted that it is only DPML which has submitted specific proposal and the petitioners failed to do so.
83. As already pointed out, in GELCON proposal, it was mentioned that any extra assets required will be taken on five years lease. This is certainly vague. There is no specific indication whether or not additional assets are required. In Clause 1.6, it is specifically mentioned in the IFP statement proposal relating to four NSL units, the extent of land is limited to Ac. 20 00 only. It was also mentioned that an extent of about Ac. 40.00 is required for loading and unloading yards to operate the factory, and Ac.20.00 for effluent treatment plants and lagoons and that the participants should specify which assets are needed for the Shakarnagar Mill and Distillery. The participants are also required to state clearly the price of each additional unit. In that view of the matter, the proposal statement submitted by GELCON insofar as additional land is concerned, cannot be considered as responsive or compliant. In the proposal submitted by DPML, it was mentioned that Ac. 31-30 guntas additional land will be taken for Shakarnagar and Ac. 9.25 guntas for Distillery at an additional cost subject to fresh valuation by District Collector or a professional valuer at mutually agreed price. The proposal, as rightly contended by the learned Additional Advocate General is responsive and compliant as per substantive compliance test. Thus the submission of the learned Counsel for the petitioners that unequals are treated equally and there is discrimination does not merit consideration. Special Issue No.(v) is accordingly answered against the petitioners and in favour of the respondents.
84. There are certain additional issues raised by the learned Additional Advocate General as well as the learned Senior Counsel Sri. E. Manohar, for the fourth respondent. They would submit that the tender of the 4th respondent is disqualified on the ground that it is not responsive and compliant. In such a situation they contend, the Court, in exercise of jurisdiction under Article 226 of the Constitution of India, would not be inclined to interfere. They would further urge that the 4th respondent submitted joint venture proposal of Rs.65.40 crores, whereas GELCON submitted joint venture proposal for Rs.53.00 crores, and therefore, in view of this, the other considerations would not be relevant. They are forceful in their submission that in the decision-making process of respondents 1 and 2, public interest has been adequately subserved and there is no failure on the part of respondents 1 and 2 to secure the best market price or best proposal.
85. Insofar as the submission of the learned Counsel for the petitioners that, GELCON/GEL ought to have been given an opportunity to correct the errors or clarify the paucity of information, they would place strong reliance on West Bengal Electricity Board v. Patel Engg. Corpn. (supra) and submit that there is no breach of doctrine of fairness, and there is no arbitrariness in the decision-making process. In reply to these contentions, the learned Counsel for the petitioners strenuously challenged the submissions.
86. This Court proposes to examine all these issues compendiously under this heading "additional issues". The well settled principles of judicial review of contractual powers of public authorities have been noticed by this Court. These general principles have not been disputed by the learned Counsel for the parties. All actions of the State and public authorities which do not properly belong to the field of public law, but belong to the field of private law, are not amenable to judicial review. This is now axiomatic. The higher Courts in all the jurisdictions of the world have repeatedly held that the State has absolute discretion; though reviewable - in matters which basically and exclusively belong to governance. They should have play in the joints so that vicissitudes of circumstances and exigencies of situations can be effectively met. Nonetheless, public interest must be sine qua non in every governmental action. Generally, in matters of contracts and contractual obligations, the public interest is subserved when maximum monetary and non-monetary benefit (best market price and best service) is bargained by the State while dispensing largesseess, rights and privileges to persons. Even if the monetary and non-monetary benefits bargained by the State are not the maximum, but optimum, various considerations should weigh with the Court before coming to a conclusion. Unless the action is mala fide and grossly unreasonable, no interference is called for. One of the inherent limitations in judicial review is that the Court will not ordinarily delve into academic matters or concern itself with intricacies of trade and commerce [See L.I.C. v. Escorts Ltd. and Raunaq International Ltd. (supra)].
