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Gauhati High Court · body

2013 DIGILAW 883 (GAU)

Udipta Energy and Equipment v. Union of India

2013-12-19

HRISHIKESH ROY

body2013
JUDGMENT Hrishikesh Roy, J. 1. Heard Mr. N. Dutta, the learned Senior Counsel appearing for the petitioner. The respondents are represented by Mr. G.N. Sahewalla, the learned Senior Counsel. The petitioner is in the business of providing effluent treatment service for Oil & Gas Companies and claim to have the know how, the equipments and trained personnel to install effluent treatment plants at specified locations. The company responded to the notice inviting bid under Tender No. R16DC12015 issued by the ONGC on 7.8.2012 for hiring of 16 numbers of Package Effluent Treatment Plant (for short PETP) and the tender documents including the instructions to bidder, general conditions of contract etc. are enclosed as Annexure-2 series in the writ petition. 2. Notification Of Award (for short NOA) for hiring of 10 PETP was issued on 28.12.2012 (Annexure-3) at ONGC rigs located in Assam and it was indicated in the work order that mobilization time is 30 days from the issue of the NOA 3. The petitioner through their letter dated 4.1.2013 (Annexure-5) assured of mobilization of 5 PETPs before 14.1.2013 and the rest 5 to be mobilized immediately after the Magh Bihu festival. The concerned officer of the ONGC was requested to give the location for installation of the offered PETPs. Through the ONGC's response letter dated 9.1.2013 (Annexure-6), the petitioner was informed of the drill sites and the rig numbers where the 5 PETPs are to be commissioned by the petitioner. For the remaining 5 PETPs, the petitioner through their letter dated 21.2.2013 (Annexure-7) informed that the PETPs are being made ready for mobilization and the respondents were requested to identify the rig/drill sites where the PETPs are to be commissioned. In the response letter of ONGC dated 23.1.2013 (Annexure-8), the petitioner was informed of the drill sites and the rig numbers where the remaining 5 PETPs are to be placed for technical assessment for full completion of the mobilization process. 4. Through the letter dated 29.1.2013, the petitioner informed ONGC about the dates (ranging from 31.1.2013 to 4.2.2013) when their PETPs will be ready for inspection Similar intimation about readiness for inspection for 2 other PETPs was given by the petitioner on 6.2.2013 (Annexure-11). The picture that emerges thus is that by 6.2.2013 the petitioner informed about their readiness for inspection for 7 PETPs at their respective rig/drill sites. 5. The picture that emerges thus is that by 6.2.2013 the petitioner informed about their readiness for inspection for 7 PETPs at their respective rig/drill sites. 5. But while the petitioner were readying themselves for assessment of their mobilization status, they received the impugned termination letter dated 11.2.2013 (Annexure-12), where it was declared that the petitioner failed to mobilize the PETPs within 30 days of the NOA. i.e. by 26.1.2013 and it was further held that they violated the Integrity Pact (under Clause 27 of the G.C.C.) by failing to disclose the termination of their earlier contract on 7.3.2011 at MBA basin, ONGC, Kolkata. Simultaneously with this termination letter, the ONGC invoked the bank guarantee furnished by the petitioner, as security for the contract. 6. Assailing the legality of ONGC's decision to terminate the contract, Mr. N. Dutta, the learned Senior Advocate makes the following arguments: 6.1 He firstly submits that although reference to arbitration is envisaged under the contract, this case will be covered by the exception clause under Section 10 which states that arbitration clause shall not be applicable for any dispute arising under the Integrity Pact. Moreover the Counsel cites Union of India v. Tantia Construction Pvt. Ltd. reported in 2011 5 SCC 697 to project that alternate remedy is not an absolute bar for invocation of writ jurisdiction and the constitutional powers vested in the Writ Court can't be fettered by any alternative remedy under the arbitration clause. 6.2 Arguing that there has been no transgression of the commitment by the bidder, the petitioner refers to Section 2 of the Integrity Pact (Appendix 1 -10) to project that the contractor is required to commit themselves to fair participation in the tender process and under Section 5 the bidder is required to declare that no previous transgression has occurred in the last 3 years with any other company, which could justify his exclusion from the tender process. Referring specifically to the previous transgression pertaining to the work at MBA basin, ONGC, Kolkata, Mr. Dutta projects that when the tender was filed on 9.9.2012 the petitioner's name was not yet uploaded in the ONGC's holiday list which was done much later on 12.2.2013 and accordingly it is argued that the bidder wasn't under any obligation to disclose the Kolkata transgression, for the contract in question. Dutta projects that when the tender was filed on 9.9.2012 the petitioner's name was not yet uploaded in the ONGC's holiday list which was done much later on 12.2.2013 and accordingly it is argued that the bidder wasn't under any obligation to disclose the Kolkata transgression, for the contract in question. 