Larsen And Toubro Limited vs Gujarat State Petroleum … on 7 February, 2000

JUDGMENT

R.K. Abichandani, J.

1. The petitioner company challenges the decision of the respondent No. 2 in
awarding Engineering, Procurement and Construction contract for natural gas
fired combined cycle power plant at Hazira to the respondent No. 3 company.
Initially when the petition was filed, the prayer was to quash the decision
selecting the respondent No. 3 as EPC contractor, but later when it came to
light that resolutions were already passed by the Management Committee and the
Board of Directors and the contracts were entered into on 13th December, 1999,
pursuant thereto between the respondents Nos. 1, 2 and 3, the resolutions and
the contracts were also challenged by way of an additional prayer.

2. The petitioner No. 1 is a multi-dimensional Engineering and Construction
company in India’s private sector, as stated in the petition. Its power project
group caters to two major areas namely – (i) the large power plants,
predominantly connected with the grid as an independent power project and (ii) a
captive co-generation business which focuses on the development of projects to
serve the captive industrial consumer.

2.1 The respondent No. 1 is a company promoted by the Government of Gujarat
and six other State sector Corporations, inter-alia engaged in the business of
exploration and exploitation of oil and gas in Gujarat. The said company, with a
view to use natural gas from the gas fields owned by it for generation of power,
proposed to establish a Power plant at Hazira in Gujarat under the name of the
respondent No. 2, which is a company promoted by the respondent No. 1.

2.2 The respondents Nos. 1 and 2 are wholly owned State Government
Corporations incorporated for exploration of oil and gas and generation of power
respectively. For the purpose of selection of EPC contractor for 160 MW Natural
Fired Combined Cycle Power Plant, Request for Qualification (for short “RFQ”)
was issued in December, 1998. It was mentioned therein that the respondent No. 1
was proposing to initially set-up a 160 MW Gas based combined cycle power plant
at Hazira and the plant capacity would be expanded as and when more gas can be
committed. It was mentioned that approval for the proposed power project scheme
from the Government was received in principle and that the Gujarat Electricity
Board has also cleared the project in its Board meeting. The project was
described in paragraph 3.4 of the RFQ and in context of `Physical Facilities of
the Project’, it was stated that the nominal, net output of the base load,
Natural Gas fired, combined cycle power station should be 160 MW +_10% at mean
site conditions. The respondent No. 1, in consultation with the Government, was
to select co-sponsors to develop the project on a Build-Own-Operate (BOO) basis,
which refers to an arrangement whereby the Project company undertakes to
finance, insure, design, construct, own, operate and maintain an electric power
generating facility. The power generated was to be sold pursuant to Power
Purchase Agreement. The respondent No. 2 company was to finalise and sign all
agreements necessary to implement the project, including Power Purchase
Agreement, Fuel Supply Agreement and Water Supply Agreement etc. This project
company created by the respondent No. 1 was to be overall responsible for
selecting the equipment, technology, designing the plant, carrying out the
plant’s construction and commissioning, at its own risk. The financing of the
project was solely a matter between the respondent No. 1 (including co-sponsor),
the Project company and the funding institutions, as stated in the RFQ document
in paragraph 3.6. The evaluation criteria was to include financial strength of
the bidder, resource raising capability and ability to execute the contract in
envisaged time schedule, equity offered for the Project etc. as mentioned in
paragraph 4.4 of RFQ.

2.3 Twelve pre-qualification bids were actually received against such
invitation and seven parties were pre-qualified for issuing of Request For
Proposal (for short “RFP”). This included the petitioner No. 1 and the
respondent No. 3. Pursuant to the issuance of RFP document, only three proposals
were received by the respondents Nos. 1 and 2 and these were the petitioner No.
1, the respondent No. 3 and one Bombay Suburban Electricity Supply Company
Limited led consortium. This RFP document was issued on 17th February, 1999, a
copy whereof is at Annexure “A” to the petition (pages 25/A to 190). A
clarification was issued on 3rd March, 1999 as per Annexure “B” to the petition,
enclosing evaluation criteria, which was to form an integral part of the RFP
document. This evaluation criteria referring to the RFP document for invitation
of EPC contract more particularly to item 1.5.0, by which weightage was to be
given totally upto 100% proceeded to give the method of computation of such
weightage. The different heads against which the weightage was to be given were
(1) Per MW (Gross Output) EPC cost determined based on parameters = 75 per cent;
(2) Financial package offered = 15 per cent; (3) Equity offered = 5 per cent and
(4) Quality of proposal and background/experience in respect of successful
completion of recent EPC contracts in power sector = 5 per cent, thus, making it
total of 100% marks.

2.4 On 15th March, 1999, a further clarification was issued with reference to
the aforesaid clarification dated 3.3.1999. This clarification, which is at
Annexure “C” to the petition (page 202) allowed the bidder to quote maximum
possible net guaranteed output based on guaranteed Station Heat Rate, Auxiliary
Power consumption and the availability of 0.9 MMSCMD gas with Net Calorific
Value of 8300 Kcal/SCM as per the revised fuel supply agreement condition. It
was provided that such net guaranteed output figure would be fully taken into
consideration even if it is more than 160MW + 10 per cent. This the petitioners
rely upon to contend that the ceiling of 160MW should be taken to have been
lifted and the petitioner was therefore, able to quote 189MW output. In the said
clarification, it was stated that the configuration however, of 2 Gas Turbines +
2 Waste Heat Recovery Boilers + 1 Steam Turbine generating unit stays as it is.
It is further stated that per Mega Watt (Gross) cost would be evaluated based on
such guaranteed Output, Station Heat Rate and Auxiliary Power consumption. It
was further stipulated that in case the Gas Turbine manufacturer included as a
consortium member, is a licensee, then an undertaking from the licensor
confirming its back-up guarantee for successful performance of Gas Turbine
Combined Cycle Power Plant alongwith associated auxiliary equipment and
availability of spare parts should also be provided. It was further stated that
in case the financial package being offered by the bidder involves floating and
fixed interest rates, floating rates would be converted to fixed rate and cost
of swap would be built in as a cash outflow, for the purpose of evaluation. It
was also stated that in case financial package offered by the bidders involves
lease financing, evaluation would be based on the actual cash out-flow for the
owners, based on lease rentals and tax implications, if any. In paragraph 6 of
this clarification letter, it was mentioned that the bid evaluation criteria had
specified loading due to increase in Station Heat Rate (average at 70 per cent
and 85 per cent PLF) over lowest quoted Station Heat Rate at the rate of Rs.
44,500 / K.Cal/MW. Similarly, loading due to increase in Auxiliary Power
Consumption over lowest quoted Auxiliary Power Consumption had been specified at
Rs. 2.25 lakh/Kw/Mw. These figures were revised to Rs. 36,000 / K.Cal/Mw and Rs.
1.80 lakh / Kw/Mw respectively for bid evaluation purpose only. These
clarifications were to be treated as an integral part of the RFP document.

2.5 Again on 3rd April, 1999, further clarification was issued as per
Annexure “D” to the petition (page 204), which also was to be considered as an
integral part of the RFP document, as stated at the bottom of that letter, and,
it was thereby clarified in context of the letter dated 15th March, 1999, that
gross capacity offered by the bidder on the basis of 9 lakhs m3 / day of gas
having Net Calorific value of 8300 kCal / m3 would be calculated based on
guaranteed net SHR for field conditions. However, to account for possible
deterioration in machine capacity over a period of time, a 2% reduction in
Maximum Capacity offerable with 9 lakhs M3 / day of gas would be considered. The
SHR to be considered at 70 per cent and 85 per cent of capacity was to be based
on the Maximum offerable Capacity thus reduced by 2 per cent. The guarantee SHR
in the bid was to be compared with the published data in the Gas Turbine
Hand-book and in case the guaranteed SHR was found to be less than the published
data, a detailed justification was to be sought for from the bidder.

2.6 On 1.5.1999, the petitioner wrote a letter to respondent No. 1, which is
at Annexure-18 of the Affidavit-in-Rejoinder of the petitioners (page 855),
proposing to optimise and to offer a plant based on marginal higher fuel
utilisation than specified, say a minimum of 10 per cent and requesting the
respondent No. 1 to accept and evaluate their offer based on offerable capacity
with higher fuel utilisation. To this, the respondent No. 1 sent a reply on 3rd
May, 1999 as per Annexure “E” to the petition (page 206), informing the
petitioner No. 1 that the decision that the capacity that may be offered for the
Power Project should be based only upon the availability of 0.9 MMSCMD (i.e. 9
lakhs/M3) of Gas having Net Calorific Value of 8300 Kcals/SCM was taken after
examining various aspects of Fuel Supply Agreement and development plans of the
respondent No. 1 for its Hazira field and this was already clarified by the
respondent No. 1 vide its earlier letter dated 15th March, 1999. It was
therefore, regretted that the suggestion of the petitioner for considering
higher capacity than what was possible with availability of 0.9 MMSCMD of Gas
with Net Calorific Valoue of 8300 Kcals/SCM, could not be considered.

2.7 The respondent No. 1 issued a further clarification vide its letter dated
7th May, 1999, as per Annexure “F” to the petition (page 207), which was also to
be treated as a part of the RFP document. It was mentioned therein while
extending the last date for submission of offers against RFP upto 5th June,
1999, that back-up guarantee would be required to be provided from the original
licensor in case the machinery supplier is a licensee. This requirement was
specifically applicable for Gas Turbine only.

2.8 It appears that there were some discussions held on 15th and 16th July,
1999 and after those discussions, a letter was written by the respondent No. 1
on 19th July, 1999, as per Annexure “G” to the petition (page 208), in which
various deviations/clarifications and final decisions and additional technical
clarifications given during the meeting on 15/16th July, 1999 were enclosed at
Annexure I to VI to that letter. Based on these final decisions, the bidders
were required to submit revised price bids in the same format as had been
submitted in the original price bids. As regards `Back-up Guarantee’, it was
mentioned in paragraph 4 (page 209) that an indicative format for the Gas
Turbine Performance Guarantee required from the Licensor/Principal was enclosed
at Annexure VII and that this back-up guarantee will be over and above the
performance guarantees offered by the bidder in respect of various parameters to
be included in the contract. It was mentioned that consortium will have to
separately produce performance guarantee from the licensor/principal either in
the format as suggested or in a format which was substantially similar to the
one given at Annexure VII. It was specified that in case of non-receipt of such
back-up performance guarantee, owner reserved the right to reject the revised
price-bid. In paragraph 7.0 of the letter, it was mentioned that the owner had a
right to treat the bid as non-responsive in case the deviations were not
acceptable, or deal with it in some other manner as deemed fit. Thereafter, the
date for submitting the revised price bid was extended upto 12th August, 1999,
as per letter dated 27th July, 1999 at Annexure “H” to the petition (page

211).

2.9 On 30th July, 1999, the petitioner No. 1 by its letter at Annexure “I” to
the petition (page 213), made a suggestion to the respondent No. 1 for
evaluation, mentioning therein, in paragraph 1.3, that the part load performance
should not be related to the offerable capacity at 0.9 MSCMD gas utilisation as
it would lead to impractical low levels of loading for their 6FA machine and
unfair comparative position with other machines and that the part load
performance was related to the PPA, which can accept the full rated capacity of
the plant and was independent of the rating for gas utilisation of 0.9 MSCMD. To
this, the respondent No. 1 sent its reply dated 4th August, 1999 at Annexure “J”
to the petition (page 216), reiterating that the evaluation criteria and loading
figures were already communicated to the bidders and emphasising that evaluation
was linked to offerable capacity. The petitioner No. 1 was also informed that
after the price bid opening, if the guaranteed figures were found to be without
adequate basis and justification, then the owner reserved the right to take
suitable decision in the interest of the project. It was also mentioned that all
applicable taxes and duties, including excise duty, irrespective of the paying
party, over and above the basic price to arrive at final landed cost of the
item, shall have to be indicated by the bidder in Exhibit PR-F of RFP document.
As per the intimation given at Annexure “K” by the respondent No. 1, the price
bid was to be opened on 19th August, 1999 at 3.00 P.M.

2.10 It appears that thereafter a meeting of the Fourth Management Committee
of Directors of the respondent No. 2 Company was held on 4th September, 1999 to
evaluate the bids. The minutes of that meeting, are at Annexure “O” (page 940)
to the affidavit-in sur-rejoinder on behalf of the respondents Nos. 1 and 2.
From these minutes it appears that in the process of selection of EPC contractor
for the said project, the Committee had before it the technical bid
recommendations of their consultant Desein Pvt.Ltd., against Request for
Proposal (RFQ) for selection of EPC contractors for which final technical and
price bids were opened on August 19, 1999. It was recorded therein that the
Committee was apprised of the broad technical and commercial terms quoted by
various bidders including the deviations from RFP terms taken by bidders and
evaluation procedure followed in the light of the criteria laid down for
evaluation. A representative of Messrs Desein explained at the said meeting the
report containing recommendations in detail. The discussion that took place on
major items was recorded in these minutes and to the extent that it would be
relevant for the purpose of this petition, it would be referred to at an
appropriate stage. The Managment Committee after awarding marks under various
heads referred to hereinabove, for the reasons mentioned therein, resolved that
the bid of the respondent No. 3 ABB Power Generation Limited be the first lowest
bid and be considered for negotiation and finalisation of the order for EPC
contract work of CCPP at Hazira. Thereafter, the proceedings of the Management
Committee meeting dated 4th September, 1999 were placed before the meeting of
the Directors Committee held on 4th September, 1999 for ratification. The
minutes of the Directors Committee held on 4th September, 1999 are at Annexure
“M” to the affidavit-in-reply filed by the respondents Nos. 1 and 2 (page 429).
It is recorded therein that the Managing Director briefed the Board about the
process for selection of EPC Contractor and about the rationale for selection of
EPC Contractor. The Board noted that the company had received twelve bids of
which seven bidders were short-listed at RFQ state. At RFP stage, three bids
were received. It was noted that the bidders were brought at par technically and
that final technical and price bids were opened on 19th August, 1999. The
representative of Messrs Desein Pvt.Ltd. apprised the Board about various
technical aspects of their report and further informed the Board about
deviations taken by the bidders and the manner in which these were dealt with by
the company. The Board also discussed about the importance of back-up guarantee
of Licensor/s and opined that such a guarantee was absolutely necessary in view
of recent experiences in the State. A comparison of proposal of three bidders on
various criteria of RFP was made by the representative of Messrs Desein before
the Board. The Board decided to accept the report of Messrs Desein and the
recommendations contained therein. The Board also considered the financing
packages offered by different bidders and discussed at length various terms and
conditions as mentioned in the minutes. It also took note of the recommendations
given by Messrs Fieldstone for adopting Internal Rate of Return (IRR) on equity
to be the main criteria for evaluation and based on this, the Board accepted the
evaluation of financial package and marks given based thereon. It was recorded
in the minutes that the Board approved the comprehensive evaluation done by the
Directors Committee at its meeting on 4th September, 1999 and the selection of
respondent No. 3 – Messrs ABB as lowest evaluated bidder. It was resolved by the
Board to ratify the resolutions of the Management Committee for selection of the
respondent No. 3 as EPC Contractor for the said Power Project. The Managing
Director of the company was authorised to negotiate and finalise detailed terms
and conditions of appointment of the respondent No. 3 as EPC Contractor, on the
basis of their final technical and price bids for the proposed power project,
keeping in view the parameters laid down during the bidding process.