87. It is apposite to also refer to yet another facet of judicial review of contractual obligations of the State. In its multifarious activities, the State innovates. One such modern innovation is a State controlled or State owned Corporation. Even such Government owned Corporation/Companies, in law, have been treated on par with other companies owned by citizens/persons. They cannot be different insofar as the rights and privileges of the owners/promoters of the companies are concerned. In L.I.C. v. Escorts Ltd. (supra), this aspect of the matter was considered. The Constitution Bench of the Supreme Court observed as under:
Thus, we see that every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolutions proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review. It is true that under Section 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managinging agent if any, the secretaries and treasurers if any, and the manager, if any. This is a duly cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions, which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons for moving the resolutions.
88. In the case on hand, though the IFP invites bids for the sale of four units of NSL, an option is given for forming a joint venture with Government of A.P./NSL. That is to say, first respondent is disinvesting its shares in the four units of NSL. In such a situation, can the first respondent, which has 98% shareholding in NSL be subjected to the limitations in excess of restrictions which operate against a private company or promoters of a private company? The answer must be in the negative as per the authoritative dicta in L.I.C. v. Escorts Ltd. (supra)
89. The first respondent has same powers, privileges and rights in relation to NSL while disinvesting its shares. The evaluation process is bound to involve intricacies of trade and commerce. The Court lacks necessary expertise, and it is not in the province of the Court to review State action even if fiscal policy (economic reforms) and its mariifestations adopt a broad "method of trial and error" and "adjustments here and there" without ignoring principles of Rule of Law. A reference may again be made to L.I.C. v. Escorts Ltd. (supra), wherein it was held:
For example, if the action of the State is political or sovereign in character, the Court will keep away from it. The Court will not debate academic matters or concern itself with the intricacies of trade and commerce. If the action of the State is related to contractual obligation or obligations arising out of the Court, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the Company like any other shareholder.
90. A reference may also be made to Centre for Public Interest Litigation v. Union of India (supra), wherein it was held:
... it will be very difficult for the Courts to visualize the various factors like commercial/ technical aspects of the contract, prevailing market conditions, both national and international and immediate needs of the country etc., which will have to be taken note of while accepting the bid offer. In such a case, unless the Court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the Courts to come to the conclusion that such a contract can be prima facie or otherwise held to be vitiated so as to call for an independent investigation, as prayed for by the appellants...
91. The Court has adverted to this aspect of disinvesting, having regard to the persistent submission made by the learned Counsel for the petitioners that respondents 1 and 2 have acted unfairly and with legal malice. Assuming that respondents 1 and 2 have fulfilled all the requirements of Company Law while disinvesting their shares in NSL can this Court interfere with their decision, even if the respondent is a State? Can this Court examine the complaints of legal malice and unfairness, if respondents 1 and 2 had been private juristic persons exercising the rights and privileges under the Company Law? Can this Court scrutinize the action of the first respondent which is purely in the realm of private law? All the authorities referred to hereinabove administer caution, and the Court must be very cautious in weighing the relative merits of the "winner" and "loser" in the tender process. This is especially so when the intricacies of trade and commerce have been evaluated by Government with the help of an expert body. It is apt to extract the following observations of the Apex Court from Raunaq International v. I.V.R. Constructions (supra):
Often when an evaluation committee of experts is appointed to evaluate offers, the expert committee's special knowledge plays a decisive role in deciding which is the best offer. Price offered is only one of the criteria. The past record of the tenderers, the quality of the goods or services which are offered, assessing such quality on the basis of the past performance of the tenderer, its market reputation and so on, all play an important role in deciding to whom the contract should be awarded. Atimes, a higher price for a much better quality or work can be legitimately paid in order to secure proper performance of the contract and good quality of work - which is as much in public interest as low price. The Court should not substitute its own decision for the decision of an expert evaluation committee.
