Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): This reference was filed before Ashok Kumar, Chairperson and  Augustine Peter and U.C. Nahta, Members by the Chief Materials Manager/Sales, Eastern Railway i.e. informant under Section 19(1)(b) of the Competition Act, 2002 against Laxven Systems and Medha Servo Drives (P) Ltd., alleging contravention of provisions of Section 3 of the Competition Act.

Facts of the case were that informant floated a tender for procurement of Microprocessor Control and Fault Diagnostics System for Electric Locos as per Research Designs and Standard Organisation. As per the information brought before Commission, there were initially 4 approved vendors but an amendment was brought in the criteria for selection due to which 2 vendors were delisted. Laxven did not participate in the impugned tender due to which by default, Medha won the tender who quoted a high rate. Negotiation by informant were not accepted and they were forced to accept the high rate quoted by Medha thus, Laxven was alleged for non-participation as a result of bid suppression and formation of a cartel.

Commission observed the fact that Laxven had not participated in other tenders conducted in the 3 Railway Zones and the reason being that they had not developed a Prototype for the required System. Thus, the allegation of bid suppression and cartelization was unsubstantiated. The high rate quoted by Medha was found to be justified due to the improved system which was to be supplied to the informant. Commission on finding no contravention of Section 3 of the Act directed the information to be closed in terms of Section 26(2) of the Act. [Chief Material Manager v. Laxven Systems, 2019 SCC OnLine CCI 1, dated 02-01-2019]

Case BriefsHigh Courts

Patna High Court: A Division Bench comprising of Amreshwar Pratap Sahi and Anjana Mishra, JJ. rejected a letters patent appeal arising from an order in a writ petition wherein a tender process was held to be vitiated.

Respondent herein had filed a writ petition challenging tender for placement of security guards at Sadar Hospital on the ground that he was not intimated about the opening of the technical or financial bid which was an essential condition of tender as a result whereof prejudice had been caused to him. The said petition was allowed by the learned Single Judge, and aggrieved thereby the instant appeal was filed by the winner of the bid.

The Court noted that, in the writ petition, the appellant had filed a document containing recording of minutes of the technical bid which did not bear the signature of the second member, namely District Sales Tax Officer. Whereas the technical bid opening document filed by the respondent 2 State along with its counter affidavit was signed by District Sales Tax Officer and had an interpolated date thereon.

The State submitted that the document filed with counter affidavit was the correct document, and appellant’s counsel Mr Arup Kumar Chongdar had no explanation as to how and from did he receive the document filed by him.

In view of the above, it was opined that the recording of technical bid was doubtful and manipulation in the opening of technical bid was evident. In relation to the financial bid, there was no evidence of service of notice on the respondent. Thus, the Court discredited the entire procedure relating to opening of technical bid and participation of respondent in technical bid or financial bid. [Spider Protection Services Pvt. Ltd. v. Imperishable Security Services Pvt. Ltd., 2018 SCC OnLine Pat 2264, decided on 20-12-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: This petition was filed before a Single Judge Bench of Atul Sreedharan, J., against the order passed by respondents where petitioner-firm were restricted from participating in any tender floated by respondents for 3 years. Further, registration of petitioner-firm with the respondents was also cancelled on the ground that while participating in a tender they had given wrong turnover for the Financial Years 2008-09 and 2010-11.

Issue before the court was whether the order of blacklisting was disproportionate to the misdemeanor caused to respondents.

It was contended by the petitioner that they were declared ineligible from participating in the tender without adequate reasons. Further, no loss ever occurred to the respondents. In addition to that respondent could not have blacklisted petitioner according to Clause 7.3 of the tender document given by respondents thus, impugned order was bad in law. Whereas respondent contended that the ban was a business ban put on the petitioner and not blacklisting.

High Court was of the view that relevant aggravating circumstances against petitioner and mitigating circumstances in favour of petitioner were found. Court agreed with the fact that petitioner mis-stated its turnover in order to defraud the respondent. However, even after above observation, though the Court considered blacklisting to be appropriate but the period of three years was considered to be unduly harsh and the same was reduced to 18 months. [Fibretech v. BHEL,2018 SCC OnLine MP 875, order dated 30-11-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: The petitioner, who challenged the eligibility of Respondent 5 to participate in the Tender process, was left high and dry when the Division Bench comprising of Hemant Gupta, CJ and Vijay Kumar Shukla, J. held that the Court in exercise of judicial review, will not sit as a Court of appeal over the decision taken by a committee of experts.

The eligibility of the said respondent to participate in the Tender for upgradation of Raipur-Sitapur-Paani Road was challenged by the petitioner. The alleged ground for the challenge was that Respondent 5 did not meet one of the conditions to participate in the process, viz. execution of the contractual works of the specified quantity during the last 5 years. The Chief Engineer, PWD (Rewa Division) sought information from Respondent 5 regarding the same but even before his response, the decision declaring him eligible for participating in the tender process was taken. The petitioner submitted that the decision of the respondents was arbitrary, irrational and unsustainable.

The High Court heard the parties and found no infirmity in the decision taken by the respondents. The Court held that “The question: as to whether the bidder is technically qualified or not, is a decision taken by the experts. Since the experts have taken a decision that Respondent 5 is eligible to carry out the work advertised, therefore, this Court in exercise of judicial review will not sit as a court of appeal over the decision taken by the committee of experts.” The Court found no merit in the petition which was accordingly dismissed. [TBCL Shiv Shakti Construction Co. (Joint Venture) v. State of M.P.,2018 SCC OnLine MP 351, dated 14-5-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: The Commission recently dealt with an application that was filed by the Association of Registration Plates Manufacturers of India, under Section 19(1)(a) of the Competition Act, seeking information against the respondents collectively, alleging them of having contravened the provisions of the Act. The informants sought investigation into the anti-competitive manner that was being done through cartelisation of implementation of a mandatory “High Security Registration Plates” (HSRP) Policy in various States by the respondents. The informants had previously filed several cases in the High Courts for larger interest of competition and public interest for the implementation of the aforementioned policy. The HSRP Policy was promulgated in 2001 following Parliament attack and the objective behind it was to control the usage of counterfeit registration plates over vehicles. The respondents had got their companies type- approved on 3 consecutive days in the same year.