3. In the petition when it was filed, the contentions that were raised were
that the decision of the respondents Nos. 1 and 2 to award the contract to
respondent No. 3 was outrageously in defiance of logic, unreasonable, arbitrary
and in violation of the principles of natural justice, unfair amounting to
favouratism and violative of the fundamental rights of the petitioners
guaranteed by Articles 14 and 19(1)(g) of the Constitution of India. It was
contended that the impugned decision of the respondents Nos. 1 and 2 was such as
no reasonable person would reach on the basis of the available bid data and
evaluation criteria adopted. It was contended that while evaluating the
techno-commercial bids of the petitioner and that of the respondent No. 3, while
2 per cent reduction in maximum capacity offerable with 9 lakh M3/day was made
only in the case of the petitioner no such reduction was made from the maximum
offerable capacity of the respondent No. 3, on the ground that in case of the
respondent No. 3, the gas utilisation being less than 9 lakh M3/day, it would be
possible to take care of deterioration of machines by enhancing the gas
availability. It was contended that this was ex-facie untenable because in all
the gas turbines there was non-recoverable degradation of power output with
usage irrespective of the availability of gas and further that it was never
clarified that 2 per cent degradation will be applied only if there was full
utilisation of gas. It was contended that even if this criteria is assumed to
have already laid down, it was arbitrary and laid down specifically to favour
the respondent No. 3, who had offered a lower capacity turbine. It was contended
that the maximum capacity offerable with 9 lakh M3/day of gas in the case of the
petitioner’s configuration was 189.87 MW, though the plant offered by the
petitioner was capable of offering 207 MW and therefore, about 9 per cent
additional capacity would have been available in future to the respondent Nos. 1
and 2 when fuel constraint of 9 lakh M3/day was overcome at no extra cost. It
was contended that the plant offered by the petitioner would generate additional
127 Million units (approx.) per annum, which would provide approximately Rs. 32
crores per annum of additional revenue to the respondents Nos. 1 and 2, but this
aspect was not considered. It was contended that the justification sought to be
offered for “loading” for working out `per MW (gross output) EPC cost’ was
untenable on the face of the tender document and the decision was based on
procedural irregularities. It was contended that awarding 75 marks to the
respondent No. 3 on this count and lowering marks of the petitioner No. 1 in
inverse proportion was violative of Article 14 of the Constitution of India. It
was also contended that there was no justification to increase the price quoted
by the petitioner No. 1 by Rs. 8.728 crores for GE supervision, in absence of
the petitioner demanding such supervision from GE. As regards the loading on the
basis of taxes, it was contended that the petitioner had quoted a fixed turn-key
price including all the prevailing taxes, duties, levies, tariffs etc.
associated with the work. It was stated that the fixed turn-key price included
sales-tax of Rs. 4.662 crores. It was also contended that there was no reason
for the respondents Nos. 1 and 2 to presume that the with-holding tax would be
payable by them when the price offered was on turn-key basis. It was therefore,
contended that the loading of Rs. 1.684 crores on account of with-holding tax,
was arbitrary and violative of Article 14 of the Constitution of India. As
regards loading of the price quoted by the petitioner on account of Works
Contract Tax, it was contended that there was no reason for the respondent No. 1
to presume that they would be required to pay the sum in addition to the price
payable to the petitioner as turn-key price. This loading was also therefore
assailed as arbitrary. According to the petitioner, the techno-commercial
evaluation made by the respondents Nos. 1 and 2 was irrational, unreasonable,
unfair, arbitrary and violative of Article 14 of the Constitution of India. It
was further contended that one mark deduction from the five marks awardable for
the quality of proposal was not permissible in view of the fact that at the
meeting held on 15th and 16th July, 1999, the respondents Nos. 1 and 2 had
agreed to accept a Consortium Agreement of Sumitomo and Hitachi duly notarised
and authenticated by the Indian Embassy in Japan and the petitioners were called
upon to furnish a letter from GE (licensor), which would establish that the
requirement of performance back-up guarantee of licensor/principal could be
dispensed with. It was contended that such agreement and letter were accepted by
the respondent No. 1 and since the respondent No. 1 did not reject the
techno-commercial bid before opening the price bid, there remained no ground for
deducting one mark. This deduction was therefore, assailed as arbitrary. It was
further contended in the petition that the RFP read in conjunction with the
amendment, clearly envisaged the net present value of outflow towards debt as
the criteria for evaluating the financial package. According to the petitioner,
the net present value of the out-flow towards debt of the package offered by the
petitioner was in all respects better than that of the respondent No. 3 and
therefore, the petitioner No. 1 company ought to have been awarded full fifteen
marks for the financial package, while the respondent No. 3 ought to have been
awarded proportionately lower marks – approximately 12.7468. It was further
contended that the suggested tenor of the petitioner’s financial package was
nine years, and it had been clearly stated that two years moratorium will be
provided. According to the petitioner, there was arbitrary misinterpretation of
the financial package offered by it, by computing two years’ period of
moratorium within seven years mentioned against the tenor of repayment.
According to the petitioner, the declaration that the petitioner’s financial
package was non-responsive and giving of zero mark on that count was arbitrary
and the petitioner was in fact, on the basis of the criteria laid down in the
RFP and its clarifications made thereafter, entitled to be awarded full hundred
percent marks.

In paragraph 3.12 of the petition, it was contended that the capacity of the
Combined Cycle Power Plant being offered by the petitioner was 207 MW, and in
view of the limitation of availability of natural gas to the extent of 9 lakh
M3/day, the plant offered by the petitioner would be functioning under maximum
offerable capacity at 189.87 MW and therefore, if larger quantity of gas was
available in future i.e. above the available 9 lakhs M3/day, the respondents
Nos. 1 and 2 would be benefitted. By not permitting such additional 207 MW, they
would be losing about 250 million Kwh per year, which would mean a revenue loss
of approximately Rs. 62.5 crores per year in additional business.

4. The respondents Nos. 1 and 2 filed a detailed reply with several
annexures, emphasising that the project was right from the beginning envisaged
to be of 160 MW +- 10 per cent and the clearance from the Government of Gujarat
and the Gujarat State Electricity Board was obtained as far back as in December,
1998. It was also emphasised that the bids were evaluated on the basis of the
criteria already prescribed in the RFP and clarification documents. It was
pointed out that after the selection of the respondent No. 3, until the orders
were made on 30th December, 1999 by the High Court in this petition, the
respondent No. 2 had already signed contracts with the respondent No. 3 – namely

(i) C.I.F Supplies Contract; (ii) Ex-Works Supplies Contracts; and (iii)
Services Contract. It was submitted that the delay in the schedule would have an
adverse cascading effect on the cost of project, if the NTP was not issued
before 31st March, 2000. According to the respondents, each day’s delay in
implementation would mean a direct loss of lakhs of rupees for GSEG besides
unquantified loss to the State, in terms of socio-economic development.
According to these respondents, a sum of Rs. 1300 lakhs was already expended by
them towards the project till that date.

The respondents Nos. 1 and 2 in their affidavit-in-reply referred to the
criteria laid down for evaluation of the bids and the weightage of marks, which
was to be given and which has been noted hereinabove. They maintained that the
evaluation was properly done on all counts and the decision was taken on the
basis of the relevant material and with the assistance of experts after proper
application of mind to all the relevant aspects of the matter. The respondent
No. 3 filed a separate affidavit-in-reply taking similar contentions.
Thereafter, even during the course of the arguments, the record of the petition
swelled to its present obesity by sur-rejoinders and sur-sur-rejoinders, which
more or less centered around the controversy delineated above and therefore, it
would be futile to repeat the contentions and averments made therein in detail
in the judgement.

4.1 In response to the demand of the petitioner made in their Civil
Application No. 231 of 2000 for producing documents having bearing on the
controversy involved, the respondents Nos. 1 and 2 have, during the hearing,
produced technical evaluation report of Desein Private Limited dated 30th
August, 1999, the revised price-bids of the petitioner as well as the respondent
No. 3 and a full copy of Request For Qualification, (which was missing in the
main record, since only few pages thereof were produced). Copies of these
documents which are relevant and which are integral part of the record were duly
supplied to the petitioner’s Counsel before they were relied upon by both the
sides.

5. The learned Senior Counsel and other Counsel appearing for the petitioners
contended that the petitioners could have been offered a more cost effective
configuration, if the configuration of 1GS + 1 WHRB + 1 ST (i.e. One Gas
Turbine, One Waste Heat Recovery Boiler and One Steam Turbine), which was
mentioned in the RFQ document earlier in 1998 had been maintained and the
respondents Nos. 1 and 2 had not confined the RFP to the configuration of 2 GSs
+ 2 WHRBs + 1 ST (i.e. Two Gas Turbines, Two Waste Heat Recovery Boilers and One
Steam Turbine). It was submitted that even the configuration of 2+2+1, which was
offered by the petitioner was most cost effective than that of the respondent
No. 3 and if the decision was properly taken in public interest and resources
were to be properly utilised, the respondent No. 3 would be a non-starter. It
was argued that there was a secret agenda so that the entirety of the contract
was so tailored as to favour the respondent No. 3. The decisions were taken from
time to time which prescribed parameters that would lean in favour of the
respondent No. 3 and deprive the petitioner of the benefit of its superior
technology and equipment. It was contended that 1+1+1 configuration was
deliberately dropped, because the respondent No. 3 did not have that
configuration to offer. It was further contended that a 200 MW project was
deliberately scaled down and downgraded to 160MW project though this would
result in a loss of Rs. 62.5 crores. Moreover, showing of lower calorific heat
value of 8300 Kcal of gas as against the actual value of about 8600 Kcal was
also adopted to suit the respondent No. 3. Repeated demands were made by the
respondent No. 1 to nitpick to find out reasons to put the petitioner to
disadvantage and these respondents did not ask for explanations or
clarifications and not asking for explanation on a facile excuse, that the
Central Vigilance Commissioner will smell corruption if they obtain
clarification, was a course adopted for deliberately not seeking the
explanations that the petitioners would have offered as to incidence of taxation
or letter in lieu of guarantee and the other aspects. It was further argued that
as the petitioners’ configuration was more cost effective than that of the
respondent No. 3, the respondent No. 1 embarked upon a two per cent deduction on
the basis of depreciation. Irredeemable loss due to depreciation was not a
unique feature for the petitioners’ machinery and it would have happened even in
case of the equipment of the respondent No. 3. It was therefore contended that
discrimination was practised on this count against the petitioner by not
imposing a similar deduction of 2 per cent from the capacity offered by the
respondent No. 3. It was also contended that an irrational stand was taken that
the loss of efficiency in the equipment of respondent No. 3 due to
“unrecoverable degradation” would be off-set by additional input of gas that the
respondent No. 3 could make, since it was to use only 7.7 lakhs M3/day gas as
against the available capacity of 9 lakh M3/day gas, which the petitioner was to
fully utilise. Giving analogy of an old car, it was contended that a depreciated
engine will not work more efficiently just by pouring more petrol in it. It was
also contended that sales-tax loading was not justified because the tender was
on a turn-key price basis and taxes which were shown separately for break-up
purposes were obviously to be borne by the petitioners. No clarification was
sought on this count by the respondent No. 1 and the Central Vigilance
Commissioner’s Circular, which did not apply, was being put up as an excuse. It
was also contended that the insistence of the respondents Nos. 1 and 2 on the
back-up guarantee of GE was unreasonable because no such lisensor would give a
back-up guarantee for the licensee manufacturer’s machines. Moreover, this
requirement must be deemed to have been waived because the price bid was opened
after the filing of the letter of GE dated 21.7.1999.

5.1 The learned Senior Counsel further argued that the petitioners had
offered financial package of seven years and two years’ moratorium period which
would be nine years in all, but these respondents deliberately misread the
package so as to mean that two years’ moratorium was within the tenor of
repayment profile of seven years. It was argued that the expression “tenor”
meant the entire period i.e. duration of instalments plus the moratorium period.
Referring to the letter of ICICI addressed to L & T Finance, it was argued
that this is how the matter was understood even by a financer. It was contended
that since no clarification on this count was sought, it should be inferred that
the decision was reached only with a view to favour the respondent No. 3 by
consciously and deliberately giving 15 marks to it. A contention was developed
as the hearing progressed that the offer of financial package made by the
respondent No. 3 was not a firm offer and no commitment to adhere to the
financial package was given by it to the respondent No. 2. It was contended that
the financial advisor of the respondents Nos.1 and 2 – Messrs Kishore and
Shastri, took into account the fact that the financial package offered by the
respondent No. 3 was not a firm commitment to arrange the finance. The
respondent No. 3 did not bind itself and the offer was therefore, no offer in
the eye of law. It was therefore argued that the offer of the respondent No. 3
of such financial package ought to have been treated as non-responsive and no
mark could be allotted for it. It was contended that neither in the Management
Committee’s minutes, nor in the Board Meeting’s minutes was a reference made to
this aspect or to the evaluation of Messrs Kishore and Shastri on this point. It
was submitted that an offer of financial package should have been clear and firm
so as to be capable of acceptance and reliance was placed on the text-books on
the law of Contract (Atliah’s 4th Edition page 61 & Trietal 9th Edition page
8 and also from Anson 27th Edition Ch.II & Pollock & Mulla’s 11th
Edition page 132) to submit that an offer should be clear and capable of
acceptance and not a non-committal one. It was contended that there was thus a
conscious effort on the part of the respondent No. 2 to give fifteen marks to
the respondent No. 3 and nil to the petitioner. It was further contended that
the action of the respondent No. 1 was actuated by malafides, which can be
inferred from the cumulative effect of the following: (1) it was deliberately
overlooked that when nine lakhs M3/day gas flow was available, its full
utilisation would have yielded more power/industry/employment; (2) choosing 160
+_ MW producer who could not have utilised the full nine lakh M3/day shows that
there was pre-determination to peg down production to 160 MW at the cost of the
State exchequer; (3) no reason was given for pegging the capacity at 160MW; (4)
the higher revenue return of 62.5 crores was ignored which shows that there was
determination to fit the `cap’ on the head of respondent No. 3; (5) the fact
that there was no firm offer of the respondent No. 3 was not referred to by the
Management Committee or the Board, and there was a deliberate attempt made to
ignore such relevant material with a view to support the respondent No. 3.

5.2 In support of his contentions, the learned Counsel for the petitioners
relied upon the following decisions:-

(1) State of Punjab v. Ramji Lal, reported in AIR 1971 S.C 1228 was relied
upon in support of the contention that where validity of action taken by the
State Government was challenged on the ground that action was malafide, then
to establish malafides, it was not necessary for the party, alleging malafide
of State action, to prove that any named officer or officers was or were
responsible for that official act. The law does not cast any such burden upon
the party challenging the validity of the action taken by the State
Government.

(2) M/s. Radhakrishna Agarwal and Ors. v. State of Bihar, reported in AIR
1977 S.C 1496 was relied upon in support of the contention that Article 14 of
the Constitution of India imports a limitation or imposes an obligation upon
the State’s executive power under Art. 298 of the Constitution and that all
constitutional powers carry corresponding obligations with them. It was held
therein that at the very threshold or at the time of entry into the field of
consideration of persons with whom the Government could contract, the State,
no doubt, acts purely in its executive capacity and is bound by the
obligations which dealings of the State with the individual citizens import
into every transaction entered into in exercise of its constitutional powers.
It would be noted that, in that decision it was also held that the allegations
made in the case before the Supreme Court were of such a nature that they
could not be satisfactorily decided without adducing evidence, which was only
possible in ordinary civil suits, to establish that the State acting in its
executive capacity through its officers, had discriminated between parties
identically situated. It was held that such a conclusion could not be reached
on the allegations in the writ petitions and the affidavit evidence on
record.