92. There is yet another controversy raised by the learned Counsel for the petitioners. He submits that though CTBEC and FPBEC found the Best and Final Proposal submitted by GELCON as not responsive and compliant, but still it was evaluated for commercial and technical aspects. He would also submit that in awarding marks at stages 1 and 2, there was discrimination practiced against GELCON. Though the learned Counsel for parties have devoted considerable time for making submission on this point, I am of the considered opinion, that this Court being not an appellate authority, it is not proper to subject the awarding of marks as per para 25 of IFP to judicial scrutiny, especially when this Court on an overall view of several decisions of the Apex Court and the various clauses in the IFP concluded that the decision-making process in disqualifying the Best and Final Proposal of GELCON as non-responsive and non-compliant, does not suffer from any illegality or impropriety or irrationality.
93. CTBEC first examined the Best and Final Proposals of GEL and DPML for responsiveness and compliance with the IFP, and on an illustrative evaluation, GELCON Proposal No. 1 (Joint venture) was taken up for the purpose of comparison. GELCON Proposal No.2 - outright purchase, was not capable of being evaluated as business plan was stated to apply to only joint venture. Be it noted that as per Clauses 1.3, 1.10.10 and 24(v) of IFP, the Proposals determined to be substantially responsive are only to be evaluated. Therefore, the learned Counsel for the petitioners cannot be heard to say that there was discrimination in awarding marks as per Clause 24(v) of IFP. It must be remembered that GELCON proposal was examined for the purpose of illustrative evaluation. CTBEC in its report dated 25.2.2002 pointed out as follows:
While GELCON's proposals are not eligible for evaluation, the report provides an illustrative evaluation of the proposals -although limited by lack of information in the case of outright purchase. The purpose is to assist decision-making on what to do next with the NSL undertakings and the results are shown in Appendix 5.
94. It was concluded by CTBEC in its report as follows:
The DPML Proposal was found to be substantially responsive and compliant. The DPML Proposal was evaluated and given a rating of 68 points. The Committee did not carry out a project appraisal of either the DPML or GELCON proposal, The Committee is not expressing a view on the likely success or otherwise of the proposals or endorsing the assumptions and projections contained in the proposals.
The illustrative evaluation of the eliminated GELCON Proposal 1 Joint Venture produced a rating of 58. GELCON Proposal 2 for outright purchase was not capable of being evaluated on all criteria as certain material such as the business plan was stated to apply only to the joint venture.
Hypothetically, if an acceptable business plan had been included with the outright purchase proposal, there would be an improved rating relative to GELCON's joint venture proposal as outright purchase means no outstanding payments to NSL/GoAP. Side by side with that improved rating because of no outstanding payments, the outright purchase proposal would receive a lower rating relative to the GELCON joint venture proposal on other criteria. This is because the GELCON Proposal states that it would be unable to finance purchase of the assets and implement the investment plan.
95. From the above, it is clear that illustrative evaluation of the eliminated GELCON proposal for the purpose of comparison of DPML proposal was done only to find out whether GELCON proposal was financially more responsive. As rightly contended by the learned Senior Counsel for the 4* respondent, it was not obligatory on the part of CTBEC to evaluate the same, and the Court in such circumstances would not interfere with the decision-making process.
96. In Ram Gajadhar Nishad v. State of U.P. and G.J. Fernandez v. State of Kamataka, (supra) the Apex Court observed that the action of the State in not opening the tender of a person who did not fulfil the requirements of the tender notice was justified. In G. J. Fernandez v. State of Kamataka (supra,) the Apex Court, while referring to its judgment in R.D. Shetty v. International Airport Authority (supra) made the following observations:
... But, we are inclined to agree with the respondent's contention that while the rule in Ramana case will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits. The appellant had no doubt also urged that the MCC had no experience in this, line of work and that the appellant was much better qualified for the contract. The comparative merits of the appellant vis-a-vis MCC are, however, a matter for the KPC (Counselled by the TCE) to decide and not for the Courts. We were, therefore, rightly not called upon to go into this question.
