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2022 DIGILAW 731 (TS)

Zenith Metaplast (P) Limited v. State of Telangana

2022-11-16

KUNURU LAKSHMAN

body2022
ORDER : Kunuru Lakshman, J. 1. The present interlocutory application is filed seeking stay of all further proceedings pursuant to the Tender Notification e-Procurement NIT No. SE/TSEWIDC/MT/696/2022-23, dated 22.09.2022, pending disposal of the main writ petition. 2. Heard Mr. S. Ashok Anand Kumar, learned Senior Counsel representing Mr. L. Aravind Reddy, learned counsel for the petitioners and Mr. Andepally Sanjeev Kumar, learned Special Government Pleader attached to the office of learned Additional Advocate General appearing on behalf of the respondents. 3. Respondent No. 2 issued a tender notification dated 22.09.2022 for procurement of dual desks that were to be supplied to identified Government/Local body schools as part of 'Maria Ooru - Mana Badi' Scheme. Under the said tender notification/document, any Original Equipment Manufacturer (hereinafter referred to as 'OEM') in its individual capacity or by entering into a Joint Venture (hereinafter referred to as 'JV') Agreement with a non-manufacturer can participate in the tender and submit their bids. Petitioner No. 1 in the capacity of OEM entered into a JV agreement with M/s. Kendriya Bhandar and participated in the said tender. Similarly, petitioner No. 2 being the OEM entered into a JV agreement with M/s. Mafatlal Industries Ltd. 4. As per the tender document, the bids were to be filed online through the e-portal and the last date of bid submission was 01.10.2022 at 3:00 PM. The technical bids were to be opened on the same day at 4:00 PM. The proposed date to open the financial bid was 12.10.2022. 5. The technical bid was opened as per the schedule of 01.10.2022. However, the financial bid was opened on 04.10.2022. The petitioners were disqualified from the tender process on the ground of conflict of interest. Therefore, the present writ petition is filed seeking a declaration against the respondent authorities that the disqualification of the petitioners on the ground of conflict of interest as arbitrary, illegal and violative of Articles - 14, 19 and 21 of the Constitution of India and for a consequential direction to re-consider the technical bid of the petitioners. 6. Contentions of the Petitioners: i) Petitioner No. 1 and Petitioner No. 2 are separate legal entities having separate operational organizational and operational setups. Only one person is a common Director in both the petitioner companies who is not involved in the decision-making process. 6. Contentions of the Petitioners: i) Petitioner No. 1 and Petitioner No. 2 are separate legal entities having separate operational organizational and operational setups. Only one person is a common Director in both the petitioner companies who is not involved in the decision-making process. Therefore, there is no conflict of interest between the petitioners and their non-manufacturer partners in the Joint Venture. ii) No opportunity of hearing was granted to the petitioners before the disqualification on the ground of conflict of interest. iii) Against the rejection of the present petitioners' bid by the same respondent authorities in a previous tender NIT No. SE/TSEWIDC/NIT/43, W.P. No. 27987 of 2022 was filed by the petitioners. This Court gave a specific finding in its interim order dated 06.07.2022 in the said writ petition that the petitioners are, prima facie, eligible to participate in the bid. The present tender is also issued by the same respondents; therefore, they cannot contend that the petitioners are not eligible. iv) The respondents having disqualified the petitioners on technical ground of conflict of interest could not have opened their financial bid prematurely. v) The date of opening of financial bid was illegally preponed in breach of the tender document. vi) The tender process is unfair and lacks transparency. 7. Contentions of the respondents: i) Based on the written instructions, it was contended on behalf of the respondents that the petitioners have one Mr. Venugopal Bhaskaran as a common Director. Therefore, the same amounts conflict of interest as having common members will come under the ambit of manipulation of fair competition. Reliance was placed on Section - 4 (c) of the tender document to contend that having a common Director amounts to conflict of interest and constitutes an undesirable practice. ii) The petitioners have failed to maintain integrity as required under Annexure - IV of the tender document. iii) The financial bid was preponed to 04.10.2022 on account of Dussehra Vacation. The petitioners were duly informed about the same through SMS. iv) Relying on various Clauses of the tender document it was contended that the respondent authorities have