(3) M.I. Builders Pvt. Ltd. v. Radhey Shyam Sahu and Ors. reported in
(1999) 6 SCC 464 was cited in support of the contention that judicial review
was called for where the Corporation’s action was unreasonable, arbitrary,
unfair and against the public policy, public interest and public trust
doctrine. There, the agreement under which prime land was given for a song by
Mahapalika was found to be arbitrary, unfair and a fraud on its power smacking
favouratism and therefore, not in public interest.

(4) Tata Cellular V. Union of India, reported in (1994) 6 S.C.C 651, which
was referred to by both the sides, was relied upon on behalf of the
petitioners for its proposition that the judicial power of review is exercised
to rein in any unbridled executive functioning. It was observed that the
restraint has two contemporary manifestations viz. one is ambit of judicial
intervention and the other covers the scope of the court’s ability to quash an
administrative decision on its merits. These restraints bear the hallmarks of
judicial control over administrative action. It was held that the principle of
judicial review is concerned with reviewing not the merits of the decision in
support of which the application for judicial review is made, but the decision
making process itself. It was held that the principle of judicial review would
apply to the exercise of contractual powers by the Government bodies in order
to prevent arbitrariness or favouritism. It was held that the duty of the
Court is to confine itself to the question of legality and its concern should
be whether a decision making authority exceeded its powers; whether it
committed an error of law or committed a breach of the rules of natural
justice or reached a decision which no reasonable tribunal would have reached
or, abused its powers. The grounds upon which an administrative action can be
subjected to judicial review are classified as illegality, irrationality and
procedural impropriety. In that very decision, while deducing the principles
from various cases referred, it was held that the modern trend points to
judicial restraint in administrative action; that the Court does not sit as a
court of appeal but merely reviews the manner in which the decision was made;
that the court does not have the expertise to correct the administrative
decision and if a review of the administrative decision is permitted, it will
be substituting its own decision, without the necessary expertise which itself
may be fallible; that the terms of the invitation to tender cannot be open to
judicial scrutiny because the invitation to tender is in the realm of
contract; and, that the Government must have freedom of contract, i.e. a
free-play in the joints is a necessary concomitant for an administrative body
functioning in an administrative sphere or quasi-administrative sphere.
However, the decision must not only be tested by the application of Wednesbury
principle of reasonableness, but must be free from arbitrariness not affected
by bias or actuated by mala fides. Moreover, quashing decisions may impose
heavy administratrive burden on the administration and lead to increased and
unbudgeted expenditure.

(5) Reference was also made to the decision of the Supreme Court in New
Horizons Limited and Anr. v. Union of India and ors., reported in (1995) 1 SCC
478, in which the Hon’ble the Supreme Court held that in the matter of
entering into a contract, the State does not stand on the same footing as a
private person who is free to enter into a contract with any person he likes.
The State, in exercise of its various functions, is governed by the mandate of
Article 14 of the Constitution which excludes arbitrariness in State action
and requires the State to act fairly and reasonably. The action of the State
in the matter of award of a contract has to satisfy this criterion. Therefore,
while entering into contracts the Government cannot act arbitrarily at its
sweet will and like a private individual, deal with any person it pleases, but
its action must be in conformity with the standards or norms which are not
arbitrary, irrational or irrelevant. It was further held that it is recognised
that certain measure of “free play in the joints” is necessary for an
administrative body functioning in an administrative sphere. Holding that the
High Court had erred in taking the view that the appellant in that case was
not a joint venture and that there was only certain amount of equity
participation by a foreign company, the Hon’ble Supreme Court held that once
it was held that the appellant was a joint venture as claimed by it in the
tender, the experience of its various constituents had to be taken into
consideration, if the Tender Evaluation Committee had adopted the approach of
a prudent businessman.

(6) Reliance was then placed on the decision of the Supreme Court in
Sterling Computers Ltd. V. M & N Publications Ltd. and ors., reported in
(1993) 1 SCC 445 for its proposition that even while taking decision in
respect of commercial transactions, a public authority must be guided by
relevant considerations and not by irrelevant ones and if such decision is
influenced by extraneous considerations, which it ought not to have taken into
account, the ultimate decision is bound to be vitiated, even if it is
established that such decision had been taken without bias. It was held that
the action or the procedure adopted by the authorities which can be held to be
`State’ within the meaning of Article 12, while awarding contracts in respect
of properties belonging to the State, can be judged and tested in the light of
Article 14. In the said decision, it was also held that public authorities
must have the same liberty as they have in framing the policies, even while
entering into contracts because many contracts amount to implementation or
projection of policies of the Government. In contracts having commercial
element, some more discretion has to be conceded to the authorities giving
them liberty to assess the overall situation for the purpose of taking a
decision as to whom the contract be awarded and on what terms, so that they
may enter into contracts with persons, keeping an eye on the augmentation of
the revenue. It was also held that it was not possible for the Courts to
question and adjudicate every decision taken by an authority, because many of
the Government Undertakings which in due course have acquired the monopolist
position in matters of sale and purchase of products and with so many ventures
in hand, can come out with a plea that it is not always possible to act like a
quasi-judicial authority while awarding contracts. It was held that even in
such matters, they have to follow the norms recognised by the courts while
dealing with public property, though the decisions taken in bona fide manner
although not strictly following the norms laid down by the courts, are upheld
on the principle laid down by Justice Holmes, that courts while judging the
constitutional validity of executive decisions must grant certain measure of
freedom of “play in the joints” to the executive.

(7) The decision of the Hon’ble the Supreme Court in the case of Star
Enterprises and Ors. v. City and Industrial Development Corporation of
Maharashtra Ltd. and ors. reported in (1990) 3 SCC 280 was referred to for its
proposition that the State or its instrumentality entering commercial field
must act in consonance with rule of law.

(8) The decision of the Hon’ble the Supreme Court in the case of Harminder
Singh Arora v. Union of India and Ors. reported in (1986) 3 SCC 247, was
referred to for its proposition that the Government may enter into a contract
with any person but in so doing the State or its instrumentalities cannot act
arbitrarily. If the authority chooses to invite tenders, then it must abide by
the conditions laid down in the tender notice and the result of the tender and
cannot arbitrarily and capriciously accept a much higher tender to the
detriment of the State. It was held by the Hon’ble Supreme Court that if the
authorities choose to accept the tender of the respondent No. 4 (in that case
for supplying pasteurized milk, instead of fresh buffalo or cow milk as
specified in the tender notice), the appellant should also have been given an
opportunity to change his tender. It was noticed that if the terms and
conditions of the tender were incorporated in the tender notice itself and
that did not indicate giving of 10% price preference to Government
undertaking, the authority concerned acted arbitrarily in allowing such
preference to the respondent No. 4.

6. The learned Senior Counsel – Additional Solicitor General, appearing for
the respondents Nos. 1 and 2 strongly contended that this was not a matter where
the High Court should exercise its powers under Article 226 of the Constitution
of India, because it was amply established from the record that there was no
element of arbitrariness in the decision making process. It was contended that
the decision to accept the bid of the respondent No. 3 was taken on
consideration of the relevant material before the concerned body and there was
no reason to infer that it was taken with a view to favour the respondent No. 3.
It was pointed out that on quite a few aspects where these respondents could
have treated the petitioner’s bid as non-responsive, the stringent requirements
were not taken to their logical effect so that the bid of the petitioner was
kept alive for consideration and this rules out any inference of mala fides. If
these respondents had pre-determined the matter and wanted to oust the
petitioner No. 1, that would have been very easy on certain aspects which were
not decided upon immediately for throwing out the petitioner’s bid and the
petitioner’s bid was considered on its merits. Illustrating this, he submitted
that as per the terms incorporated in the RFP, the petitioner’s bid could have
been treated as non-responsive for the simple reason that the manufacture was
not directly a part of the consortium as also for the reason that as per the
later clarification which became part of the RFP document, the expected
undertaking of the licensor was not furnished and what was furnished was a
letter, which admittedly did not measure up to the requirement of the RFP
document. It was submitted that the petitioner No. 1 being itself not qualified
as per the terms of invitiation to bid, was not a fit person to carry the writ
of this Court. It was contended that there was delay in the filing of the
petition as the contracts were already executed on 13.12.1999. It was submitted
that the loading done which brought the petitioner’s marks to 71.4 as against
full 75 marks given to the respondent No. 3 for evaluating the `Per MW gross
out-put EPC cost’ was done on a rational basis and taking into account the
opinion of the technical expert Desein Pvt.Ltd., who had also recommended
loading of 2 to 3 million dollars in the price quoted by the petitioner in lieu
of the supervision, which otherwise would have been been guaranteed if the
undertaking of the licensor were given as per the requirement of the RFP
document as clarified. It was further argued by the learned Senior Counsel that
there was no need to infer that M/s. Kishore and Shastri appointed as advisor
for commercial and financial evaluation was dropped or that M/s. Fieldstone
(finance arrangers) was brought in picture with a view to favour the respondent
No. 3. Referring to the letter dated 4.12.1998 (at Annexure “D” to the
sur-rejoinder of respondents Nos. 1 and 2 – page 899) of appointment of M/s.
Kishore and Shastri, the learned Counsel pointed out that Messrs Kishore and
Shastri were appointed for financial services, legal and tax consultancy and
preparation/negotiation of various project contracts and it was specified
therein that the advisor will assist the respondent No. 1 in commercial and
financial evaluation of RFP bids for EPC contractor. In response to the
contentions raised by the petitioners during arguments that the financial
advisor M/s. Kishore and Shastri, who were engaged for a huge fee of Rs. 20
lakhs was omitted as at the time when the Management Committee considered the
question of evaluating the financial package, it was pointed out that this fee
included advice on tax and legal concerns for all matters related to the
project. They also included payment of legal services required for vetting of
documents/ agreements etc. In any event it was submitted that M/s. Kishore and
Shastri did not evaluate the financial package and it only analysed RFP
requirements and the nature of financial package offered with
exceptions/deviations. It was submitted that in mere describing, in the analysis
made by M/s. Kishore and Shastri of the offers of petitioner No. 1 and the
respondent No. 3, there was no opinion expressed and that their financial
packages were required to be evaluated on the basis of methodology, which was
advised by the finance arrangers M/s. Fieldstone to the respondent No. 2. It was
submitted that there was no question of M/s. Fieldstone’s substituting any
opinion of M/s. Kishore and Shastri because they did not evaluate the financial
package but only forwarded the methodology, which was required to be adopted in
such cases. It was argued that it was open for the respondent No. 2 to seek
guidance from such experts with a view to evaluate such financial packages. It
was also contended that there was no detailed method indicated for the
evaluation of financial packages, declared in the RFP and the expression that
the evaluation will be made on the basis of `prudent financial practices’ left
ample scope for evaluating the packages on the basis of a rational methodology
suggested by M/s. Fieldstone, who being Finance Arrangers were well equipped to
give advice in the matter. It was further contended that there were no
allegations of malafide initially made in the petition and that the petitioners
have, during the course of arguments, by their further pleadings, expanded the
scope of their initial attack. It was submitted that there was no question of
pegging the project at 160MW with a view to favour the respondent No. 3,
because, much before the bid of the respondent No. 3 or the petitioner came, the
capacity of the power project was already determined. The clarifications and the
discussion during presentations which are reflected from the record, clearly
show that nothing was being tailor-made for the purpose of respondent No. 3 and
all basic postulates were determined openly and were known to one and all.

6.1 In support of his contentions, the learned Senior Counsel appearing for
the respondents Nos. 1 and 2 relied upon the following decisions of the Supreme
Court.

(1) The decision in Raunaq International Ltd. v. I.V.R Construction Ltd.
and Ors., reported in (1999) 1 SCC 492 was heavily relied upon for its
proposition that any judicial relief at the instance of a party which does not
fulfil the requisite criteria seems to be misplaced. It was contended on the
basis of this proposal that even if the entire thing goes back, it would be
open for the respondent No. 1 to reject the petitioner’s bid on the ground on
which it could have earlier been rejected. The Supreme Court observed that
award of a contract whether it is by a private party or by a public body or
the State is essentially a commercial transaction and in arriving at a
commercial decision, considerations which are of paramount importance are
commercial considerations. It was held that even when the State or a public
body enters into a commercial transaction, considerations which would prevail
in its decision to award the contract to a given party would be the same.
However, because the State or a public body or an agency of the State enters
into such a contract, there could be, in a given case, an element of public
law or public interest involved even in such a commercial transaction. It was
held that when a writ petition is filed challenging the award of a contract by
a public authority or the State, the court must be satisfied that there is
some element of public interest involved in entertaining such a petition and
if the dispute is purely between two tenderers, the court must be very careful
to see whether there is any element of public interest involved in the
litigation. A mere difference in the prices offered by the two tenderers may
or may not be decisive in deciding whether any public interest is involved in
intervening in such a commercial transaction. It was observed that it is
important to bear in mind that by Court intervention, the proposed project may
be considerably delayed thus escalating the cost far more than any saving
which the court would ultimately effect in public money by deciding the
dispute in favour of one or the other tenderer. Therefore, unless the court is
satisfied that there is a substantial amount of public interest or the
transaction is entered into malafide, the Court should not intervene under
Article 226 of the Constitution in a dispute between two rival tenderers. It
was also held that intervention of the Court may ultimately result in delay in
execution of the project. The obvious consequence of such delay is price
escalation. If any re-tender is prescribed, cost of the project can escalate
substantially. What is more important is that ultimately the public would have
to pay a mugh higher price in the form of delay in the commissioning of the
project and the consequent delay in the contemplated public service becoming
available to the public. It was observed that if it is a power project which
is thus delayed, the public may lose substantially because of shortage in
electricity supply and the consequent obstruction in industrial development.
The Supreme Court held that where the decision has been taken bonafide and a
choice has been exercised on legitimate considerations and not arbitrarily,
there is no reason why the court should entertain a petition under Art. 226.
The Supreme Court also held that price may not always be the sole criterion
for awarding a contract and 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 of it. The price offered is only
one of the criteria. At times a higher price for a much better quality of 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 a low price.
It was held that the Court should not substitute its own decision for the
decision of an expert evaluation committee. Moreover, if there is a good
reason why the project should not be undertaken, then the time to object is at
the time when the same is under consideration and before a final decision is
taken to undertake the project. These observations were relied upon to meet
with the argument of the petitioners that the project ought not to have been
pegged at 160MW, as it would not be financially viable in view of the
possibility of additional energy being available in future. The Supreme Court
observed that it was unfortunate that despite repeated observations made by
the Supreme Court in a number of cases, such petitions are being readily
entertained by the High Court without weighing the consequences. It was
pointed out that in the case of Fertilizer Corporation Kamgar Union (Regd.) v.
Union of India, (1981) 1 S.C.C 568, an observation was made to the effect that
if the Government acts fairly, though falters in wisdom, the court should not
interfere. The observation of the Supreme Court in Tata Cellular Vs. Union of
India (supra), to the effect that the right to choose cannot be considered as
an arbitrary power, was referred to while reiterating the conclusions reached
by the Supreme Court in that case, which included the holding that the terms
of the invitation to tender cannot be open to judicial scrutiny because the
invitation to tender is in the realm of contract.

(2) Decision in All India State Bank Officers’ Federation and Ors. v. Union
of India and Ors., reported in (1997) 9 SCC 151, was referred to for its
proposition that for an allegation of malafide to succeed, it must be
conclusively shown that influence was wielded over all the members of the
Board who were present at the meeting. Moreover, the person against whom
malafides are alleged must be made a party to the proceedings.

(3) Decision in Ashok Kumar Mishra and Ors. v. Collector, Raipur and Ors.,
reported in (1980) 1 SCC 180 was cited for its proposition contained in
paragraph 7 of the judgement that it was well settled that the power of the
High Court under Article 226 of the Constitution to issue an appropriate writ
is discretionary and if the High Court finds that there is no satisfactory
explanation for the inordinate delay, it may reject the petition if it finds
that the issue of writ will lead to public inconvenience and interference with
rights of others.