The applicant pointed out that the Supreme Court had held in Association of Registration Plates v. Union of India, (2005) 1 SCC 679 that the State shall have the power to select a certain manufacturer through notice inviting tender (NIT) and can impose tender conditions for the purposes of manufacturing, supplying or selling of HSRP. He argued that the conditions upon which the tender was issued was such that it proved cartelization amongst the respondent companies had taken place as the rates quoted by them were so high that it could only be secured if there did not exist any competition in the selection process. This was done by seeking assistance from officials of the Transport Department in creating a “tailor-made pre-eligibility criteria”. But when non-manipulated NITs were issued in other states, since the respondent companies could not control the market in those states, the HSRP rates saw a fall in them in such states. This acted as an impetus for the respondent companies to lower their own rates to unreasonably lower prices so as to again be able to eliminate competition.

The Commission held that a careful consideration of the facts of the case ruled out a specific case of bid rigging in any State post relaxation of norms since many previous contracts that the respondent companies had secured were cancelled subsequently and other companies formed contracts instead of the ones in question. The Court mentioned that this could at best be called a case wherein misconduct by public officials had taken place since they connived with the bidding entities. But it went on to acknowledge that CBI had already begun proceedings in that regard and hence, the Commission didn’t need to look into that matter any longer. [Association of Registration Plates Manufacturers of India v. Shimnit UTSCH India Private Limited; Case No. 58 of 2017, decided on 14.11.2017]

Case BriefsSupreme Court

Supreme Court: Stating that in a complex fiscal evaluation the Court has to apply the doctrine of restraint, the Court held that the courts cannot really enter into the said realm in exercise of power of judicial review as several aspects, clauses, contingencies, etc. have to be factored and these calculations are best left to experts and those who have knowledge and skills in the field.

In the present case, before finalization of the financial bid submitted series of representations and seeing the silence of the owner it knocked at the doors of the Madras High court which directed for consideration of the representations. Stating that the High Court at that stage should have exercised caution, the Court said that if the courts would exercise power of judicial review in such a manner it is most likely to cause confusion and also bring jeopardy in public interest. An aggrieved party can approach the Court at the appropriate stage, not when the bids are being considered. Once the price bid was opened, a bidder could not have submitted representations on his own and seek a mandamus from the Court to take certain aspects into consideration. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently.

The Court also noticed that the issue pertaining to correctness of Consultant’s report has to be adjudged and scrutinized within the scope of limited power of judicial review in the obtaining factual score and in the present case the Consultant had analysed the offers regard being had to the tender conditions. Be it ingeminated that the analysis and determination made by the financial consultant has been carried out before receipt of any additional document from either side. The documents were called for by the owner from both the qualifying bidders in a transparent manner and the same have been considered at the time of evaluation by the Consultant.

The Bench of Dipak Misra and Shiva Kirti Singh, JJ held that Courts cannot sit in appeal over the financial consultant’s assessment. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. [Tamil Nadu Generation and Distribution Corporation Ltd. v. CSEPDI – Trishe Consortium, 2016 SCC OnLine SC 1150, decided on 18.10.2016]

 

Case BriefsSupreme Court

Supreme Court: In the controversy relating to bids invited by the Nagpur Metro Rail Corporation Limited for the design and construction of Metro Rail in the city of Nagpur, the Court held that M/s. Guangdong Yuantian Engineering Company (GYT) of China and M/s. TATA Projects Limited (TPL) as a Joint Venture (GYT-TPL JV) were not eligible to bid for the contract under consideration.

The issue arose in the light of one of the eligibility criteria specified by NMRCL where it was necessary that the bidder has satisfactorily completed a minimum number of similar contracts as a prime contractor, joint venture member during last 10 (ten) years i.e. up till 31.05.2016. According to GYT-TPL JV, it had executed the Pearl River Delta intercity high speed railway project in China, however, as per NMRCL, an inter-city high speed railway project did not meet the requirements of a metro civil construction work.

NMRCL has contended that there is a difference between an inter-city rail and a metro rail.  An inter-city rail is between two cities and the trains are usually high speed trains. A metro rail is intra-city, it has a dedicated right-of-way, normally it does not have high speed trains and the frequency of trains is much greater that of inter-city trains. A metro rail may extend, in some cases, to a suburb of a metropolitan city but it essentially remains an intra-city project. There is, therefore, a qualitative difference between an inter-city rail and a metro rail. By itself, this indicates a qualitative difference in a railway project that is inter-city and a railway project that is intra-city and the construction of a viaduct for a railway project that is inter-city and a railway project that is intra-city.

Considering the said difference highlighted by the he Court, hence, held that the fact that GYT-TPL JV made constructions in a metropolitan city or in a metropolitan area during the execution of the Pearl River Delta inter-city high speed railway project, does not make that project an intra-city metro rail project. It continues to be an inter-city railway project.

Regarding the interference with the decision of the owner or the employer in accepting or rejecting the bid of the tendered, the bench of Madan B. Lokur and R.K. Agrawal, JJ said that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given. [Afcons Infrastructure Ltd v. Nagpur Metro Rail Corporation Ltd, 2016 SCC OnLine SC 940, decided on 15.09.2016]