complete discretion in accepting or rejecting a bid. v) The jurisdiction of Courts to interfere in tender matters is extremely limited and only in cases of mala fides, discrimination and arbitrariness, the Courts will interfere. iv) Relying on various Clauses of the tender document it was contended that the respondent authorities have complete discretion in accepting or rejecting a bid. v) The jurisdiction of Courts to interfere in tender matters is extremely limited and only in cases of mala fides, discrimination and arbitrariness, the Courts will interfere. Reliance was placed on the decisions in National High Speed Rail Corporation v. Montecarlo Limited (2022) 6 SCC 401 , Balaji Ventures Pvt. Ltd. v. Maharashtra State Power Generation Company Ltd. and N.G. Projects Ltd. v. Vinod Kumar Jain (2022) 6 SCC 127 . 8. Findings of the Court: i) From the facts of the case and the contentions of the parties, the question before this Court is whether the respondent authorities were justified in disqualifying the petitioners on the ground of conflict of interest. ii) It is relevant to note that Section - 4 (d) of the tender document defines an undesirable practice which also includes conflict of interest. The said clause is extracted below: Section 4 (d): b. "fraudulent practice" means a misrepresentation or omission of facts or suppression of facts or disclosure of incomplete facts; d. "undesirable practice" means establishing contact with any person connected with or employed or engaged by the Authority with the objective of canvassing, lobbying or in any manner influencing or attempting to influence the Bidding Process; or having a Conflict of Interest; and iii) As the tender document does not define what constitutes conflict of interest, it is apt to refer to the interpretation given to the term 'conflict of interest'. iv) Dealing with the issue of conflict of interest in tender matters, the Madras High Court in Travel News Services (India) Private Limited v. Airports Authority of India (Southern Region held that conflict of interest depends on the commercial relationship of control between the parties. The Courts have to see the mutuality of interest between the parties and whether they are in a position to access the information of each other. The relevant paragraphs are extracted below: "10.1. According to the learned counsel, the Writ Petition is not maintainable and the petitioner cannot seek for a declaration and such a relief can be obtained only from a Civil Court under Section 34 of the Specific Relief Act. The relevant paragraphs are extracted below: "10.1. According to the learned counsel, the Writ Petition is not maintainable and the petitioner cannot seek for a declaration and such a relief can be obtained only from a Civil Court under Section 34 of the Specific Relief Act. The petitioner does not have any legal right and there is no statutory obligation on the authority, therefore, the Court cannot grant a writ of mandamus. The Airports Authority's power to grant a bid to a bidder of its choice and the terms of its tender are drawn only to identify the eligible bidder of its choice as per its requirements. The bid terms in the bid documents are not statutory nor they prescribe any statutory duties. The relief sought for is purely contractual and therefore, is not within the writ jurisdiction of this Court. The Airports Authority is the author of the tender document and hence, they are empowered and competent to interpret and take a decision. The petitioner has not made out a case of arbitrariness or malafides. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest or to decide the contractual disputes. The appropriate remedy available to the petitioner is to approach a Civil Court and that too, when the disputed and complicated facts are raised in the Writ Petitions. The evidences produced by the petitioner were obtained from unreliable sources and the same are not supported by sufficient information. The petitioner cannot put up a different case from what has been pleaded in the Writ Petitions. There is no Conflict of Interest between the respondents 2 & 3. The relationship mentioned in Clause-2.2.1(c)(vi) should be a commercial relationship of control and interest and not mere blood relation. Further, it is also to be proved that either or both of them are in a position to have access to each others information and influence each others proposal. The Office of the Bhawar Group is the same as the 3rd respondent or their Telephone Numbers are same etc., are totally immaterial and smacks of malafides. Two concerns or units operated by a husband and wife do not automatically become related persons and do not have mutuality of interest. 