R-MC Power Recovery (India) Pvt. Ltd. v. Union of India
2019-08-13
BIBEK CHAUDHURI, THOTTATHIL B.RADHAKRISHNAN
body2019
DigiLaw.ai
JUDGMENT : THOTTATHIL B. RADHAKRISHNAN, J. 1. The Directorate of Procurement, Foreign Purchase Wing (FPW) Air Headquarters, issued request for proposal for supply of NRS spares for Jaguar Air Craft, RFP No. AIRHQ/CPF-243/AHQ/JAGUAR/W1725041/PUR under single bid system on LTE basis. Such request was not addressed to the first writ petitioner R-MC Power Recovery (India) Pvt. Ltd. hereinafter referred to as the petitioner. It, therefore, took steps in an attempt to enable it to participate in the bid. It took the stand that it is entitled to be permitted to participate in the bid under Single Bid System on LTE basis, on the strength of different eligibilities that it purportedly has. It being, apparently, relevant as to whether the petitioner was eligible to participate in the bid without being registered in terms of the Defence Procurement Manual, 2009 (Revenue Procurement) issued by the Government of India, Ministry of Defence; hereinafter referred to as the 'Manual' for short the petitioner pleaded that it was eligible for registration; and that, notwithstanding that its request for such registration is still pending, it is eligible to participate on the basis of its other credentials. The writ petition from which this appeal arise was, therefore, filed seeking mandamus commanding the respondents to allow the petitioner to participate in the bid. An interdicting mandamus was sought to ensure that the respondents do not give any further effect to the tender process in relation to which the petitioner was staking claim to participate. Direction in the form of certiorari was sought for the production of records for the purpose of the case. 2. The plea of the respondents was that the vendor selection for the purpose of the bidding in question was governed by Clause 9.4 and the mode of tendering was provided in Clause 9.5 of the Registration of foreign Original Equipment Manufacturers (hereinafter referred to as ‘OEM’) and vendors was prescribed and regulated by Clause 9.3 of the Manual. It was the specific plea of the respondents before the learned Single Judge that the terms of Clause 9.3 of the Manual, enjoins that only foreign OEMs and vendors could participate for the present. It was projected that such situation is a matter of policy and such policy is one touching governance and not liable to be read otherwise than has been assimilated and applied by the department. That apart, such policy is not under challenge. 3.
It was projected that such situation is a matter of policy and such policy is one touching governance and not liable to be read otherwise than has been assimilated and applied by the department. That apart, such policy is not under challenge. 3. The learned Single Judge, considering the contents of Clause 9.3.1 and 9.3.2 of the Manual held that the petitioner is not entitled to participate and does not have registration to do so in terms of Clause 9.3 though it may have different certifications regarding participation in tender as well as supply to different establishments including defence establishments and public sector undertakings. Accordingly, the writ petition was dismissed. Hence, this appeal. 4. The learned senior counsel appearing for the appellants/writ petitioners argued for the position that Clause 9.3 of the Manual does not exclude the unregistered vendors from participation if they fall within the scope of vendors in terms of Clause 9.4. He also argued that the Request for Proposal in short ‘RFP’ in its clear terms, does not confine itself to be applicable exclusively to foreign OEMs and foreign vendors. It is argued that on an interpretation of Clause 9.3 and 9.4, there is no ground to exclude those Indian vendors who do not have registration in terms of Clause 9.3 of the said Manual but otherwise are eligible for being considered as vendors in terms of Clause 9.4. Reference was made in the course of the arguments to the interlocutory order issued during the pendency of the writ petition which contained a direction to allow the first petitioner to participate in the process provisionally. 5. The learned Additional Solicitor General reiterated the arguments advanced before the learned Single Judge and also relied on the decisions referred to in the order impugned in this appeal, to buttress the plea that the first petitioner, having been shown to be not qualified to participate in terms of the RFP, is not entitled to seek any relief as sought for. He pointed out that the RFP is not a general invitation of offers to a Limited Tender Enquiry and is addressed only to those who are relevant for such tender in terms of the Manual.