(4) Decision in Ramana Dayaram Shetty v. The International Airport
Authority of India and Ors., reported in AIR 1979 S.C 1628 was referred to, in
order to point out that where the writ petition was filed by the petitioner
after five months of the acceptance of the tender during which period
considerable expenditure was incurred by the contractor over setting up a
restaurant and the snack bars, it was held that it would now be most
inequitous to set aside the contract.

(5) Decision in State of M.P and Ors. v. Nandlal Jaiswal and Ors. reported
in (1986) 4 SCC 566 was relied upon for its proposition that there must be
specific pleadings regarding malafides on the basis of which Court can arrive
at its conclusion. It was also relied upon for its proposition that the
challenge which was late by ten months after the Government took the decision
was rightly not entertained by the High Court under Article 226 of the
Constitution. The Supreme Court held that the power of the High Court to issue
appropriate writ under Article 226 of the Constitution is discretionary and in
the exercise of its discretion, the High Court does not ordinarily assist the
tardy and the indolent or the acquiescent and the lethargic.

7. The learned Senior Counsel appearing for the respondent No. 3 adopted the
contentions which were canvassed by the learned Senior Counsel appearing for the
respondents Nos. 1 and 2 and added that during the presentations it was made
clear to everybody that the respondent No. 1 had decided to have a configuration
of 2+2+1 i.e. Two Gas Turbines, Two Waste Heat Recovery Boilers and One Steam
Turbine. He referred to the clarifications made after the presentation in
January, 1999 in this regard. He pointed out that it was all through out
maintained that the project was to be of 160MW and not of any higher capacity.
It was also pointed out from the relevant record that the justification for
adopting the configuration of 2+2+1 was recorded in the contemporaneous record
and the configuration of 1+1+1 which was earlier referred to alongwith the
configuration of 2+2+1 in the RFQ published in December, 1998 was given up for a
valid reason. It was submitted that the course of events discloses that there
was an effort to keep the petitioner No. 1 in the reckoning, otherwise bid of
the petitioner No. 1 could have been thrown out as non-responsive on grounds
more than one. It was also contended that since the petitioner No. 1 was not a
manufacturer itself, it could have supplied an appropriate 2+2+1 configuration,
because, there were many manufacturers of that configuration in the field and
not the respondent No. 3 alone. It was argued that the contention raised by the
petitioners that public interest demanded that the capacity of the power project
ought to have been fixed of 200MW output instead of 160MW, in fact, if
countenanced, would amount to entertaining a challenge against the terms of
invitation to tender, which cannot be done in view of the settled legal
position. It was submitted that ordinarily the respondent No. 1 would not have
entertained offerable capacity in excess of 160MW in the configuration, which
was notified, but they were willing to make concession in favour of the
petitioner No. 1 that they would evaluate the price based on utilisation of 9
lakhs M3/day and reduced by 2 per cent of the maximum capacity offered. It was
pointed out that the contention that there was involved a revenue loss of Rs.
62.5 crores was raised ignoring the provisions which have bearing on fixation of
tariff, fixed costs and variable costs and pay load factor. It was submitted
that the “owner” had correctly evaluated the bids and decided to accept the bid
of the respondent No. 3.

7.1 The learned Senior Counsel for the respondent No. 3 relied upon the
decisions, which are already cited on behalf of the respondents Nos. 1 and 2 and
also referred to further following decisions of the Supreme Court.

(1) E.P. Royappa v. State of Tamil Nadu and Anr. reported in AIR 1974 SC
555 was referred to in support of the submission that the burden of
establishing malafides is very heavy on the person who alleges it. The Supreme
Court held that the allegations of malafide are often more easily made than
proved, and the very seriousness of such allegations demands proof of a high
order of credibility. It was held that suspicion cannot take the place of
proof.

(2) Delhi Science Forum and Ors. v. Union of India and Anr. reported in AIR
1996 S.C. 1356 was relied upon to show that the capping, against which the
objection was raised by the petitioners, could legitimately be done by while
inviting tenders. The Supreme Court noted that the tender documents in
question had clearly stated that the authority was free to restrict the number
of the service areas for which one company can be licensed to provide the
service and therefore, it could not be urged that the decision regarding
capping restricting the award of licence in category “A” and “B” Circles to
one bidder to three was taken with some ulterior motive or purpose, not being
one of the terms specified and prescribed in the tender documents.

(3) G.B. Mahajan and Ors. v. The Jalgaon Municipal Council and Ors.
reported in AIR 1991 S.C 1153 was referred to for pointing out that the very
concept of administrative discretion involves a right to choose between more
than one possible course of action upon which there is room for reasonable
people to hold differing opinions as to which is to be preferred. In that
case, the Hon’ble Supreme Court observed that in the context of expanding
exigencies of urban planning, it would be difficult for the Court to say that
a particular policy option was better than another. The contention that the
project was ultra-vires the powers of the Municipal Council did not appeal to
the Supreme Court.

(4) Decision in G.J. Fernandez v. State of Karnataka and Ors., reported in
(1990) 2 SCC 488 (which considered the decision reported in (1990) 2 S.C.C 486
which also was cited) was referred to for its proposition that where the
instrumentalities of the State consistently and bonafide interpreted the
standards prescribed in a particular manner and acted accordingly, the Court
should not interfere and substitute an interpretation which it considers to be
correct.

8. It is difficult to accept the extreme contention of the respondents that
the Court ought not to entertain a petition to go behind the wisdom underlying
the decision to accept a particular bid. It is equally difficult to accept the
other extreme suggested on behalf of the petitioners that would make the Court
plunge into the forbidden field of merits underlying the contract by examination
of the requirements that went into the formation of the terms inviting tenders.
There is a jural postulate of good faith in business relations and undertakings
which is given effect to by preventing arbitrary exercise of powers by the duty
bearer authority in bringing about a contractual transaction with the State.
Duties co-relative to rights in personam are imposed upon persons exercising
certain offices or callings in recognition and for the securing of the social
interest in the individual life, especially individual opportunity and
individual conditions of life. Here lies the border between public law and
private law where vocational obligations cognizable in the ordinary courts of
law give rise to enforceable individual rights which are rights in personam.
With the rise of the Social Service State, questions have arisen as to contracts
by or with incorporated public authorities owning or managing industries or
activities. When such authority is a State within the meaning of Article 12 of
the Constitution, there is a constitutional obligation on it not to act
arbitrarily and discriminate against a person similarly situated as the favoured
one. This is the constitutional limit of their authority within which there can
be transactions between public authorities and private persons governed by law
as administered in the ordinary Courts – binding them alike in the contractual
field. The public officer and the public authority are in no superior position
as such, because, in general, it is presumed that the State operates as a
private-law person when it carries on an industrial or commercial service or
lets property (see Jurisprudence by Roscoe Pound, Vol. V – page 226). Therefore,
in the matter of particulars of the contract, such as what is actually required
to be done, in what mode it is to be done, with what quality of material, in
what time frame, subject to what type of supervision, as to what should be the
standards to be observed and innumerable other aspects, which may have a bearing
on the purposes for which the State authority invites the tenders, the Court
will not ordinarily interfere with them nor require the authority to ask for a
particular thing in a particular manner while inviting tenders. The consensual
element in contract is as much present in the State authorities as in private
individuals in the matter of fixation of the stipulations on the basis of which
a contract is to be formed. What stipulations the authority should have fixed or
ought to fix for the purpose underlying the subject contract has a bearing on
the consensual aspect of the contract where the public authority should be free
to determine its requirements like any private person. In short, the Court’s
power of judicial review does not extend to fixing stipulations of the subject
of the contract. It only extends to keeping the public authorities, that are
“State” as defined by Article 12, within the limits of their authority to
safeguard the fundamental rights guaranteed by Part-III of the Constitution. If
the Courts were to postulate rules ostensibly related to limitations on
administrative power, but in reality calculated to open the gate into the
forbidden field of merits of its exercise, the functions of the Courts would be
exceeded. But, when it comes to the matter of exceeding or abusing the authority
to bring about a contractual transaction the judicial review is permissible to
prevent arbitrariness in the manner in which the public authority functions
while entering into a contract. That is, in reality, in the realm of judicial
control over administrative power of the public authority to bring about a
contractual relationship with a private individual and not an interference into
the stipulations on the basis of which the contract is intended to be made by
the authority. It is more a matter of a legitimate constitutional expectation,
that a public authority i.e. State will adhere to its duty of not denying
equality right of persons, enshrined in Article 14 of the Constitution by acting
in an arbitrary manner that necessarily would result in an unjustifiable
discrimination, than a mere legitimate expectation that an obligation will be
fulfilled by a private individual.

9. Considerable time was invested in impressing upon the Court that there was
a design from the very inception, not only by the initial declaration of the
capacity of the power project, but also subsequent clarifications made from time
to time to see to it that the respondent No. 3 alone remains in the fray and its
bid could be conveniently accepted. The request for proposal was published in
February, 1999 (Annexure “A” page 25A to 190). It laid down the proposal
requirements in Part-I. It was clearly indicated in paragraphs 1.1.2 thereof
that the respondent No. 1 had invited pre-qualification bids (RFQ) for EPC
Contractors for setting up a 160 MW +- 10 per cent (net) at site conditions
(mean) Natural Gas Fired Combined Cycle Power Plant at Hazira being built by
respondent No. 1 on Build, Own and Operate (BOO) basis. It was stated that this
RFP document was being issued to selected pre-qualified EPC bidders (machinery
manufacturers or consortium having GT manufacturer as consortium partner) for
submitting their EPC bids for the project. It was specifically stated that the
respondent No. 1 was promoting the 160 MW+- 10 per cent (net) Power project
pursuant to the Government of Gujarat sanction letter dated 1.12.1998 and
Gujarat Electricity Board clearance dated 14.12.1998. By communication dated
2.1.1999 (annexure-17 of the petitioners’ rejoinder at page 854) addressed to
all the bidders by way of clarification on the RFQ document also, it was
stipulated that the configuration for generating 160MW+_10% net output at site
conditions shall have 2 GTSs with corresponding HRSGs and 1ST for the said 160MW
power project. In Part-III of the RFP document dealing with Technical
Specifications it was again stated in paragraph III. 3.1.00 that the scope of
the contract shall be for Engineering Procurement and Construction (EPC) of a
highly reliable most modern `State of the art’ technology based GT Power Plant
of proven design having configuration of 2+2+1 i.e. Two Gas Turbines, Two Waste
Heat Recovery Boilders and One Steam Turbine, based on natural gas as fuel with
necessary operating flexibility at the proposed site as a base load plant for
delivering net of about 160MW +- 10 per cent continuously at the battery limit
of 220KV Switchyard outgoing terminal at mean site conditions. The plant shall
be capable of operating at PLF (i.e. plant load factor) over 90 per cent with
efficient use of fuel. Under the head Gas Turbines, in Part III 2.01, it was
mentioned that the rating of gas turbines should be selected such that the same,
with steam injection facilities from heat recovery steam generates (HRSG) with
suitable Steam turbine generator (STG) for combined cycle operation, can deliver
net total output of about 160MW +10 per cent. Even in the clarification letter
dated 3rd March, 1999, the plant was described as 160 MW Natural Gas based
Combined Cycle Plant. In the clarification dated 15.3.1999 made by the
respondent No. 1, it was informed to the bidders that the bidder may quote
maximum possible net guaranteed output based on Guaranteed Station Heat Rate,
Auxiliary power consumption and availability of 0.9 MMSCMD (i.e. 9 lakh M3/day)
gas with Net Calorific Value of 8300 Kcal/SCM (revised Fuel Supply Agreement
condition). Such net guaranteed output figure would be fully taken into
consideration only if it is more than 160MW +- 10 per cent. However, it was made
clear that the configuration of 2 GTSs + 2 HRSGs + 1 ST stays as it is. It was
specifically mentioned that `Per MW (gas) cost’ would be evaluated based on such
guaranteed output, Station Heat Rate and Auxiliary Power Consumption. In a
further clarification to this, made on 3rd April, 1999 (Annexure “D” page 204),
it was stated that the Gross Capacity offered by the bidder on the basis of 9
lakhs M3/day of gas having Net Calorific Value of 8300 Kcal/M3 would be based on
guaranteed net SHR for field conditions. However, to account for possible
deterioration in machine capacity over a period of time, a 2 per cent reduction
in maximum capacity offerable with 9 lakhs M3/day of gas would be considered.
The SHR to be considered at 70 per cent and 85 per cent of capacity would be
based on the maximum offerable capacity thus reduced by 2 per cent. On this the
petitioner wrote a letter to the respondent No. 1 on 1.5.1999 (Annexure – 18 of
the affidavit in rejoinder at page 855), proposing to optimise and offer a plant
based on marginal higher fuel utilisation than specified, say a minimum of 10
per cent, in order to give `best value for money to the respondent No. 1. It was
stated that the optimum sizing suggested by the petitioner will provide
“additional comforts to GSEC/GSPC in terms of better output and heat rate in the
tariff calculations, thus, leading to higher profitability to generating
company.” To this the respondent No. 1 gave a negative response by its letter
dated 3.5.1999 (Annexure “E” to the petition, page 206), stating that: “after
examining various aspects of Fuel Supply Agreement and development plans of GSPC
for its Hazira field, it has been decided that the capacity that may be offered
for the Power Project should be based only upon the availability of 0.9 MMSCMD
of Gas having Net Calorific Value of 8300 Kcal/SCM”. It was once again clarified
by the respondent No. 1 in their letter dated 19.7.1999 (Annexure “G” at page

208) under the heading “Capacity”, at Item 5, that any capacity more than
offerable at site conditions (with 9 lakh SCM/day of maximum gas available and
calculated keeping in view the letter of respondent No. 1 dated 3.4.1999 will
not be considered for evaluation. This will be so even if plant offered may have
a higher capacity with 9 lakh M3/day Gas or without any restriction on gas
quantity at ISO / site conditions. The time to submit revised bids was extended
upto 12th August, 1999 at the request of the bidders, as stated in the letter
dated 27th July, 1999 of the respondent No. 1 at Annexure “H” to the petition
(page 211). On 30th July, 1999, the petitioners wrote a letter to the respondent
No. 1 (Annexure “I” to the petition at page 213), in which it was stated at item
1.3 under the heading “Recommendations” that; the part load performance should
not be related to the offerable capacity at 0.9 MSCMD utilisation as it leads to
impractical low levels of loading for the 6FA machine and unfair comparative
position with other machines and that the part load performance be related to
the PPA, which can accept the full rated capacity of the plant and is
independent of the rating for gas utilisation of 0.9 MSCMD. The respondent No. 1
in its letter dated 4.8.1999 (Annexure “J” to the petition at page 216)
reiterated in response to the petitioners’ letter dated 30th July, 1999 that
evaluation criteria and loading figures were already communicated to the bidders
and that it may be noted that evaluation was linked to offerable capacity. The
petitioner thereafter submitted the revised price bid.