12.2. The Office of the Bhawar Group is the same as the 3rd respondent or their Telephone Numbers are same etc., are totally immaterial and smacks of malafides. Two concerns or units operated by a husband and wife do not automatically become related persons and do not have mutuality of interest. 12.2. On a reading of Clause-2.2.1(c)(vi) of the RFP, it is clear that a Bidder, who has a relationship with another Bidder directly or through common third party that puts either or both of them in a position to have access to each other information about or to influence the proposal of either or each other, shall be deemed to have a Conflict of Interest affecting the bidding process. In the case on hand, the petitioner produced the documents to establish that the respondents 2 & 3 were having common Consultant, who had quoted the 3rd respondent's Account ID for depositing the Earnest Money Deposit with the Airports Authority of India, while depositing the EMD of the 2nd respondent. In these circumstances, the 2nd respondent's bid was rejected since the 2nd respondent's Account ID was not furnished by the Consultant for depositing the EMD. Therefore, it is clear that the Consultant had knowledge about the Account ID of both the respondents viz., respondents 2 & 3. Subsequently, the Consultant had written a letter to the Tendering Authority regretting for the mistake committed by them. In the letter dated 19.12.2016, the Consultant had stated that they were engaged by the 2nd respondent viz., Bhawar Lifestyle to assist them with e-tendering of the tender process and that they were also supporting other Client and by mistake, they have supplied the wrong RTGS challan to Bhawar Lifestyle, which was meant for another client (i.e.) the 3rd respondent, Evolve Business Ventures." v) Subsequently, the Madras High Court echoing a similar view again in P. Ravishankar v. State of Tamil Nadu, Highways Department has held that conflict of interest is against the principle of fairness. The relevant paragraphs are extracted below: "20.5. This court considered the rival submissions. There is no dispute with regard to the relationship between the respondents 4 and 5. It is settled law that any nexus between the bidding parties will undermine the tendering process and therefore, the same cannot be wished away slightly. The relevant paragraphs are extracted below: "20.5. This court considered the rival submissions. There is no dispute with regard to the relationship between the respondents 4 and 5. It is settled law that any nexus between the bidding parties will undermine the tendering process and therefore, the same cannot be wished away slightly. Undoubtedly, there will be conflict of interest, if a bidder has relationship with another bidder directly or through common third party that puts either or both of them in a position to have access to each other's information about or to influence the proposal of either or each other and that, the same is an eligible criterion even for short listing the bidders. Rule 15 of the Tamil Nadu Transparency in Tender (Public-Private Partnership Procurement) Rules, 2012 pertains to conflict of interest, as per which, it is the responsibility of the Tender Inviting Authority and Tender Accepting Authority to ensure that the prospective tenderers do not have a conflict of interest that affects the tender proceedings and hence, the omission to include such a clause in the notice inviting tender, that too in a high value contract, would lead to an inference that the respondent authorities have not strictly adhered to the provisions of the Act and Rules. A cursory glance at the decision extracted above would reveal that the Supreme Court commented upon the decision of the Division Bench of this court with respect to the issue dealing with technological and commercial expediency of the companies. After having found that the objective set out by the Government in the said case was relating to use of technology as would prevent spurious liquor from being sold, the supreme court has observed that it must be left to the state Government to see how best to maximize its revenue and what is the technology to be utilized to prevent situations like spurious liquor, which in turn would impede revenue collection, apart from causing damage to the consumers. It was further observed by the supreme court that in every tender, there are certain qualifying parameters whether it be technology or turnover; the court cannot sit over in judgment on what should be the turnover required for an entity to participate; that, it is not really the function of the court to vet the terms of the notice inviting tender, as it is the decision-making process, which can be reviewed in judicial scrutiny. Ultimately, the Supreme Court has set aside the Division Bench judgment and accordingly, allowed the appeals. Whereas, in the instant case, the petitioner raised a plea of conflict of interest as the respondents 4 and 5 in both the cases are closely related to each other, though they are doing business by establishing separate entities, besides challenging the tender process on the ground of arbitrariness, malafide and violative of the mandatory requirements as laid down under the Rules and hence, the facts obtaining herein are clearly distinguishable from the case decided by the supreme court. 