He pointed out that the RFP is not a general invitation of offers to a Limited Tender Enquiry and is addressed only to those who are relevant for such tender in terms of the Manual. He reiterated the stand taken before the learned Single Judge that the classification of manufacturers or vendors is essentially a choice in administration and management and that, in the instant case, it is also a matter touching the policy decision of procurement of equipments in connection with defence requirements. He submitted that there is no deviation made by the establishment from the mode of registration, vendor selection and mode of tendering provided by Clause 9.3, 9.4 and 9.5 respectively of the said Manual which, admittedly, governs the bid. 6. In view of the pleadings and materials on board and the argument advanced on behalf of both sides, the following Clauses of the Manual are relevant for consideration and are hence quoted hereunder:- "9.3. Registration of Foreign OEMs and Vendors 9.3.1 Procedure of Registration: At present foreign OEMs and vendors are being registered by the Service Headquarters and Headquarters of other Departments. Till such time as common guidelines are formulated, these Registering Authorities would continue to register foreign OEMs and vendors as per the existing procedure followed by them. 9.3.2 Registration of Authorized Vendors/Stockists of Foreign OEMs by the Service Headquarters etc: Widening of the foreign vendor base is a multi-disciplinary and techno- commercial exercise. Registration of foreign OEMs and their authorized vendors/stockists is to be undertaken as per laid down guidelines, with the help of the Defence Attaches and Commercial Counselors in the Indian Embassies/ High Commissions abroad. 9.4 Vendor Selection 9.4.1 Prospective vendors to be Indicated in the Indent: Details of registered vendors and likely sources of supply are to be indicated in the indent. Vendors already registered with Army, Navy, Air Force, Ordinance factories, DRDO, DGS&D and Defence PSUs for similar items will be treated as registered vendors and may be considered for issue of Limited Tender Enquiry. The registering agency should include all foreign vendors registered with different departments of MOD. However, specific needs of the departments/wings are to be kept in mind and complied with.
The registering agency should include all foreign vendors registered with different departments of MOD. However, specific needs of the departments/wings are to be kept in mind and complied with. 9.4.2 Selection of Vendor: A careful selection of the authorized and registered vendors is to be made for the range of spares listed in the Schedules of Requirement by the Procuring Agency for the purpose of issuing the RFP. Widening of the foreign vendor base is a multi-disciplinary and techno-commercial exercise. Registration of foreign OEMs and their authorized vendors/stockists should be undertaken as per laid down guidelines with the help of our Defence Attaché and commercial Counselors in our Embassies/High Commissions abroad. 9.5 Mode of Tendering 9.5.1 The mode of tendering should be decided with regard to factors like, whether the stores/equipment are general purpose of specialized, likely and known sources of supply, expected competition, delivery schedule desired, urgency of requirement, etc. In foreign procurements, one of the following methods of inviting tenders can be adopted. (a) Global tenders Enquiry (b) Limited tenders Enquiry (c) Single tender Enquiry without Proprietary Article Certificate (PAC) (d) PAC Enquiry 9.5.2 Global Tender Enquiry: *** *** *** *** *** 9.5.3 Limited Tender Enquiry: In all cases of foreign procurement, where the indentor has not furnished a PAC, Limited Tender Enquiry (LTE) should be the preferred mode of tendering as procurement is to be done from OEMs or authorised stockists only. LTE should be sent to as many registered/ known suppliers as possible, but normally the number of firms should not be less than six unless the available sources are limited and less than six." 7. Referring to the contents of the RFP Form dated 12.03.2018 it was argued on behalf of the appellant that it is one intended to be addressed to those from whom proposals for supply are requested and the said form calls for various details which shows that the zone of consideration does not confine to foreign OEMs and foreign vendors. It is pointed out that PAN No. CST/VAT/TIN/Regn. are also called for. It is argued that such detail could be only with reference to Indian entities and there is no reason to take a view that the RFP was intended to be only as regards foreign OEMs and foreign vendors to the exclusion of vendors or agents from India. 8.