9.1 It will thus be seen that from the very inception and much before the
qualified bidders could be identified, the capacity of the Power Plant Project
was already fixed at 160 MW +_10 per cent. The petitioners’ attempt to persuade
the respondent No. 1 to raise the offerable capacity of 160 MW did not succeed
and though it was stated that the net guaranteed output figure would be fully
taken into consideration even if more than 160MW +_ 10 per cent, it was
consistently maintained by the respondent No. 1 that any capacity more than
offerable capacity will not be considered for evaluation whether with or without
any restriction on gas quantity of 9 lakh M3/day. The petitioners entered the
fray with open eyes and could not have insisted on raising the offerable
capacity from 160MW +_ 10 per cent to a higher figure of 189MW or thereabout
that its plant was capable of reaching on full utilisation of 9 lakh M3/day gas.
At that time never was it suggested by the petitioner that the offerable
capacity was pegged at 160MW +_ 10 per cent with a view to favour the respondent
No. 3. The fact that the petitioner knew that there was not going to be any
change in the ceiling of 160MW +_ 10 per cent of the Plant Capacity already
declared while inviting the bids is clearly borne out from the record including
the correspondence in respect of the financial package offered by the petitioner
(see letter dated 22nd April, 1999 at Annexure-13 to the affidavit-in-rejoinder
at page 841 with enclosures and letter dated 28.4.1999 of ICICI at Annexure-14
page 846 to the petitioners’ subsidiary L&T Finance Ltd.). It would be too
far-fetched to think that the ceiling of the capacity of 160MW was fixed before
even the bidders could be ascertained with a view to favour the respondent No.

3. No malafides can be inferred from such initial fixation of the Power Plant
Capacity at 160MW +_ 10 per cent. The criteria of 2 per cent reduction in
maximum capacity on full utilisation of 9 lakh M3/day gas and the calorific heat
value of 8300 Kcal were also laid down much before the giving of the bids and
the petitioner No. 1 entered the competition knowing them full well and having
failed to persuade the respondent No. 1 to accept its suggestions to the
contrary. Neither fixation of the plant capacity at 160MW, nor incorporation of
the stipulation regarding reduction of 2 per cent of the maximum capacity
offered or taking the heat value of the gas at 8300 Kcal could be said to have
been tailor-made to suit any particular bidder in March and April, 1999 when the
bids were not yet received and the dates for which were from time to time
extended upto 12th August, 1999.

10. The petitioners contention that its plant of the capacity 189 MW +_ 10
per cent would have been more cost effective necessarily leads to an elaborate
statistical and technical exercise which would exert even those who are experts
in the field. The rival tenderers have given their own reasons for the opposite
stands that they take on the issue. On the petitioners’ part a deliberate loss
of revenue to the tune of Rs. 62.5 crores which could have been earned on the
basis of a higher output on the optimum use of the fuel and its upper marginal
additional possible swing under the FSA (Fuel Supply Agreement) due to an
additional 33MW of electricity is alleged (see paragraph 13 (vii) of the
petitioners’ rejoinder) as a ground reflecting malafides or in any case
arbitrariness in the decision making process; on the respondents’ part this is
disputed by contending that the statistical demonstration of the petitioners is
deceptive and ignores several factors such as the additional capital outlay of
Rs. 82 crores, the guaranteed minimum gas supply and offtake of 80 per cent of 9
lakh SCM3/day on annualised basis and recurring additional costs, of fuel to the
tune of 31.32 crores, operation, maintenance, additional financing etc. The
output of the 160MW +_10 per cent plant of respondent No. 3 was 156MW per 7.7
lakhs M3 SCM/day as against the projected higher capacity offered by the
petitioner No. 1 of 189 MW on the basis of the 9 lakh M3/day, which means there
was to be additional 1.3 lakh CM3/day gas consumption cost of which could not
have been ignored. The petitioners had contended in paragraph 3.3 of the
petition (page 12 to 13) that “the plant offered by the petitioners would
generate additional 127 million units per annum, which will generate
approximately Rs. 32 crores per annum additional revenue to the respondent Nos.
1 and 2” and jacked up the figures in their affidavit-in-rejoinder (paragraph 13

(vii) at page 560) by alleging that the annual loss of revenue of the
respondents Nos. 1 and 2 was of 62.5 crores (approx.) In paragraph 3.2 of the
petition they had referred to loss of 62.5 crores per year in additional
business in the context of the higher capacity of 207MW attainable on use of
quantity of gas higher than the available 9 lakh M3/day because in future there
was possibility of availability of more gas. Eminent Counsel appearing for both
the sides groping with the statistics, not so vital, presumably prepared by
behind the screen experts aiding them in their arguments had a tug of war over
the question of the alleged revenue loss to the respondents Nos. 1 and 2. Both
sides dexterously demonstrated expertise in engineering economics of gas turbane
Power Plant Project with opposite results. Such detailed exercise by the Court
of assessing the pros and cons of different combinations of capacity, payload
factor, operational costs, yield cost ratio etc. having bearing on financial
viability of a plant configuration cannot be undertaken and in absence of any
definite ground pointing at irrationality smacking of malafides or total
arbitrariness, no inference can be drawn merely from a comparison of two
different outcomes of a deal differing in the returns on investments.

10.1 The contention raised in the rejoinder by the petitioner at page 560
that there would be revenue loss of 62.5 crores on the basis of loss of power
output at 80 per cent of plant load factor appears to be an exercise in
oversimplification. It seems to ignore the statutory shackles of terms,
conditions and tariff for sale of electricity by generating company contained in
Sec. 43A of the Electricity (Supply) Act, 1948, which admittedly would apply to
this project. As provided by Section 43A, the tariff for the sale of
electricity by a generating company to the Electricity Board shall be determined
in accordance with the norms regarding operation and plant load factor as may be
laid down by the Authority and in accordance with the rates of depreciation and
reasonable return and such other factors as may be determined, from time to
time, by the Central Government, by notification in the official Gazette. Under
Section 22 of the Electricity Regulatory Commissions Act, 1998, the State
Commissioner has power to determine the tariff for electricity, wholesale, bulk,
grid, or retail in the manner provided in Section 29. It is also empowered under
Clause (c) of Section 22(1) to regulate power purchase including the price at
which the power shall be procured from generating companies. The State Advisory
Committee constituted under Section 24, advises the Commissioner on major policy
questions, energy supply and overall standards of performance by utilities.
Section 29(1) of the Act provides that notwithstanding anything contained in any
other law, the tariff for supply of electricity, grid, wholesale, bulk or
retail, as the case may be, in a State shall be subject to the provisions of the
said Electricity Regulatory Commission Act and the tariff shall be determined by
the State Commission in accordance with the provisions of that Act. The
generating companies are obliged to adopt such principles in order that they may
earn an adequate return and at the same time they do not exploit their dominant
position in the generation, sale of electricity or its inter-State transmission.
There are financial principles and their applications contained in Schedule VI
to the Electricity (Supply) Act, 1998, which are to be kept in mind for fixation
of tariff. By Notification dated 30th March, 1992, issued under Section 43A
of the Electricity (Supply) Act, the Central Government determined the factors
in accordance with which the tariff for sale of electricity by Generating
Companies to Electricity Board shall be determined. The two part tariff for sale
of electricity from Thermal Power Generating Stations, including gas and naptha
based Stations, is provided consisting of annual fixed charges and energy
(variable) charges. The first part of annual fixed charges covers (a) interest
on loan capital; (b) depreciation, operation and maintenance expenses (excluding
fuel); (c) taxes on income reckoned as expenses; (d) return on equity and (e)
interest on working capital at a normative level of generation. The second part
of energy (variable) charges covers fuel cost recoverable for each unit
(Kilowatts hours) of the energy supplied on the basis of the norms prescribed in
para 1.1 of that notification. Norms of operation and plant load as laid down by
the authority are subject to modifications if any under Section 43A. These
refer to plant load factor during stabilisation at 4500 hrs. /KW/year and for
subsequent period 6000 hrs./KW/year, Station Heat Rate for gas based stations,
Auxiliary consumption, and Stabilisation period which is 90 days for Combined
Cycle Gas/Naptha based Station. Clause (e) of para 1.5 relating to the method of
computing annual fixed charges lays down that Return on equity shall be computed
on the paid up and subscribed capital relatable to the generating unit, and
shall be 16 per cent of such capital. Full fixed charges shall be recoverable at
generation level of 6000 hours/KW/year (which is 68.5 per cent of the total
hours in a year and therefore, known as 68.5 per cent plant load factor). It is
specifically provided in para 1.6 that “there shall not be any payment for fixed
charges for generation level above 6000 hours/KW/year i.e. above 68.5 per cent
of plant load factor. Only additional incentive not exceeding 0.7 per cent of
paid up and subscribed capital was to be given for each per centage point
increase of Plant Load Factor above the normal level of 6000 hours/KW/year i.e.
68.5 per cent of PLF.

10.2 The above narration is made just to indicate that a host of factors go
into the economic aspect of the returns from the power generation and that these
are statutorily regulated. It will therefore be too naive to accept the
oversimplified approach of the petitioners raised for the first time in the
rejoinder wailing over huge revenue loss worked out (at page 560) on an
assumption of 80 per cent plant load factor and other assumptions which may not
be in reality warranted. In fact such dabbling of an outsider into estimating
the possible revenue returns of a generating company that is shackled by several
terms and conditions for fixation of tariff and has to keep in view 16 per cent
return on equity is not permissible at the instance of the petitioners or of its
own by the Court while examining whether there has been arbitrary denial of
contract to the petitioner. No such exercise is at all warranted for a sort of
`post-mortem’ of the decision fixing the requirement for tenders. Fixing the
plant capacity of a Generating Company which regulated by statutory provisions
as to tariff is no one else business. The analysis of reasons that led to fixing
the plant capacity required for the project is in no way Courts’ concern. It is
not for the Court to study whether the project was viable and then to infer
arbitrariness or malafides. The decision making process with which the Court is
concerned for ruling out arbitrariness or malafide exercise of power is the
process of deciding whom to award the contract and not any anterior process of
deciding as to what should be the requirements for inviting tenders. In short
the Court cannot in a petition of this nature ask the State authority “why do
you install a 160MW project, why not 200MW?” That has nothing to do with the
decision making process in the matter of award of contract, which starts only
after the tenders are invited. The cardinal principle that the terms of the
invitation to tender are not open to judicial scrutiny in the realm of contract,
is laid down by the apex Court in Tata Cellular and Ronaq International (supra).
As noted above, the decision to have 160 MW Combined Cycle Plant was conceived
in the middle of 1998 and the sanction of the State Government was given on
1.12.1998 as can be seen from the communication of the State Government at
Annexure “A” to the affidavit-in-reply of the respondents Nos. 1 and 2 (page

298). The RFQ published in December, 1998 also mentioned the project as 160MW
Project. It is stated that ninteen persons showed interest, eleven submitted
documents and seven were pre-qualified. In the clarification of 2.1.1999
(Annexure – 17 of Sur-rejoinder of respondents Nos. 1 and 2 – page 854), it was
made clear to everyone that the respondent No. 1 had decided to have
configuration of 2+2+1 for their 160MW Power Project. In the management
presentation held on 4.1.1999 (minutes at Annexure “C” to the Sur-rejoinder of
respondents Nos. 1 and 2 at page 895), it was stated that the GSPC had obtained
for 2GTs, 2HRSGs and 1ST configuration and that the capacity of 160MW, which was
declared will not be changed. In the meeting of Board of Directors held on
18.1.1999 (minutes at Annexure “N” to the affidavit-in-rejoinder of respondents
Nos. 1 and 2 at page 938), the rationale for going for 2GTs + 2 HRSGs + 1 ST
configuration was explained. The RFP document published in February, 1999
clearly mentioned that the power project was to be of 160MW and the
configuration to be 2+2+1. These then were clearly the terms of invitation to
tender and therefore not subject to judicial review. Even in the letter of
1.5.1999 which is Annexure “18” to the petitioner’s rejoinder at page 855, the
petitioner had rightly shown 160MW natural gas based Power Project at Hazira in
the communication. The petitioner clearly knew the capacity of the proposed
project and responded to the invitation to tender on that footing.

10.3 The Courts are not concerned with the wisdom or desirability of the
terms on which a party is willing to contract. The Courts will not reconstitute
or renegotiate the terms of contract. At the stage of negotiation of the terms
of the proposed contract, there is everything to be said for allowing the
parties to formulate the terms and conditions as per their respective
contractual intentions. The parties are free to determine for themselves what
primary obligations they will accept. The preliminary negotiations leading upto
the execution of a contract are to be distinguished from the contract itself.
There is no meeting of minds of the parties while they are merely negotiating as
to the terms of an agreement to be entered into. To be final, the agreement must
extend to all the terms which the parties intend to introduce.

10.4 If in the decision making process of entering into a contract by the
State there is element of arbitrariness that results in violation of fundamental
rights guaranteed by Article 14 of the Constitution, then the power of judicial
review would extend to correcting it. It would however not extend to requiring
the “State” to enter into a particular type of contract or to vary the subject
of the contract. When offer is invited by the offeree, it is the offeree who
sets the parameters of the offer and the offeror cannot dictate as to what the
offeree should seek. The offeror has no choice in fixing the requirements of the
offeree. A fortiori, the Court cannot exercise its jurisdiction to confer such
choice on him and tune the requirements of the contract to suit the offeror’s
capacity and will. Those would be the elements that go into the constitution of
a contractual relationship and will have no bearing on the aspect of
arbitrariness in a decision making process by which contract is entered into.
The arbitrariness that can justify Court’s interference in award of contract by
“State” is not the arbitrariness in determining the requirements for which the
offer is invited but the one that results in discrimination against the offeror
who fulfils the requirements with a valid offer, by bypassing him for no valid
reason whatsoever. It is such pre-contractual situation that would make the
decision to award a contract prone to challenge. Such arbitrary award of
contract is bad not because of its terms but because of the manner in which it
has resulted in violation of the fundamental right of a person bidding for it or
due to violation of the statutory, including procedural requirements laid down
for the purpose. There again, if evidence is required to be led the matter ought
not to be summarily adjudicated on affidavits in exercise of the writ
jurisdiction of the High Court. Thus, the petitioner cannot insist that the
requirement in the invitation to offer should have been for a gas turbine
generator of capacity of 200MW and that the respondent No. 1 should not have
pegged it down to 160MW capacity or that the basis of Calorific Value of gas
ought to have been 8300 Kcal instead of 8600 Kcal or that no back up guarantee
of the GE i.e. the licensor, in respect of the gas turbine which were to be
supplied by the licensee Hitachi or a letter supporting the back-up guarantee of
the licensee should have been insisted upon by the respondent No. 1. In the
matter of what the State wants for in a contract, the Court should hardly have
any say. Fixing these requirements for calling offers for a contract was a
unilateral exercise of the entity calling the offers and the offerer was not in
picture at all at that stage. The petitioners therefore, cannot complain of
arbitrariness against fixing of these requirements for which the offers were
invited. The guarantee against arbitrariness under Article 14 is not intended to
obliterate the essential elements of a contract and convert all contracts by
States into a purely statutory relationship.

10.5 Merely because one bidder who has ultimately satisfied all the tender
conditions remains, because other bids are not found to be acceptable due to
non-compliance with the terms of invitation to tender, it would not warrant an
inference that a single bid situation is created to suit the bidder who alone
has answered the terms. The question of bias in favour of the lone bidder who
has qualified, can arise only if any other bidder was wrongly disqualified
despite his having satisfied all the conditions. The question whether conditions
were satisfied for qualifying as a bidder would depend upon objective facts
relatable to the requirements laid down in the conditions prescribed for the
purpose while inviting the tenders.

10.6 There have been broad based expert committees that had examined all the
facets of the deal involving a scores of high ranking officials of the public
authorities and expert bodies and it will be too much to assume that they all
acted in concert to favour the respondent No. 3 and disfavour petitioner No. 1
forming sort of an unlawful assembly to do such acts that may verge on
criminality. The contemporaneous record in form of expert reports, evaluation
and the reasoned decisions of the Management Committee of respondent No. 2 and
of the Board of Directors of the respondent No. 1 rules out any deliberate
design either from inception or during the consideration of the bids to show any
undue favour to the respondent No. 3 at the cost of the petitioner. The decision
taken cannot be branded as one which no person in his normal sense would ever
take. Mere variation in assessments without anything more would not justify a
conclusion of arbitrariness or legal malafides.