20.9. Thus, for the aforemade discussions, this court is of the considered opinion that the conflict of interest is against the principle of fairness and hence, the close relationship between the respondents 4 and 5 in both the cases, assumes great significance as it undermines the tender process and hence, the same cannot be disregarded in judicial review. vi) This Court agrees with the view expressed by the Madras High Court in the aforesaid decisions. A tender process involving various participants is expected, to: be based on fair competitions, Participants/bidders involving common members will raise a presumption of collusion/cartelization and possible abuse of the tender process. The test to decide whether conflict of interest exists between two or more entities participating in the tender is: a) to see the common link between the parties; b) the nature of commercial interest they have in each other; and c) whether by virtue of the common link are they in a position to access information of each other. Therefore, where the above tests are satisfied it can be said that a conflict of interest exists between the parties. vii) The Hon'ble Supreme Court in Board of Control for Cricket in India v. Cricket Association of Bihar (2015) 3 SCC 251 has held that conflict of interest need not result in an abuse of position, mere possibility of abuse is enough. vii) The Hon'ble Supreme Court in Board of Control for Cricket in India v. Cricket Association of Bihar (2015) 3 SCC 251 has held that conflict of interest need not result in an abuse of position, mere possibility of abuse is enough. viii) In the present case, prima facie, this Court is of the view that conflict of interest exists between petitioner No. 1 and petitioner No. 2, who are separate participants in the present tender. Both the petitioners have a director in common which, prima facie, raises a presumption that he as part of the Board of Directors in both the companies has access to information. ix) This Court cannot accept the contention of the petitioners that this Court in its interim order dated 06.07.2022 observed that they were eligible to participate in an earlier tender and, therefore, the petitioners are eligible to participate in the present tender. It is relevant to note that in the earlier tender a Joint Venture was constituted vide a tripartite JV agreement between petitioner No. 1, petitioner No. 2 and M/s. Kendriya Bhandar. All the three entities participated as a single Joint Venture entity. Therefore, no question of conflict of interest arose or was considered by this Court in W.P. No. 27987 of 2022. Whereas, in the present case, petitioner No. 1 along with M/s. Kendriya Bhandar participated as a separate JV entity and petitioner No. 2 along with M/s. Mafatlal Industries Ltd., participated as a separate JV entity. Therefore, two separate entities which had one director in common participated in the present tender. According to this Court, the same, prima facie, amounts to conflict of interest. x) Further, this Court cannot accept the contention of the petitioners that preponing the date of opening of financial bid warrants interference of this Court at the stage where a counter-affidavit is yet to be filed. No discrimination or mala fides are shown to suggest that the preponing of financial bid opening caused any undue advantage to any other participant. Financial bids of all the bidders were opened on the same day and no prima facie case is made out to interfere. xi) It is trite law that the Courts shall be slow in interfering in tender matters. The Court can interfere only where arbitrariness, discrimination and mala fides are proved in the decision-making process. Financial bids of all the bidders were opened on the same day and no prima facie case is made out to interfere. xi) It is trite law that the Courts shall be slow in interfering in tender matters. The Court can interfere only where arbitrariness, discrimination and mala fides are proved in the decision-making process. In the present case, the petitioners have failed to make out a prima facie case and balance of convenience favours the respondent authorities as staying of all further proceedings will delay the entire tender process. 9. Conclusion: Therefore, in light of the aforesaid discussion, the present Interlocutory Application No. 1 of 2022 in W.P. No. 40402 of 2022 is liable to be dismissed and accordingly the same is dismissed.