It is pointed out that PAN No. CST/VAT/TIN/Regn. are also called for. It is argued that such detail could be only with reference to Indian entities and there is no reason to take a view that the RFP was intended to be only as regards foreign OEMs and foreign vendors to the exclusion of vendors or agents from India. 8. The Clause 4 of the RFP states that only those vendors willing to abide by the terms and conditions of the Defence Procurement Manual, 2009 (as amended) need to participate in the tendering. Thus, there can be no doubt, that the provisions of the Manual, which we have quoted in paragraph no. 7 would govern nor can it be disputed. 9. The petitioner's contention is the fact that the RFP was addressed only to those from whom proposals for supply were invited, clearly shows that it is the Limited Tender Enquiry (‘LTE’ in short). Clause 9.5.3 quoted above is the mode of tendering in Limited Tender Enquiries. That provision enjoins that Limited Tender Enquiry should be the preferred mode of tendering as the procurement is to be done from OEMs or authorised stockists only. This obviously means that tender proposals ought to be invited only from Original Equipment Manufacturers or their authorised stockists. The petitioner has no case that it is an Original Equipment Manufacturer. It also does not have the case that it is an authorised stockist for goods enlisted in Appendix-A of the RFP, which is evidently a manufacturer centric description in relation to the need for purchase of spares for the Jaguar Air Crafts. Therefore, the petitioner was not eligible to be issued the RFP for the LTE in question. 10. Apart from the portions of the Manual produced as part of the material papers, reference was made to the Defence Procurement Manual, 2009 (Manual) in the book form, which was presented for our perusal by the Learned Additional Solicitor General. The Manual, describing its title, proceeds to state that it contains principles and procedure relating to procurement of goods and services for the Defence Services, Organizations and Establishments, laid down in terms of Rule 135 of General Financial Rule, 2005. The Manual came into force with effect from 1st of April, 2009. 11. Chapter 9 of the Manual deals with procurement of goods and services from foreign vendors.
The Manual came into force with effect from 1st of April, 2009. 11. Chapter 9 of the Manual deals with procurement of goods and services from foreign vendors. Foreign Original Equipment Manufacturers and vendors is dealt with in Clause 9.3 which requires registration of foreign OEMs and vendors. Clause 9.3.1 quoted above shows that, at present, foreign OEMs and vendors are being registered by the Service Headquarters and Headquarters of other Departments. It is also the policy of the Central Government, as reflected in Clause 9.3.1, that till such time as common guidelines are formulated, the Registering Authorities would continue to register foreign OEMs and vendors as per the existing procedure followed by them. Clause 9.3.2 provides the modality for widening of the foreign vendors base, which is noted to be a multi- disciplinary and techno-commercial exercise. Registration of foreign OEMs and their authorised vendors/stockists is to be undertaken as per laid down guidelines, with the help of the Defence Attaches and Commercial Counselors in the Indian Embassies/High Commissions abroad. The petitioner does not have a case that it is an authorised vendor or stockist of the OEM Jaguar and is authorised to supply the goods listed in Appendix-A of the RFP as an authorised vendor or stockist of the OEM Jaguar. It is the specific situation that even if it were so, it has not obtained registration under Clause 9.3.1. What the petitioner wanted was an order to permit it to participate in the LTE even without registration under Clause 9.3.1. Neither the provisions of the Manual nor any of the provisions of the RFP is under challenge in the writ petition. The provisions quoted above from the Manual reflects the policy of the Central Government in relation to purchase. In so far as the purchase of equipments where the OEMs are of foreign origin, the procedure as of now, available is that the OEMs and the vendors should be registered with the Service Headquarters and the Headquarters of other departments. The petitioner, though has said that it has registration with different institutions of Government and Public Sector Undertakings, it has no claim that it has registered itself with the Service Headquarters. 12. The prescription in the Manual are matters touching governance, including policy matters of purchase of defence equipments and its spare parts etc.
The petitioner, though has said that it has registration with different institutions of Government and Public Sector Undertakings, it has no claim that it has registered itself with the Service Headquarters. 12. The prescription in the Manual are matters touching governance, including policy matters of purchase of defence equipments and its spare parts etc. The scope of judicial review in the case in hand cannot be enlarged, to go into the question as to whether the respondents were justified in insisting that the LTE through the RFP in question was required to be issued only to OEMs and vendors who had registration with the Service Headquarters and Headquarters of other departments. Even if one has any registration with other departments or Headquarters of other departments that would not qualify, unless the registration is with the Service Headquarters. Whether the vendors should also be of foreign origin or whether the term "foreign" in Clause 9.3.1 applies only to OEMs and not to vendors is not a matter on which any element of arbitrariness can be found on judicial review because the view taken by the department and on the basis of which the impugned action has proceeded cannot be held as arbitrary. Notwithstanding that is the fact that the contents of Clause 9.3.1 and other Clauses relating to vendor selection are essentially matters where the view of the departments will have primacy since such contracts are not to be treated at par with those over which the Central Government ought not to exercise such control. Reverting to Clause 9.5.3 it can be seen that RFP can be addressed only to OEMs and authorised stockists. As already noted by us hereinabove, the petitioner does not have a case that it is an authorised stockist of the OEM which manufactures the goods sought to be supplied. Its plea, therefore, fails. 13. The scope of judicial review in contractual matters was examined by the Hon'ble Supreme Court in catena of decisions. The decisions of the Hon'ble Supreme Court in Tata Cellular vs. Union of India, (1994) 6 SCC 651 , Jagdish Mandal vs. State of Orissa, (2007) 14 SCC 517 , Air India Ltd. vs. Cochin International Airport Ltd. (2000) 1 SCR 505 and Meerut Development Authority vs. Association of Management Studies, (2009) 6 SCC 171 are authorise on the point besides several other decisions to which we need not refer. 14.