11. It was contended that the financial package offered by the respondent No.
3 was non-committal and should have therefore been treated as non-responsive
with zero mark. However, this aspect was deliberately ignored to favour the
respondent No. 3. Financial package was a proposal requirement covered by item
1.1.1.2 of the RFP document. It was mentioned therein that the respondent No. 1
required contractor’s plan (including strategy and approach) for securing
suppliers’ credit, support or any other form of Financial Assistance and
commitment for the equipment and the terms and conditions of the same. The
response was to be given by the bidders using the format of Ex. PR-C. As stated
in the Evaluation Criteria Para 1.5.1 of the RFP document, for the Financial
Package, the Financial Assistance can be offered by way of suppliers’ credit or
in any other form. The bidders were required to mention the quantum offered,
Rates, Credit enhancement required and any other terms and conditions. It was
stated that the FP would be evaluated considering the currency, rate of
interest, credit enhancement costs and other costs arising due to the terms and
conditions. The lowest evaluated cost contractor would be given highest marks
and others proportionately lower marks. It was specifically made clear that the
Financial Package offered may or may not be availed of by the respondent No. 1.
In the event of respondent No. 1 not opting for the Financial Package offered by
the bidders, the marks indicated for the Financial Package were to be
reallocated. If the respondent No. 1 availed of the Financial Package offered,
the rates and terms and conditions quoted in the RFP were to be binding on the
bidders. In the Ex-PR-C proforma of “Financial Package offered”, the
contractor’s organisation plan to secure suppliers credit/any form of financial
assistance, source, repayment profile (its tenor, instalments and moratorium),
rate, currency, details of credit enhancement required and other terms and
conditions, major covenants were required to be stated. In the clarification
dated 3.3.1999 (at Annexure “B” to the petition page 191 at page 195) of the
RFP, a detailed evalution criteria was enclosed and it was to form an integral
part of the RFP document as stated therein. Accordingly, fifteen marks were
earmarked for evaluation of the Financial Package offered. The relevant para of
Evaluation of Financial Package around which the arguments centered, reads as
under:-

*”- Where the bidders offer a financial package for 50 per cent or less of
the value of its bid, such a financial package will be considered non
responsive and no marks will be awarded under this category.

*- In the event the bidders offer a Financial package for more than 50 per
cent but however, does not fund value of the entire EPC Bid offered, the
evaluation of the NPV for the portion not offered will be evaluated based on
the following assumptions. – Currency : Rupee

– Tenor : 9 years

– Interest : 18% (All inclusive)

– Repayment – Quarterly instalment’s
after a moratorium
of six months.

*- Terms and conditions and covenants stipulated for availing of the
financial package must adhere to those offered under prudent financial
practices. The security package available under the project will be offered on
pari passu basis to all lenders – whether part of this bid or mobilised
separately by GSPCL. Where in the opinion of GSPCL the financial package
stipulates norms not in line with the prudent financial practices, such a
financial package will be considered non responsive and no marks will be
awarded under this category.

*- Present value of the outflow towards debt will be computed using 12% as
a discount factor.”

11.1 By its letter dated 18.8.1999, the petitioner submitted revised price
bids and enclosed Financial Package offered (PRC-of RFP) “based on current
market conditions”. This was in form of a letter dated July 24, 1999 from L
& T Finance Ltd. addressed to the respondent No. 1. It was, inter-alia,
stated therein as under:-

“The lenders would appraise the project and perform due diligence
on the final terms and documents on award of the EPC contract to Larsen &
Toubro and on their satisfaction the loan will be disbursed.”

This means the FP offered depended upon the appraisal of the project by the
tenders and their diligence on the final terms and documents. It is only when
the tenderers were satisfied that the loan would be disbursed. Therefore, the
bidder did not give a firm commitment but left it to the satisfaction of the
tenderer L & T Finance Ltd., who offered the Financial Package under the
contractors plan for securing the financial assistance. There was no commitment
that the funds would flow merely on the basis of this package offered in the
Financier’s letter. In fact in the very nature of things such a Financial
package would be only indicative reflecting how the contractor intended to plan
the Financial Assistance and would not be a firm offer that could be accepted
straightway without any further negotiations. The Financial Package offered by
the petitioner was in view of the above stipulation not a firm commitment on the
petitioners part to procure funds on the lines indicated and the matter was
clearly left to the lender’s discretion. Equally so was with the Financial
Package offered by respondent No. 3 which was described as indicative terms of
financing subject to technical feasibility and financial viability of the
project and all approvals and satisfactory completion of the lender’s due
diligence and internal credit approval as mentioned in the lender ICICI’s letter
dated 28.4.1999 addressed to respondent No. 3 in response to their letter of
22.4.1999. It is significant to note that even the petitioner had through L
& T Finance Ltd. approached for the financial package to the same ICICI as
stated in its affidavit-in-rejoinder (page 546), which secured letter of the
ICICI as per Annexure 14 (page 846) also dated 28.4.1999, which also clearly
stated that indicative terms would be subject to technical feasibility and
financial viability of the project being established and GSEG obtaining all
approvals and satisfactory completion of the lenders (ICICI’s) due diligence and
internal credit approvals. It was also mentioned that the quotes were indicative
and were being provided on a non-exclusive basis. In the annexure to that letter
(page 847) it was stated that the terms and conditions were valid for three
months from the date of the letter and this was a stipulation identical to the
stipulation contained in the letter of ICICI of even date addressed to the
respondent No. 3 as reflected in M/s. Kishore and Shastri’s letter dated 31st
August, 1999 (page 911). Thus, in the financial packages offered by both the
petitioner and the respondent No. 3, the terms were indicative and only the
ability and readiness of the financer to arrange a financial package was
displayed as a part of the contractors’ organisation plan to arrange for a
financial assistance and there was no question of making a firm offer of actual
funds which could be accepted without anything more and bind the parties into a
financial contract. In fact, there was no “offer” of actual finance at all from
the prospective lenders in the strict sense of the word, in either case, which
could straightway be accepted without any more.

11.2 In the evalution criteria mentioned in the RFP document (Annexure “A”)
under the sub-head “Assumptions of Evaluation” (page 52), it was provided that
the bidders were required to mention the quantum offer, rates, credit
enhancement required and any other terms and conditions. Rival contentions were
canvassed on the assumptions for evaluation contained in sub-paragraph (2) of
paragragh 1.5.1. having bearing on the evaluation criteria of the financial
package for the project and therefore, the same is reproduced hereinbelow:-
“2. Bidders are invited to offer Financial Package for the
Project. Financial Assistance can be offered by way of Suppliers Credit or in
any other form. The bidders are required to mention the Quantum offered,
Rates, Credit enhancement required and any other terms and conditions. The
financial package would be evaluated, considering the currency, rate of
interest credit enhancement costs and other costs arising due to the terms and
conditions. The lowest evaluated cost Contractor would be given highest marks
and other Contractors would be given proportionately lower marks. Bidders may
also indicate the time frame for arranging the financing package. It may be
noted that the Financial Package offered may or may not be availed by GSPCL.
In the event GSPCL does not opt for the financial package offered by the
bidders then the marks indicated for the financial package will be
reallocated. In the event GSPCL avails the Financial Package offered the rates
and terms and conditions quoted in the RFP would be binding on the
bidders.”

Thus, while it was open for the respondents Nos. 1 and 2 not to opt for the
Financial Package, if it was availed then the rates and terms and conditions
quoted in the RFP were to be binding on the bidders. This means that rates and
terms which were offered in the Financial Package in PR-C regarding
quantum/repayment profile/rate/currency would bind the bidder, meaning thereby,
if there was any deviation the bidder would be liable to reimburse the
respondent Nos. 1 and 2. The contractor’s organisational plan to secure
supplier’s credit/financial assistance was to be documented (see PR-C page 56).
It was therefore rightly contended that in the owner’s view nothing turned upon
the description of the Financial Package offered by the petitioner No. 1 as
“firm Financial Package” by M/s. Kishore and Shastri Consultants (P.) Ltd. in
the accompaniment to its letter dated 31st August, 1999 at Annexure “F” to the
sur-rejoinder of the respondents Nos. 1 and 2, (page 905). It will be noted that
the said letter only purported to forward bidders quotes/deviations vis-a-vis
the RFP requirement, and was not an evaluation of the Financial Package. The
contention that M/s. Kishore and Shastri was dropped to bring in M/s. Fieldstone
to evaluate the Financial Package is erroneous, because, M/s. Fieldstone only
furnished the methodology for assessment to the respondent No. 1 and did not
itself evaluate. A bare reading of the evaluation criteria annexed to the
clarification dated 3.3.1999 at Annexure “B” to the petition shows that it did
not lay down any detailed method of evaluation of the terms of the Financial
Package, but only provided that the terms and conditions and covenants for
availing of the financial package must adhere to those offered under prudent
financial practices. It was also provided that where in the opinion of GSPCL the
financial package stipulates norms not in line with the prudent financial
practices, such a financial package will be considered non-responsive and no
marks will be awarded under this category (see Annexure “B” to the petition at
page 195). Reliance on behalf of the petitioner on the net present value as the
method indicated in the evaluation criteria is misconceived because in the
context in which net present value is referred to, it was to be applied to the
portion of financial package not offered which was not the case here. Reference
to present value of the outflow towards debt which was to be computed using 12
per cent as a discount factor was also not the method laid down for evaluating
all the aspects of the financial package since it referred only to the present
value of outflow towards debt. The paramount consideration was that the terms
and conditions and covenants stipulated for availing of the financial package
must adhere to those offered under prudent financial practices which were not
elaborated. There were also stipulations in the clarification of 15.3.1999
(Annexure “C” to the petition) to the following effect:-

“3. In case the financial package being offered by the bidder involves
floating and fixed interest rates, floating rates would be converted to fixed
rate and cost of swap would be built in as a cash outflow, for the purpose of
evaluation.

4. In case financial package offered by the bidders involves lease
financing, evaluation would be based on the actual cash out-flow for the
owners, based on lease rentals and tax implications if any.”

11.3 The respondent No. 1 was therefore, justified in inquiring about the
methodology of evaluation of the Financial Packages from M/s. Fieldstone who
were experts in the field being finance arrangers. Their communication at
Annexure “H” to the sur-rejoinder of respondents Nos. 1 and 2 at page 913 to
916, shows that they only forwarded to these respondents, their recommended
methodology for evaluating different financial packages submitted by EPC bidders
in connection with GSEG’s combined cycle power project. The methodology takes
care of the relevant aspects including the Power Purchase Agreement, which
provides a tariff on a cost plus 16 per cent return on equity at 68.5 per cent
plant load factor with incentives at higher plant load factor. The two-part
tariff formula typical to the power projects was to be kept in mind alongwith
the Government of India guidelines which are referred. It was stated that in any
two financing packages for different type and capacity of equipment where cash
flows are positive on a year to year basis in a two power tariff project, the
only way to compare them would be based on return on equity. It was opined that
the only way one can evaluate different EPC offers with financing will be to
evaluate the effect the financing package will have on the common denominator,
which was return on equity. Thus, it is not as if M/s. Fieldstone had themselves
evaluated the financial packages. They only indicated the method of evaluation
to the `owner’ who on that basis evaluated the financial packages of the rival
bidders. Therefore, the contention that evaluation made by M/s. Kishore and
Shastri was substituted by the evaluation by M/s. Fieldstone to favour the
respondent No. 3 has no basis whatsoever. It was open for the respondent No. 2
to evaluate the financial packages on the Return on Equity/Equity IRR basis
which they have done as is evident from the evaluation of these Financial
Packages done by the Managing Committee of the respondent No. 2 (minutes at
Annexure “O” to the sur-rejoinder of respondents Nos. 1 and 2 at page 940) and
the decision of the Board of Directors dated 9.9.1999 at Annexure “M” to the
affidavit-in-reply of respondents Nos. 1 and 2 (at page 429), by which the
evaluation made by the Managing Committee was approved.

11.4 The real issue however was as to the terms and conditions of the
financial package in Ex. PR-C offered by the respective bidders. The relevant
terms and conditions of Financial Packages offered by the petitioner Company and
the respondent No. 3, which were binding on these bidders, are as under:-

Petitioner No. 1’s Financial Package:

Document Contractor’s organization plan to secure supplier’s credit/any
form of Financial assistance. Source : Indian Banks

Quantum of Finance Offered : Upto 55 Crores

Repayment Profile

* Tenor : 7 Years
* Instalments : Quarterly
* Moratorium : Till capitalisation

Rate : 16.75 PTPM

Currency : INR

Financial Package Offered:

Document contractor’s organisation plan to secure supplier’s credit / any
form of Financial assisstance.

       Source                          :       Indian Banks/FIs etc. 
      
       Quantum of Finance Offered      :       Upto 500 Crores
                                               comprising of Rupee term
                                               loan Secured Redeemable
                                               Non convertible
                                               Debentures and Government
                                               Guaranteed Bonds.
   

Repayment Profile        
             *       Tenor             :       7 Years
             *       Instalments       :       Quarterly
             *       Moratorium        :       2 years. 
      
                     Rate              :       Weighted  average  coupon
                                               rate  of  14.5  per  cent
                                               (exclusive   of  interest
                                               tax) payable semi-annually.

                                                     
                     Currency          :       INR.
      
      
      
      xxx               xxx              xxxx
      
      xxx               xxx              xxxx
   

Major covenants will be as applicable to project finance deals of this
nature and will be decided mutually at the time of financial
closure.”

Respondent No. 3’s Financial Package:

Source Offshore:

             (1) ECA Facility (Swiss ERG)       ANZ Bank or others
             (2) Commercial Facility            ANZ Bank or others
      
             Onshore :
      
             (3) Commercial Facility            ICICI or others
             (4) Deferred Payment Guarantee
                 ("DPG") for offshore 
                 facilities)                    ICICI or others
      
      Quantum of Finance Offered:
      
             (1)       MUS $ 51 (plus IDC and 85% ECA premium)
             (2)       MUS $ 9 (plus IDC and 15% ECA premium)
             (3)       MUS $ 40 in INR.
      
      Repayment Profile:
      
             * Tenor             :  (1)       14 years
                                    (2)       8 years
                                    (3)       10 years
      
             * Instalments          (1)       24 semi-annually
                                    (2)       11 semi-annually
                                    (3)       32 quarterly
      
             * Moratorium (from financial close) (1) 2 years
                                             (2) 2.5 years
                                             (3) 2 years
      
      Rate:
             (1)       45 bp (margin)
             (2)       175 bp (margin)
             (3)       350 bp (margin)
      
      Currency:
      
             (1)       US$ or CHF
             (2)       US$ or CHF
             (3)       INR 
   

Details of credit Enhancement Required:
   

(1) Swiss ERG guarantee, and from IFIs/Indian banks acceptable to ERG and
lender.

(2) DPG from IFIs/Indian banks acceptable to lender.

(3) Securities in the project company acceptable to lender and further
securities to be determined.

Terms and Conditions, Major Covenants:

The above terms and conditions are indicative. They do not constitute any
commitment for any ABB company or the above parties to arrange financing to
the above terms and conditions.”

11.5 According to the petitioners, the respondent No. 1 had deliberately
construed the tenor of the Financial Package supplied by the petitioner so as to
exclude two years’ moratorium period which was required to be added to the tenor
of 7 years during which the instalments were to be paid for repayment. It was
argued that the tenor was infact of nine years because the moratorium period of
two years was required to be added to the tenor of seven years.