6.3 On the allegation of delayed mobilization which was the other ground for termination of contract, the petitioner projects that soon after receipt of the NOA on 28.12.2012 bank guarantee of Rs. 21,98,160/- was furnished on 1.1.2013. Immediately after the mobilization was started on 9.1.2013 for 5 PETPs and for the balance 5, it was started subsequently on 21.3.2013. The ONGC inspection team concluded their part of the mobilization process for 9 PETPs by 8.2.2013 and 7 of those were approved by the Inspection Team of the ONGC. Contending that the delay was minimal and the petitioner had made all efforts to mobilize the PETPs within 30 days of the NOA, Mr. Dutta argues that the 2nd ground for termination is discriminatory. 6.4 The next submission made on behalf of the petitioner is that extension of mobilization period (subject to payment of liquidated damage) under tender clause 19(c) is envisaged and accordingly the contractor through their letter dated 24.1.2013 requested for 4 weeks' extension of the mobilization period starting from 27.1.2013 and offered to pay the liquidated damage as provided in the contract. But receipt of this letter is denied by the ONGC authorities and their stand is that no such request for extension was ever received from the contractor. According to the petitioner, mobilization period for other similarly situated PETP suppliers was granted by the respondents but the petitioner was subjected to discriminatory treatment. 6.5 In this context Mr. Dutta submits that the reason for impugned decision must be construed objectively with reference to the language used in the order itself as was held in Commissioner of Police-Bombay v. Gordhanddas Bhanji reported inAIR (34) 1952 SC 16 and in Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi reported in (1978) 1 SCC 405 . Dutta submits that the reason for impugned decision must be construed objectively with reference to the language used in the order itself as was held in Commissioner of Police-Bombay v. Gordhanddas Bhanji reported inAIR (34) 1952 SC 16 and in Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi reported in (1978) 1 SCC 405 . The petitioner contends that the validity of the decision of the respondents must be judged by the reasons mentioned in the decision itself and can't be supplemented by fresh reason in the shape of affidavit as otherwise an order had in the beginning may, by the time it comes to Court on account of a challenge, get validated by the additional grounds later brought out. 7. Appearing for the ONGC, the Senior Counsel Mr. G.N. Sahewalla submits that time was the essence of the contract and therefore only 30 days for mobilization after the NOA dated 28.12.2012 was stipulated and as such the mobilization exercise should have been completed by 26.1.2013 in terms of the contract. He refers to Clause 1.14 of the G.C.C. to project that "mobilization" means rendering the equipment fully manned and equipped and ready to begin work at site and the date and time of ONGC's acceptance of ONLINE survey will be treated as the date and time of mobilization. Referring to petitioner's own description of chronological events, Mr. Sahewalla submits that although the mobilization should have been completed by 26.1.2013, the contractor defaulted in placing all the PETPs at the given site and in fact only after the 30 days period was over, they informed through letters dated 29.1.2013 and 6.2.2013 that 8 of the ordered 10, PETPs are ready at site for inspection. 7.1 The respondents deny that any request for extension of mobilization time was made by the petitioner on 24.1.2013 as is claimed and Mr. Sahewalla refers to his counter affidavit to project that the Diary Stamp "MM-RO-CS-SVSDY No. 4973 date 28.01.2013" stamped on the petitioner's letter of 24.1.2013 is a forgery committed by the petitioner to serve their own interest. Additionally Mr. Sahewalla submits that although receipt of the letter dated 24.1.2013 is denied the petitioner's admitted stand is this request for extension of mobilization period was given to the ONGC only on 28.1.2013 even though the last date for mobilization ended on 26.1.2013. 7.2 Mr. Additionally Mr. Sahewalla submits that although receipt of the letter dated 24.1.2013 is denied the petitioner's admitted stand is this request for extension of mobilization period was given to the ONGC only on 28.1.2013 even though the last date for mobilization ended on 26.1.2013. 7.2 Mr. Sahewalla submits that in a previous contract the petitioner failed to mobilize equipment of appropriate specification for Mobile Effluent Treatment Plant at Radhapur-I well rig under the MBA basin and for this default, the contract was terminated through written communication dated 7.3.2011 (Annexure-16), The respondents contend that the previous transgression in a contract of similar kind is a relevant matter to be considered for awarding fresh contract and since this was not disclosed by the tenderer, it amounts to incorrect statement under Section 5(2) of the Integrity Pact and on this ground itself the present contract can be terminated. 7.3 The Senior Counsel for the respondent ONGC submits that the petitioner has alternate remedy and therefore this writ petition is not maintainable. He refers to the petitioner's letter dated 18.12.2013 for seeking intervention of the External Independent Monitor (for short "the EBM") against the termination of contract and submits that on the preliminary views of the EIM, the ONGC had given their para-wise response on 26.4.2013 and only because of this case, the further decision could not be taken by the EIM. 7.4 The respondents also contend that the bidder failed to mobilize the PETPs within the permissible 30 days to make them ready for operation as per Clause 1.14 and accordingly it is argued that the contract was rightly terminated for good reason. 