14. Suffice it to say that in the matter of award of contracts or tender, the Government and its agencies have to act reasonably and fairly at all points of time. To that extent an aggrieved party has an enforceable right in the court which is competent to examine whether the aggrieved party has been treated fairly or discriminated against to the detriment of public interest. 15. In Michigan Rubber (India) Ltd. vs. State of Karnataka, (2012) 8 SCC 21 , the legal position on the subject is summed up and the principles of law applicable to the process for judicial review are detailed out in paragraph 23 in the following words:- "23. From the above decisions, the following principles emerge: (a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities. (b) Fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited. (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted. (d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim fundamental right to carry on business with the Government." 16.
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim fundamental right to carry on business with the Government." 16. Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the questions; whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or, whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached" and whether the public interest is affected. If the answers to the above questions are in negative, then there should be no interference under Article 226. 17. It is important to read Clause 9.5.3 bearing in mind Clause 9.3.2 which provides that the widening of the foreign vendor base is a multi-disciplinary and techno-commercial exercise. That is why Clause 9.3.2 provides that registration of foreign OEMs and their authorised stockists is to be undertaken as per laid down guidelines with the help of the Defence Attaches and Commercial Counselors in the Indian Embassies/High Commissions abroad. That is not entitled to be an exercise carried out purely within India. This view is fortified to our satisfaction by the contents of the Foreword by the Ministry of Defence, to the Defence Procurement Manual-2009 in which it is stated as follows:- "A significant proportion of our defence requirements continue to be imported. In order to promote indigenization, a mechanism has been introduced in our procurement procedures in the form of an offset policy which requires foreign vendors involved in large projects to actively invest in Indian firms and joint ventures. The new DPM facilitates this objective and complements the offset policy by streamlining the procedure for placement of development orders on domestic firms for equipment and services hitherto being imported." We are not using the contents of Foreword to interpret the Manual, but only to assure ourselves that the policy of the Central Government which is being operated through the Manual has been assimilated by us without ignoring the policy of the Central Government. 18.
18. The interpretation placed by the Learned Single Judge on Clause 9.3.1 and 9.3.2 by applying the adjective "foreign" to OEMs and vendors in 9.3.1 is not only a plausible conclusion but also an apt one, having regard to the Central Government's policy reflected in Manual. The conclusion arrived at by Learned Single Judge in the impugned judgment on the basis of the Clause 9.3.1 and 9.3.2 becomes further emphatic on the basis of what we have stated dilating on Clause 9.5.3 and Clause 9.3.2 taken together. This means that, in all cases, of defence procurement where LTE is preferred, it has to be for procurement from OEMs or authorised stockists only. So long as the OEMs and the authorised stockists, if any, do not have registration under Clause 9.3.1, the object sought to be achieved by the multi- disciplinary and techno-commercial exercise intended widen the foreign vendor base as focused upon in Clause 9.3.2 of the Defence Procurement Manual cannot be effectuated. On this ground also, we affirm the impugned order issued on the writ petition. 19. The Learned Single Judge noted the judgment of this Court in Kaberi (Dutta) Santra and Others vs. State of West Bengal and Others, 2015 (1) CLT 384 to hold that a person must have the requisite qualification to participate in the tender process. We agree with the view of the Learned Single Judge that the petitioner did not have the requisite qualification in the form of registration and, therefore, was disentitled to participate in the subject tender process. The Learned Single Judge was justified in declining the reliefs sought for by the petitioner. 20. For the aforesaid reasons this appeal fails and it is accordingly dismissed. 21. Since the appeal is disposed of, application, if any, shall be treated as disposed of. 22. Urgent Photostat certified copy of this judgment/order, if applied for, be supplied to the parties upon compliance of all requisite formalities.