11.6 The word “tenor” in the context in which it is used in the PR-C under
the heading “Repayment Profile” would mean the settled course of the whole
repayment profile and not just the period of instalments for repayment. The
settled course of repayment profile would include both the period covered by the
instalments as well as the initial moratorium period. Moratorium would be the
legal authorisation to the debtor to postpone the repayment, or the total period
of such postponement. The period of moratorium will necessarily fall within the
period for which the financial assistance will stand good and usually be the
initial part of the total period during which the debt is scheduled to be
repaid. The tenor of repayment profile was indicated in the RFP document
(Annexure “A” at page 195) to be nine years as a method of evaluation of NPV in
the context of the portion not offered in the offer of Financial Package. The
repayment profile in that context was indicated to be nine years, quarterly
instalments after a moratorium of six months. Both instalments and moratorium
are indicated under the sub-heading `Repayment Profile’. That method of dealing
with the portion not offered could, however, not be taken as the basis for
comparision of the offers made by these bidders, as was initially sought to be
suggested during the arguments on behalf of the petitioners. In their case there
was required to be made comparison on the basis of method of evaluation which
was equity IRR. In the form of Financial Package offered under the head
`Repayment Profile’ three things were to be stated namely tenor, instalments and
moratorium. This would mean tenor of repayment profile which would be the total
period of time by which the repayment has to be made for satisfying the debt,
instalments for such repayment, and the moratorium during the period in which
debt is to be repaid. Moratorium by its very nature would fall within the tenor
of the repayment profile. Non-payment of debt during the agreed period of
moratorium is also a part of `Repayment Profile’ which in the context would mean
the course agreed for making repayment of debt. The two termini of duration of
financial assistance i.e. incurring of debt and its discharge by repayment would
constitute the period within which the number of instalments agreed and the
period of deferring repayment would both fall. Thus, if the tenor of repayment
profile is seven years with moratorium of two years, it means that the debt is
to be discharged within seven years from the date when it was incurred within
which period the agreed moratorium of two years would fall and after which the
instalments will commence so as to repay the debt fully on the expiry of seven
years from the date when it is incurred. This would mean that the instalments
were to be for five years. The Financial Package of the petitioner at Annexure
“I” to the affidavit-in-reply of respondents Nos. 1 and 2 (at page 323) is
capable of this interpretation adopted by the respondents Nos. 1 and 2 and
therefore, it cannot be said that it has been deliberately misunderstood or that
the tenor of the petitioner’s repayment profile should have been taken to be
nine years and not seven years. The tenor of repayment profile of the Financial
Package of the respondent No. 3 was 14 years 8 years and 10 years for the three
types of finances offered with respective moratorium from financial close, of 2,
2.5 and 3 years and respective instalments – 24 semi-annual, 11 semi-annual and
32 quarterly. Therefore, the period of repayment profile in the plan of
financial package offered by the respondent No. 3 which had average tenor of
more than ten years was found to be prudent and acceptable as borne out from the
following minutes of the meeting of the Managing Committee held on 4.9.1999
under the head of `Evaluation criteria for award of 15 marks for `Financial
package offered’. The shorter tenor of 7 years of the petitioners’ offer was
considered not prudent as it would cause low cash flow resulting in very low
debt service coverage ratio which itself would render financing not feasible.
The offer of financing made by the petitioner was found to result in an equity
IRR of above 10.42 per cent as against the higher equity IRR of 17.47 per cent
from the offer of financial package made by the respondent No. 3.

Excerpts from the Minutes.

“The evaluation criteria awards 15 marks for financial package offer.

(i) The financing package offered by the bidders were discussed at legnth.
M.D informed that BSES consortium did not provide any financing package with
their revised bid but sent a separate letter after the bid opening date. It
was decided that their offer, therefore, cannot be considered.

(ii) RFP provided for adjustments to be made in the financing offered such
as correcting the figures for the exchange rate on the date of bid opening,
adjusting for additional financing when the financing offered was less than
100 per cent of the EPC price. Letter dated 3.3.99 to bidders, which is a part
of the RFP also indicated that the financing should flow prudent financial
practices for financing power projects. The RFP and subsequent clarifications,
however, did not clearly lay down the criteria that will be used in evaluating
different financing offers. The committee accepted M/s. Fieldstone’s
recommendations that Return on Equity to be the criteria that should be used
in evaluating the financing package. It was also the general consensus of the
Committee that any equity investor should consider primarily Return to the
investors as the relevant criteria.

The specifics of the financing package offered by L&T and ABB were
discussed in the light of foregoing L&T’s financing had a tenor of Seven
years and ABB’s average tenor was more than ten years. The PPA allows for
recovery of capital or principal payment of loans through depreciation, which
was about 7.98 per cent per year. Any financing that had short tenor such as
L&T’s would tend to reduce the Return on Equity. Also financing tenor of 7
years will cause low cash flow resulting in very low debt service coverage
ratio which itself will render financing not feasible.

The indicative calculations, prepared in house on the basis of common
assumptions, confirmed the foregoing and showed that L&T’s offer of
financing will result in an equity IRR of about 10.42 per cent and that of ABB
in an equity IRR 17.47 per cent.

Moreover, it had been laid down that where in the opinion of GSPCL the
financing package stipulates norms not in line with the prudent financial
practices, such a financing package will be considered non-responsive and no
marks will be awarded under this category.

The committee deliberated the issue at length and in view of:

(i) Cash flow problems,(ii) Poor Return on Equity,

in case of financing package of L&T, decided to allocate Zero marks to
L&T’s offer. ABB’s financing package was given 15 marks.”

This evaluation was accepted by the Board of Directors on 9.9.1999 (Annexure
“M” to the affidavit-in-reply at page 429) after considering financial packages
offered by different bidders and a detailed discussion of various terms and
conditions and the methodology recommended by Messrs Fieldstone for adopting IRR
on equity to be the main criteria for evaluation.

11.7 Variation in the tenor of repayment profile in the components of
instalments for repayment fixed and moratorium would have a direct financial
implication on the cost of the project and consideration of this factor and the
return to the investor on equity criteria while judging the bids would be
perfectly germane to a decision on acceptance of a financial package. There is
therefore, no element of arbitrariness on this count nor can it be inferred that
any special favour was shown on this count to the respondent No. 3, whose tenor
of Repayment Profile was found to be comparatively more beneficial on the
relevant IRR on equity criteria as per the prudent financial practices, so as to
earn 15 marks as per the stipulations contained in clarifications dated 3.3.1999
(page 195), by which it was provided that “where in the opinion of GSPCL the
financial package stipulation norms are not in line with the prudent financial
practices such a financial package will be considered non-responsive and no
marks will be awarded under this category.” It would be hazardous for the court
to venture into any detailed inquiry as to why GSPCL found the financial package
of the petitioner to be not in consonance with the prudent financial practices.
There is no indication from the stand taken by GSPCL on the basis of the type of
financial packages offered by the petitioner No. 1 and the respondent No. 3 that
it came to a conclusion so very arbitrary as no person, with the normal prudence
expected in such field, would have reached unless he acted with a pre-determined
mind to oust the petitioner and favour the respondent No. 3. It is therefore,
difficult to question the impugned decision awarding 15 marks to the respondent
No. 3 and zero to the petitioner for the Financial Package offered.

12. The award of 75 marks to the respondent No. 3 for the lowest `Per MW
(gross output) EPC cost’ and the corresponding inverse proportion of 71.4 marks
awarded to the petitioner was assailed on the grounds, that the 2 per cent
reduction in the capacity offered by the petitioner which was 189 MW was not
justified, because no such reduction was made in case of the 156 MW capacity
offered by the respondent No. 3, on the basis of depreciation graphs of
unrecoverable degradation of turbines which warranted similar reduction; that
the offer of the petitioner being on “turn-key” basis there was no justification
to load the price quoted by the petitioner; and finally, that there was no valid
reason for the Management Committee to load the quoted price of the petitioner
by 2 million U.S dollars on the spacious ground of non-production of a back-up
guarantee from the licensor GE when no licensor in his senses would ever offer
such guarantee for the turbines manufactured by the licensee here Hitachi.

12.1 Weightage of 75 marks was fixed in the evaluation criteria declared, in
the clarification dated 3.3.1999 at Annexure “B” to the petition – (page 192 to

194), which formed integral part of the RFP document for “Per MW (gross output)
EPC Cost” determined. The per MW (gross) evaluated cost was to be worked out by
“loading” the quoted prices with the cost of missing items and further by a
factor as indicated in the table, for increase in heat rate (average of heat
rate at 85 per cent and 70 per cent) and auxiliary power consumption. Such
evaluated per MW (gross) cost was to be worked out for all the bids. The lowest
bid was to be awarded 75 marks and other bids were to be awarded marks in the
inverse proportion of bid price to lowest bid price multiplied by 75.

12.2 On 7.1.1999, the respondent No. 1 appointed Desein Pvt. Ltd. as their
consultants by letter at Annexure “E” of the sur-rejoinder of respondents Nos. 1
and 2 (page 901), for a detailed technical review and evaluation of the EPC bids
for the compliance with the specified technical aspects and carrying out
detailed technical analysis of the bids and evaluate them based on technical
considerations. The bid evaluations were to be submitted by Desein with
conclusions and recommendations to the Respondent No. 1 for final decision and
the bid evaluation document was to remain as a permanent record of the basis for
procurement decision. At the instance of the petitioners the respondents Nos. 1
and 2 placed on record certain documents which included the technical evaluation
done by Desein and award of marks out of total possible 75 marks. The report was
forwarded to the respondent No. 1 by Desein under its letter dated 30.8.1999.
The report refers to seven pre-qualified EPC bidders and to the fact that the
bids were received from three international/domestic EPC contractors namely ABB,
L&T – Sumitomo-Hitachi and BSESBHEL Ansaldo. As regards the petitioner, it
was observed in paragraph 4.9 of the report that “the L&T consortium does
not have all the three partners as direct members of the consortium. This aspect
needs to be further examined legally by GSPC”. In para 4.10 of the report it was
noted qua the petitioner that the back-up guarantee was not satisfactory. It was
noted that RFP had required that in case gas turbine manufacturer is a licensee,
the GT manufacturer must obtain a back-up guarantee from the licensor in respect
of guarantees and availability of spare-parts. It was further noted qua the
petitioner that: “In respect of L&T consortium, Hitachi claims to be
co-developer with GE. However, the same is not borne out by GE letter as it
states that “Frame 6FA Licence Agreement grants Hitachi, the right to
manufacture the entire gas turbine”. The GE letter does not specifically
guarantee the machine performance. This is borne out from GE’s letter dated
21.7.1999 which is at annexure “N” to the petition (at page 240). It was
observed that `L&T consortium strictly does not fulfil RFP requirement’. It
was further noted that probably GE has to place supervisory personnel at
licensee’s works at a considerable cost to enable them to issue the requisite
guarantee. Such charges, according to Desein could be of the order of two to
three million U.S. dollars; although no evaluation was done on this count. All
the three bids were evaluated by Desein to arrive at evaluated cost and loading
on account of technical item loading, auxiliary power consumption and station
heat rate averaged at 85 per cent and 70 per cent and the results were annexed
at annexure-I of the report. Desein concluded that on the basis of evaluation
criteria the bid of respondent No. 3 was evaluated and awarded 75 marks and the
petitioner was awarded 73.86 marks (The third bidder BSES was given 62.26
marks). From the comparative statement of bids at Annexure-I of the report it is
clear that the total cost/MW (gross) of the petitioner’s bid was higher and that
of the respondent No. 3 was the lowest meriting it 75 marks. In the note below
it was explained how loading was done in the prices quoted by these three
bidders. Therefore, an independent expert had evaluated the bid of the
respondent No. 3 as the lowest and awarded 75 marks. There is absolutely no
valid reason for the court to question this evaluation.

12.3 This report was considered by the Fourth Management Committee of
Directors of the company in detail in paragraphs (i) to (vi) as can be seen from
its minutes of the meeting held on 4.9.1999 at Annexure “O” to the sur-rejoinder
of the respondents Nos. 1 and 2 (at page 940). The report was found to be in
order and the Committee therefore decided to accept it. A representative of
Desein Pvt. Ltd. was present during the meeting as recorded in the minutes. The
Management Committee so assisted by the presence of the expert, applied its mind
to the factors relevant to loading the price quoted by the bidders including the
petitioner. The following excerpt from the minutes at annexure “N” to the
sur-rejoinder of the respondents Nos. 1 and 2 at pages 941 to 953 shows the
decision taken by the Committee, for accepting the recommendations as submitted
by the technical advisor Desein Pvt. Ltd. and of further loading the
petitioner’s bid by US dollars 2 million on the basis of the estimated cost due
to non-availability of the GE’s back-up guarantee which would entail cost that
may have to be incurred over supervisory specialists at manufacturer’s work and
other related costs, resulting in the further reduction of marks of the
petitioner from 73.86 to 71.41 on the basis of the formula which was
pre-determined for evaluation (see Annexure “B” to the petition at page 192 to
page 194).

Excerpt from the Minutes

” (v) L & T quoted prices are stated to be envisaged on a split
contract structure to optimise works contract tax implication. The exact split
of “off shore” supplies and “on shore” erection and other service contract
between rupee contracts for supplies and services is provisional and will be
advised by L&T during negotiation. This may lead to higher incidence of
Excise and Sales Tax if `on shore’ supplies portion increases. Further, the
price schedule indicated that in the event of foreign currency component
actually incurred and invoiced is lower than the quoted amount, the balance
amount shall be paid in equivalent rupees at exchange rates prevailing at the
time of invoicing. Such a stipulation cannaot be acceptable to GSEC.

Works contract tax on civil works, withholding tax on foreign services and
local sales tax on HRSG (being offered on lease) boiler do not appear to be
included and are loaded as shown in M/s. Desein’s evaluation.

(vi) The evaluated per MW cost, was arrived at by loading quoted cost by
missing items, mentioned above, and considering offered output with 9 lac
cubic meters/day gas and derated by 2 per cent to account for deterioration of
SHR as per criteria already laid down. This was further loaded with
differential “auxiliary power” and “heat rate” loading. The technical
evaluation has awarded maximum 75 marks to the “lowest evaluated per MW cost”
bid. Other bids are marked in inverse proportion of their “evaluated per MW
cost”. Thus, ABB gets 75 marks, L&T – Sumitomo & BSES-BHEL-Ansaldo get
73.86 and 62.26 marks respectively as shown in Recommendation report of M/s.
Desein. This report was found to be in order and hence, committee decided to
accept it.

RFP had required that in case of manufacturer being a licensee, the
licensee should submit a back up guarantee from original manufacturer licensor
in respect of performance guarantees and supply of spares. A format was also
furnished to bidders. Hitachi had stated that for frame 6FA they are
co-developers of GE. Subseaquent GE clarification letter furnished by Hitachi
states that gas turbine(s) will be built pursuant to existing license or
manufacturing associate agreement. Under the agreement, Hitachi, is granted
the right to manufacture entire gas turbine. The letter further states that GE
provides Hitachi with technical information on numerous gas turbine models as
well as technical support during manufacture, if required, including visits by
GEPS engineering and technical specialists to Hitachi Ltd.’s factories. The
aforesaid GE letter makes it clear that Hitachi is indeed a licensee of GE.
And GE’s back-up guarantees come with posting of supervisory specialists at
manufacturer’s works at cost and may involve some other costs. Desein has
estimated cost of such effort at the level of USD 2 to 3 million although they
have not considered the same in evaluation. The Committee deliberated on the
issue and decided to load L&T offer further by USD 2 million. Similarly in
case of BSES also the arrangement offered is not satisfactory as brought out
in para 4.10 of Desein’s Report. Hence, Committee decided to load BSES bid
also by the same amount of USD 2 million.”