8. Before proceeding to deal with the merit of the case it would be appropriate to decide at the outset as to whether this writ petition is maintainable. Under Clause 27 of the General Conditions of Contract (GCC) in the event of any dispute arising out of the contract which can't be mutually settled, the issue can be referred to arbitration. Resolution of disputes through conciliation through an Outside Expert Committee (for short "the OEC") is also envisaged and the members of the OEC are to be inducted from the Financial/Commercialy/Technical & Legal fields. But Clause 27.3.5 shows that the recommendation of the OEC is not binding and the parties have the option to accept or not to accept the OEC's recommendation. But Clause 27.3.5 shows that the recommendation of the OEC is not binding and the parties have the option to accept or not to accept the OEC's recommendation. Additionally intervention of the EIM is also envisaged and the EIM has the power to review and assess all decisions and in the event of violation of the agreement, the EIM can request the management to discontinue or heal the violation or to take other relevant action. But recommendations of the EIM under Section 8 of the Integrity Pact are non-binding and the EIM has no right to demand from the parties that they act in a certain direction. 9. In the context of the 2 available alternate Forums i.e. the EIM and the OEC and the non-binding nature of their recommendation, the rejection of petitioner's challenge at the threshold by declaring that they have alternate remedy may not in my view be justified as the decision by these two independent bodies are not binding. 10. That apart Section 10 of the Integrity Pact provides for exception to arbitration by making the arbitration clause inapplicable for any dispute arising under the Integrity Pact. Therefore since violation of the Integrity Pact is one of the basis for the impugned decision, I have no hesitation to hold that writ petition is maintainable and the Forums of the OEC, the EIM and Arbitration are not impediments, to entertain this challenge. 11. Here through the letter dated 28.12.2012 the petitioner was notified of the contract awarded to them and Clause 3 of the NOA specified 30 days as mobilization period for the PETPs. According to Clause 1.14 of the GCC, mobilization means rendering the equipment fully manned and equipped and ready to begin to work at the designated site and the acceptance by the ONGC will be the effective date and time of mobilization. Therefore mere placement of the equipment at the designated site is not mobilization within the meaning of the contract. 12. The petitioner intimated their readiness for inspection of only 6 PETPs at the designated site on 29.1.2013. Next on 6.2.2013, they communicated their readiness for inspection of 2 more PETPs at the designated site. Bearing in mind that 30 days mobilization period for 10 PETPs ended on 26.1.2013, it is apparent that the petitioner was not even ready for inspection under Clause 1.14 of the GCC for any of the PETPs. Next on 6.2.2013, they communicated their readiness for inspection of 2 more PETPs at the designated site. Bearing in mind that 30 days mobilization period for 10 PETPs ended on 26.1.2013, it is apparent that the petitioner was not even ready for inspection under Clause 1.14 of the GCC for any of the PETPs. They communicated their readiness for inspection only for 8 PETPs and that too beyond the 30 days deadline and therefore it is apparent that they failed to adhere to the schedule for mobilization of the PETPs under the NOA dated 28.12.2012. 13. On the request allegedly made on 28.1.2013 for extending the mobilization period, the stand of the respondents is that this request letter was never received. But even if we reject the non receipt plea, what is seen here is that the extension request was given to ONGC only on 28.1.2013 whereas 30 days mobilization period ended on 26.1.2013. Although Mr. Dutta has submitted that because of Sunday and other holiday the request letter could not be furnished within the validity of the mobilization period, the petitioner should have realistically assessed the delay on placement of the PETPs and accordingly their belated request for extension defies logic. Therefore it is clear that the petitioner foiled to mobilize the PETPs within the stipulated period of 30 days and considering that high premium was placed on adherence to the time schedule, this can't be considered to be a condonable infraction of the contractor. Moreover since extension is at the discretion of the ONGC and the request was made after the time period has ended, the respondents can't be faulted for not granting extension to the petitioner who are not in the same footing as those, who applied on time. 14. The next issue that the Court is required to consider is whether the petitioner violated the Integrity Pact by not informing about the termination of their previous contract at the Radhapur-II well in MBA basin which decision was communicated to them on 7.3.2011. In the previous contract also the petitioner was hiring out Mobile Effluent Treatment Plant but the inspection team of the ONGC found their equipment was deficient and the treatment process of the PETP did not measure up to the specified standard. Since the contractor failed to mobilize the equipment of the required specification, their contract was terminated in the MBA basin. Since the contractor failed to mobilize the equipment of the required specification, their contract was terminated in the MBA basin. Under Section 5 of the Integrity Pact, the bidder is required to declare previous transgression in the last 3 years and obviously this was intended to exclude contractors with poor track record. When incorrect statement is given or relevant information is withheld, the contractor can be