97. For the above reasons, it must be held that the submission of the learned Counsel for the petitioners that respondents 1 and 2 acted unfairly with legal malice must be rejected as devoid of merit.
98. The learned Counsel for the petitioners also made a feeble submission that the decision of the second respondent may be set aside and a direction be issued that the Best and Final Proposal submitted by the petitioners and fourth respondent be evaluated by an independent body of experts. A similar prayer was made in Centre for Public Interest Litigation v. Union of India, (supra). It was also a case of consortium of Reliance Industries Limited and Enron bidding for development of medium size oil fields on joint venture. It was a profit sharing contract and the bids were evaluated by the recommending authority based on a comparative economic study conducted by ONGC for Panna and Muktha Oil Fields. It was submitted that the report of the economic study was not placed before the Government of India when the decision was taken Therefore, the appellant sought for independent investigation. In such circumstances, the Apex Court rejected the prayer observing that in the absence of any prime facie conclusion that the decision to contract is vitiated by unreasonableness, independent investigation cannot be ordered. The decision in Centre for Public Interest Litigation v. Union of India, (supra) squarely applies to the facts of this case also. The submission is therefore rejected.
99. When the matter was placed before it, FPBEC noticed that by submitting two letters from Sri C. Ramachandraiah, Member of Parliament on 11.2.2002 and 14.2.2002 suggesting as to how GELCON Best and Final Proposal should be rated, GEL has violated confidentiality and noninterference agreement dated 11.1.2002 leading to disqualification regardless of eligibility for evaluation or the results of evaluation at any time in the bid process. Basing on this, the learned Senior Counsel for the fourth respondent Sri E. Manohar submits that by making a Member of Parliament to write letters to Hon'ble Minister for Industries With obvious motive of influencing the decision-making, the petitioners violated the confidentiality and noninterference agreement and also incurred disqualification under various clauses of IFP. This Court is not inclined to consider the submission for two reasons; first, in the counter-affidavit the reasons for disqualifying the GELCON Best and Final Proposal are mentioned which have been considered in detail and this is not one of the reasons, and, secondly, the learned Additional Advocate General did not specifically press this submission presumably because it did not weigh significantly with the CSC when it considered the reports of CTBEC and FPBEC.
100. Contracts, licences, quotas, mineral rights and other valuables, dispensed by the Government take many forms and replace the traditional forms of wealth. In dispensing these valuables, the Government is not invariably subjected to public law principles. There are many governmental actions, which have private law character. However, whether in the realm of private or public law, if one of the parties to the transaction is government or public authority, the Court of judicial review would not shirk its constitutional role to test the Governmental action on the touchstone of transparency and fairness. It, does not, however, mean that the Court would interfere in all the non-justiciable issues and decisions. As observed by the Apex Court in Tata Cellular v. Union of India (supra) the present trend in all the jurisdictions, points to judicial approach of non-interference unless the action impeached is absolutely arbitrary and mala fide. If the Government as owner of public sector undertaking invites a partner for joint venture and disinvests its share or its financial interest, there should be very strong reasons and grounds for interfering with the decision of the Government in choosing a preferred participant. These are absent in the present case. This Court has examined the decision-making process at every stage in the light of IFP relating to privatisation of four units of NSL and keeping in view the fact that the Court of judicial review is not a Court of appeal. The Court is satisfied that respondents 1 and 2 have procured the best market price and have chosen a superior proposal to the unsolicited proposal as well as Best and Final Proposal of GELCON. Indeed, having regard to the importance of the matter and principles of fairness, though this Court refused to pass an interim order, requested the learned Additional Advocate General not to take any hasty step, which would tend to result in a fait accompli. In obedience to such observations, it is reported that the decision has been kept in abeyance.
101. This Court has now considered all aspects from different angles and there are no grounds to interfere with the decision of respondents 1 and 2 in choosing DPML as preferred participant. The writ petition fails and it is accordingly dismissed. There shall, however, be no order as to costs.