12.4 The resolutions passed by the Management Committee at its meeting held
on 4.9.1999 were ratified by the Board of Directors on 9.9.1999. The Board was
assisted by the representative of Desein Pvt. Ltd., who apprised the Board about
various technical aspects of their report and about deviations taken by the
bidders and the manner in which these were dealt with by the company. The
importance of back-up guarantee of licensor was discussed and the Board was of
the opinion that such a guarantee was absolutely necessary in view of recent
experiences in the State. The Board approved the comprehensive evaluation done
by the Directors Committee at its meeting on 4th September, 1999 and the
selection of the respondent No. 3 as lowest evaluated bidder and passed the
impugned resolution.

12.5 It will thus be seen that the decision making process involved
evaluation by the expert (Desein Pvt.Ltd.) who made its report entitled
“Technical Bid recommendation against RFP for selection of EPC contractor”. The
basis for such evaluation was debated at the meetings of the Management
Committee and the Board and loading of price quoted by bidders was done for
reasons noted in the relevant record. The decision appears to be well informed,
taken after proper consideration of the relevant material and for justifications
given by interaction of several responsible persons. No extraneous factor that
can vitiate such decision is discernible. It cannot be said, on a close scrutiny
of the decision making process, that the impugned decision is such as no
reasonable person would take.

12.6 The next contention raised on behalf of the petitioners was that the
derating of the output offered by the petitioner company alone at 189MW by 2 per
cent was not warranted because it was based on deterioration of the
configuration unit which would be common to all machines and was not a unique
flaw of the petitioners’ offer. It was argued that increased fuel input would
not add to the output in any significant way when the level of degradation
reaches its lowest and makes the efficiency `unrecoverable’ as per the graphs of
depreciation of such machines. To this the Counsel for the respondents argued
that this derating of 2 per cent was linked with the use of 9 lakh CM3/day of
fuel for the capacity offered by the petitioner. It was contended that the
respondent Nos.3’s configuration with output of 156MW would not have consumed
the entire available 9 lakh CM3/day and would have worked on 7.7 lakh CM3/day,
leaving scope for maintaining the output when the depreciation sets in on the
basis of the scope of using the remaining fuel upto 9 lakh CM3/day.

12.7 There was an animated debate over the issue whether when the machines
wear out to an `unrecoverable’ level would it be possible to improve their
performance by injecting more fuel. The Counsel for the petitioner would say
`No’ and remind us of an old battered engine of a car not putting in any
additional speed or mileage by pouring in more petrol while the respondents’
Counsel would say `Yes’ because it was so thought while stipulating the derating
of 2 per cent and even relying upon a part of the report of Professor Kale (who
was engaged by the petitioners on 15.1.2000 as per his report at Annexure 12
(page 836) of the petitioners’ affidavit-in-rejoinder, to opine amidst the
controversy already started by way of this petition), dealing with the ability
of a gas turbine to pass additional fuel and make-up for fall over a period of
time in which he could not with an intellectual honesty presumed of an
academician, dispute that “The only method for making-up the power output of the
turbine is to increase the gas (i.e. air and fuel) flow rate through it.”
However though in answer to his engagement he did finally conclude that “the
loss or reduction capacity due to degradation over time cannot be made up by
additional fuel”, he left the trail of sound theory in the process of forming
his opinion as under:-

“The power output of a turbine is the product of the mass flow
rate of gases passing through it and the available enthalpy drop. With
degradation, the temperature of exhaust gases leaving the turbine increases
and the available enthalpy drop across the turbine decreases. The only method
for making-up the power output of the turbine is to increase the gas (i.e. air
and fuel) flow rate through it. For reasons cited above, the only possibility
for realizing this objective is to increase the fuel flow rate. Usually, the
fuel mass flow rate is a fraction of the air mass flow rate.”

Prof. Kale, however, for reaching his conclusion resorted to the reasoning
that “the required increase in mass flow rate through the gas turbine, is
however, much greater and it will not be possible to make up for the short-fall
in power output and that firing additional fuel has a serious limitation, namely
increased heat release rate in the combustor which will increase the TIT (mass
flow rate of air is unaltered).

12.8 We cannot get entangled in a technical debate of this sort by pretending
to understand the engineering nuances nor should we remember that a car with an
old engine would consume more fuel than before for covering the same distance.
Mercifully, there is a stipulation initially incorporated, long before the
dispute peeped out of the horizon, that would steer us through without having to
test the opinions of experts on a point that they alone are presumed to
understand. The stipulation having bearing on reduction of 2 per cent of the
maximum capacity when offered on the basis of use of the entire 9 lakh CM3/day
of gas with net Calorific Value of 8300 K.cal/SCM (which was as per the revised
Fuel Supply Agreement condition (See Annexure “I” of respondents’ sur-rejoinder
dated 2.2.2000), clearly had figured in the clarification to the RFP document
that was made on 3rd April, 1999 as per annexure “D” to the petition (page 204)
in context of the earlier clarification dated 15.3.1999 at Annexure “C” to the
petition (page 202). It was provided therein that the gross capacity offered by
the bidder on the basis of 9 lakh M3/day of gas having net calorific value of
8300 K.cal/CM3 would be calculated based on guaranteed net SHR for field
conditions. However, to account for possible deterioration in machine capacity
over a period of time, a 2 per cent reduction in maximum capacity offerable with
9 lakh M3/day of gas would be considered. This would form the basis of the SHR
to be considered at 70 per cent and 85 per cent of capacity. The earlier
clarification dated 15.3.1999 (page 202) while permitting the bidder to quote
maximum possible net guaranteed output based on guaranteed Station Heat Rate,
Auxiliary Power Consumption and availability of 0.9 MMSCMD i.e. 9 lakh K.cal
M3/day gas with net calorific value of 8300 cal/SCM made it clear that per MW
(gross) cost would be evaluated based on the guaranteed output, SHR and
auxiliary power consumption. The petitioner’s proposal dated 1st May, 1999 (at
Annexure 18 of its rejoinder at page 855) to optimise the plant capacity on fuel
utilisation marginally higher than 9 lakh M3/day was turned down by the
respondent No. 1 by its letter dated 3.5.1999 at Annexure “E” (page 206), in
which the petitioner was informed that after examining various aspects of Fuel
Supply Agreement and development plans of GSPC for its Hazira field, it had been
decided that the capacity that may be offered for the power project should be
based only upon the availability of 0.9 MMSCMD of gas being Net Calorific Value
of 8300 K.Cal/SCM as clarified in the letter dated 15th March, 1999. The
petitioner cannot challenge the above terms of invitation to tender by
contending that the criteria of evaluation which envisaged reduction of 2 per
cent of the maximum capacity offered on the basis of the use of 9 lakh CM3/day
should not have been applied in the case of the petitioner who offered 189.870MW
capacity with the use of 9 lakh CM3/day gas. The maximum capacity offered by the
petitioner 189MW was therefore, reduced by 2 per cent to 186.070 as recorded in
the table at Annexure “I” of Desein’s report as “offered capacity after 2 per
cent deterioration due to SHR”, in accordance with the stipulated terms and the
petitioners cannot make any valid grievance on this count.

12.9 The justification for loading the price quoted by the petitioner on the
ground of non-inclusion of Works contract tax, Withholding tax and local Sales
tax is reflected from Desein’s report as under”:-

“4.12 xxx xxx xxx . In respect of L&T the works contract tax on civil
works, withholding tax on foreign services and local sales tax on HRSG do not
appear to be included. The offer is therefore, loaded on that account as shown
in Annexure I.”

“NOTE:

* Prices quoted by L&T are envisaged on a split contract structure with
a view to optimize works contract tax implication. The exact split of offshore
supplies and onshore erection and other service contract between rupee
contracts for supplies and services is provisional and will be advised during
negotiation. The custom duty charges, though payable in Indian rupees, are
shown in foreign currency. Further, the price schedule indicate that in the
event of foreign currency components actually incurred and invoiced is lower
than the quoted amount, the balance amount shall be paid in equivalent rupees
at exchange rantes prevailing at the time of invoicing. Works contract tax is
loaded at the rate of 2 per cent of civil works cost estimated at 50 per cent
of on shore erection and other services quoted price of Rs. 538.92 million.
Withholding tax applicable is 15 per cent in US and UK and 20 per cent in
Japan. HRSG is offered on lease and local sales tax is loaded at the rate of
10 per cent on indicated price of Rs. 550 million.

* Loading due to increase in heat rate has been calculated at the rate of
Rs. 36000/Kcal/MW over averaged differential heat rate at 85 per cent and 70
per cent of offerable capacity.

* Loading due to increase in Auxiliary Consumption has been calculated at
the rate of Rs. 1.80 lakhs/KW/MW of installed capacity over averaged
differential auxiliary power consumption at 85 per cent and 70 per
cent.”

12.10 As noted above, this evaluation made by Desein as reflected into its
report was considered and approved by the Management Committee as recorded in
its minutes of the meeting held on 4th September, 1999 at Annexure “O” to the
Sur-rejoinder of the respondents (page 940). The petitioner company has
therefore, miserably failed in its challenge against the award of 75 marks to
the respondent No. 3, and in its claim to get marks higher than 71.46 awarded to
it after further loading of estimated cost of US dollars 2 million due to lack
of availability of the back-up guarantee of the licensor GE as required by the
terms of invitation to tender.

13. The learned Senior Counsel appearing for the petitioners questioned the
justification for reduction of one mark from 5 marks allotted for “Quality of
Proposal and background”, on the ground that the manufacturer was not part of
consortium. It was argued that no licensor would be ready to become part of the
licensee manufacturers transactions. It was too much to expect the licensor GE
to become member of the consortium and the letter of GE dated 21.7.1999 (at page

240) was accepted good enough and satisfactory because the revised price bid of
the petitioner was opened after the petitioner had submitted the letter
alongwith its bid on 18.8.1999.

13.1 The RFP document (page 196) required that manufacturer should be part of
the consortium and that the bid not conforming to this requirement will be
treated as non-responsive and will be rejected. In the clarification dated
15.3.1999 (page 202), it was in para 2 laid down that in case the gas Turbine
manufacturer included as a consortium member, is a licensee, then undertaking
from the licensor confirming its back-up guarantee for successful performance of
Gas Turbine Combined Cycle Power Plant alongwith associated auxiliary equipment
and availability of spare parts should also be provided. The letter of the
respondent No. 1 dated 19.7.1999 (at page 208 without annexures and also at page
327 to 424 with annexures), furnished the format of such guarantee at Annexure
VII to that letter (at page 423). The letter of GE dated 21.7.1999 profferred by
the petitioner at Annexure “N” (page 240) was nothing short of a mockery of this
term of invitation to tender. There is not a word in that letter which can
constitute an undertaking of the licensor in support of the licensee
manufacturers back-up guarantee in respect of the project in question. The
Desein in its Evaluation Report dated 30.8.1999 referred in para 2.6 to the fact
that RFP required GT machinery manufacturer to be part of the consortium bidding
for the project and recorded in para 2.8 that the bidders were asked for the
back-up guarantee from the licensor in respect of guarantees and availability of
spare parts observing in para 4.9 in respect of the petitioner’s consortium that
the original consortium comprised L&T Sumitomo and later Hitachi as GT
manufacturer joined hands with Sumitomo to become consortium member through
Somitomo. It was observed that the L & T (i.e. petitioner’s) consortium did
not have all the three partners as direct members of the consortium.

13.2 The Management Committee which met on 4.9.1999 deleberate on this issue
assisted by the representatives of M/s. Desein who explained their report in
detail as recorded in the minutes, and held that the arrangement did not exactly
fulfil the RFP criteria in respect of consortium arrangement and it therefore,
decided that one mark be deducted in case of the petitioner on this count from
the total of 5 (awardable under head “Quality of Proposal & Back-up
guarantee”) as recorded in the minutes at Annexure “O” (page 940) in clause

(iv). This evaluation was confirmed by the Board as reflected in its minutes
(Annexure “M” page 429) after discussing the importance of back-up guarantee of
licensors and being of the opinion that such guarantee was absolutely necessary.
Thus, the deduction of 1 mark under the head “Quality of proposal” on the basis
of the terms of invitation to tender cannot be said to be unjustified, arbitrary
or calculated to favour the respondent No. 3.

13.3 Back-up guarantee was required from the manufacturer of gas turbines. A
licensee of manufacturer manufactures on the basis of the licence granted by the
original manufacturer and if such license is cancelled he cannot lawfully
continue the manufacture of the product. Therefore, the requirement that back-up
guarantee of the original manufacturer be obtained by its licensee cannot be
said to be an arbitrary requirement calculated to favour the respondent No. 3.
This requirement was in fact diluted by allowing back-up guarantee of the
licensee manufacturer to be supported by an undertaking of the licensor
confirming its back-up guarantee for successful performance of Gas Turbine
Combined Cycle Plant alongwith associated auxiliary equipment and availability
of spare parts. The letter dated 21.7.1999 of GE (page 240) did not provide the
needed assurance. The contention that because the bid was not rejected earlier
on the ground of non-production of the letter of GE as stipulated in the
communication of 19.7.1999 and the price bid of the petitioner was opened, it
should be assumed that the condition was dispensed with, is mis-conceived. Can
it be contended from the mere fact that price bid was opened that the earlier
requirement of letter from the licensor was dispensed with? The price bids of
bidders were to be opened in presence of bidders who chose to remain present on
a given day. The position after the meeting on 15/16.7.1999 as summarised at
item 2 of Annexure “I” to the letter dated 19.7.1999 (Annexure “J” collectively
at pages 327 and 335 to 336) in context of the requirement of back-up guarantee
was that the consortium of Sumitomo/Hitachi will furnish letter from GE
specifying arrangement between GE and Hitachi with regard to manufacture of the
gas turbine (Frame 6FA). It was stipulated that unless this letter clearly
establishes that the requirement of performance back-up guarantee of
licensor/principal can be dispensed with, the same will have to be produced, as
mentioned in para 4 of the covering letter dated 19.7.1999. It was also stated
that the consortium agreement between Sumitomo-Hitachi on one hand as against
triparte agreement will be subject to the owner’s approval. Then comes clause

(iv) on which reliance was placed to contend that opening of the price bid
should be construed as acceptance of the GE’s letter and in any event the
requirement should be taken to have been waived. This clause reads that “Price
bid will be opened only after receipt of above for the bidder”. It is obvious
that the contention is raised in desperation and cannot be countenanced.
Physical opening of the price bid cannot be attributed with an efficacy of
waiver of all preceding requirements. By opening of the revised price bid the
question of evaluation of the Quality of proposal for which 5 marks were to be
allocated and which required manufacturer to be a member of the consortium did
not evaporate. No conscious decision of waiver of this requirement was at all
taken at the intermittant stage of opening of the bid. The petitioner put forth
GE’s letter dated 21.7.1999 (page 240) before the price bid was opened. There is
nothing to show that any decision over the validity of that letter was taken by
the “owner” or that it was in any manner decided to waive the important basic
requirement. The state of formal rejection of a bid comes at the end and
continued consideration till the end will not imply intermittent irreversible
approval of the matters under consideration or implied waiver of basic
conditions specifically required to be fulfilled by the bidder.

14. In view of what has been stated hereinabove, there is absolutely no
warrant for interfering with the impugned decision taken by the respondents Nos.
1 and 2 for awarding the contract to the respondent No. 3. The petition is
therefore, rejected. Notice is discharged with no order as to costs. Interim
relief stands vacated.

At this stage, a request has been made on behalf of the petitioners that the
interim relief in form of status-quo which has been operating till today may be
extended for two weeks. This request cannot be countenanced having regard to the
facts and circumstances of the case and keeping in view the ratio of the
decision of the Hon’ble Supreme Court in Ronaq International
(supra).