disqualified and if the contract is already awarded it can be terminated. These measures are intended to protect the interest of the ONGC and here the tenderer failed to disclose relevant information and this has exposed the ONGC to potential loss and risk. 15. When there was an instance of previous transgression by the petitioner and he justifies withholding of information on the plea that the contractor was not placed in the holiday list, I am of the view that such explanation if accepted would defeat the very purpose of requiring the contractor to disclose information on previous transgression. The capability of each tenderer to execute work is to be assessed by the ONGC and that is why in the E-Tender process, the tenderer is required to furnish complete information on past transgression and withholding of such information in a previous contract can't be condoned only because, the tenderer was not placed in the holiday list until 12.2.2013. 16. The Integrity Pact meant to enhance probity in public contracting, was developed in the 1990's by the Transparency International and it promotes ethical conduct by specifying rights and obligations for the contracting parties. While the Public Authority is to provide a level playing field, the bidders in turn are to ensure, inter alia, that they will not receive any advantage through unprofessional behaviour and are obliged to disclose all relevant information to assess their capability. When an Integrity Pact is incorporated in a contract, ethical conduct from both parties are expected and the bench mark for behaviour standard in such situation can't naturally be at the ordinary level. In this contract, by withholding information of the earlier termination (when they failed to mobilize equipments as per contract terms), the petitioners have secured unfair advantage and judged from the expected level of ethical standard, they have indeed failed and their proffered explanation (of being subsequently uploaded in the ONGC's holiday website), for withholding relevant information is held to be unacceptable. 17. 17. When one is expected to display higher ethical standard to meet the test of probity and truthfulness, the non placement of the tenderer in the holiday list can hardly lower the bar for the bidder since they, certainly were notified of the termination order and should have known that disclosure of the earlier termination might result in rejection of their tender. The disclosure obligation on previous infraction starts from 7.3.2011 when the earlier contract was terminated and the bidder can't be permitted to count time from a later date - when the infraction information was uploaded in public domain by the ONGC. To put it another way, the disclosure obligation under the Integrity Pact starts from the date the bidder was notified of termination. 18. In this context, the petitioner's challenge to the termination order in the Calcutta High Court and the initial interim order and the eventual stay vacating order of the Court has to be borne in mind as possible causes for late notification of the defaulter in the holiday list. Since the petitioner had taken legal steps to challenge the termination letter dated 7.3.2011, keeping the objective of the Integrity Pact in mind, I am of the considered view that they erred in withholding information on their previous transgression. Non-disclosure of material information can certainly entail the consequences envisaged under Section 5 of the Integrity Pact and consequently arguments to the contrary made by the petitioner is rejected. 19. At the time of evaluation of the tenders the ONGC expects to be fully informed on the background of the participating tenderers and in this E-Tender process, the tenderers are made responsible to furnish information on previous transgression. When there is a clear instance of the contractor failing to mobilize equipments of required specification leading to termination of contract in the Radhapur-I Well, much before the present tender was submitted on 9.9.2012, it is obvious that relevant information (to assess the contractor's capacity to provide the equipments) was wrongfully withheld. The previous termination ordered on 7.3.2011 is an important bit of information and merely because the contractor was not immediately placed in the holiday list is not an acceptable excuse for withholding relevant material as the same might have lead to wrongful assessment of the contractor's capacity. 20. The previous termination ordered on 7.3.2011 is an important bit of information and merely because the contractor was not immediately placed in the holiday list is not an acceptable excuse for withholding relevant material as the same might have lead to wrongful assessment of the contractor's capacity. 20. In the impugned letter dated 11.2.2013 (Annexure-12) the ONGC has given two reasons for termination of contract and they are (i) the failure to mobilize and deploy the required manpower/equipment & to commence service within the period specified; (ii) Violation of Section 3 of the Integrity Pact. If we now apply the principle of Gordhandas Bhanji (supra) and Mohinder Singh Gill (supra) to test the legality of the impugned order, one finds that the reasons disclosed for the termination are germane and relevant and no supplementing by way of counter affidavit is being attempted by the ONGC in this case. Therefore since the impugned order discloses good and acceptable reasons, Court's interference is not found warranted on the ratio of the two case cited by the petitioner's lawyer. For the forgoing reasons I hold that the case has no merit and the same is accordingly dismissed without any order on cost.