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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
WRIT PETITION NO.1542 OF 2009
1. Reliance Infrastructure Limited,
a Company registered under the
Companies Act, 1956, having its
Registered Office at Reliance
Energy Centre, Santa Cruz (East),
Mumbai-400 055.
2. Reliance Infrastructure &
Consultants Limited, a Company
registered under the Companies Act,
1956, having its Registered Office
at 'H' Block, 1st Floor, Dhirubhai
Ambani Knowledge City (DAKC),
Navi Mumbai-400 710,
3. Shri Surendra R.Khot
of Mumbai, Indian Inhabitant,
having office at Reliance Centre,
Walchand Marg, Ballard Estate,
Mumbai. ...Petitioners.
Vs.
1. Maharashtra State Road Development
Corporation Limited, a Government
of Maharashtra Undertaking,
registered under the Companies' Act,
1956, having its Registered Office
at Near Priyadarshini Park, Napean
Sea Road, Mumbai-400 036, India.
2. The State of Maharashtra,
through the Principal Secretary,
Public Works Department,
Mantralaya, Mumbai-400 001.
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3. MEP Toll Road Ltd.,
a Company registered under the
Companies Act, 1956, having its
registered office at 1RB Complex,
Chandavili Farm, Chandavili Village,
Andheri (East), Mumbai-400 072.
4. Ashoka Buildcon Ltd.,
a Company registered under the
Companies' Act, 1956, having its
registered office at Ashoka House,
Ashoka Marg, Nasik-422 011.
5. IL & FS, a Company registered
under the Companies' Act, 1956,
having its registered office at,
IL & FS Financial Centre, Plot No.C-22,
'G' Block , Bandra-Kurla Complex,
Bandra (East), Mumbai-400 050. .... Respondents.
....
Mr.J.J.Bhat, Senior Advocate with Mr.Janak Dwarkadas, Senior
Advocate, Ms.Anjali Chandorkar, Mr.Naval Agarwal and
Mr.D.J.Kakalia i/b. M/s.Mulla & Mulla & CBC for the Petitioners.
Mr.Rafique Dada, Senior Advocate with Mr.Prashant Chavan,
Mr.J.Kapadia, Mr.F.Lakdawala and Mr.M.Bootwala i/b. Little & Co.
for Respondent No.1.
Mr.D.A.Nalavade, Government Pleader for Respondent No.2.
Mr.Rohington Nariman, Senior Advocate, Mr.Furdoon De'vitre,
Senior Advocate, Mr.Aspi Chinoy, Senior Advocate, Mr.Rajev
Kumar, Mr.Rudreshwar Singh, Mr.Deepak Y.Chitnis i/b.
M/s.Chitnis-Chinparikar & Co. for Respondent No.3.
Mr.R.S.Apte, Senior Advocate i/b. Mr.Aniruddha A.Garge for
Respondent No.4.
Ms.Savitha Kundar i/b. Negandhi, Shah & Himayatulla for
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Respondent No.5.
.....
CORAM : SHRI MOHIT S.SHAH, C.J. AND
DR.D.Y.CHANDRACHUD, J.
October 28, 2010.
ORAL JUDGMENT (PER MOHIT S.SHAH, C.J.) :
1. The Maharashtra State Road Development Corporation
(MSRDC) has been engaged in the implementation of a project
involving the construction of fifty five flyovers in Mumbai. In
order to recover the cost of construction, MSRDC has been given a
right to collect a toll at five entry points to the city. MSRDC
proposed to award a contract under which it would take an
upfront payment for the repayment of a project loan, against the
securitization of collection at the five entry points into Mumbai,
and for other related work. In addition to the payment of upfront
money to MSRDC, the proposal required (i) Operation and
maintenance of flyovers and allied structures; and (ii) Collection of
tolls at five entry points into Mumbai. In order to implement the
project, MSRDC floated a tender inviting bids for the appointment
of a contractor. The tender notice invited bids from Companies or
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Consortia of not more than three members. An upfront payment of
Rs.2,100/- crores was stipulated and there was a requirement of
bid security in the amount of Rs.105 crores.
2. The eligibility criteria for bidders contained financial
criteria and toll experience. The financial criteria stipulated that
where the bidder was a consortium or a joint venture, the lead
member must continue to hold at least a 26% equity stake at all
times during the lock-in-period and all members of the Consortium
together must hold 51% of equity. The minimum annual
turnover, including toll collection, in any one of the previous three
years as per the audited balance sheet/profit and loss account for a
period ending not earlier than 31 March 2008 was required to be
Rs.125 crores for all the members of the consortium taken
together. Of this, the Lead Member was required to have an
average annual turnover towards toll collection of at least Rs.75
crores. The toll experience required was as follows:
” i) Individual Company/ at least one member of
consortium shall have experience of operating minimum
20 automated – computerized toll lanes under one
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authority not below the rank of Executive Engineer or
equivalent shall only be accepted for this purpose.
-ii) The turnover and experience of octroi collection will
not be considered for the above eligibility.”
3. Clause 5.5.1.1.2 of the bid document provided that
where a bidder was a Consortium, each member shall furnish a
Power of Attorney in favour of the lead member duly signed by an
authorised representative of the members in accordance with a
stipulated format. The bid was required to be signed by a duly
authorised signatory of the lead member and was to be legally
binding on all the members of the Consortium. Under clause 5.6,
every bidder was required to submit or participate in only one bid
in the bidding process either individually as a bidder or as a
consortium partner in a joint venture. The draft contract appended
to the bid stipulated that the first instalment of Rs.1350/- crores
(out of a total payment of Rs.2100/- crores) was required to be
paid within 90 days of the letter of allotment.
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4. MSRDC had appointed an independent consultant for
scrutinizing, evaluating and advising on the bid submitted by
various bidders. Seven bidders including the Petitioners submitted
their bids. The bids were required to be submitted in two covers,
the first being the technical proposal and the second the financial
proposal. Technical bids were opened on 23 July 2009. During
the course of the scrutiny, clarifications were sought by the
Consultants from bidders, including the Petitioner. A joint
inspection was carried out of the Toll Plaza in Kolkata in respect of
which the Petitioner had submitted a certificate of experience
dated 31 August 2006 and a subsequent certificate dated 11 August
2009. The Consultant submitted a final report on 17 August 2009
of the technical scrutiny. The Board of Directors of MSRDC, at a
meeting held on 17 August 2009, concluded that four bids,
including that of the Petitioner were to be rejected as non-
responsive.
5. The reasons for the rejection of the bid of the Petitioner
were communicated by a letter dated 18 August 2009 addressed to
the Lead Member of the Consortium, SMS Infrastructure Limited by
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MSRDC. The grounds on which the bid submitted by the
Petitioner was disqualified are as follows:
-(i) The consortium of the Petitioners – SMSIL-Rel Infra-RICL
had by a letter dated 17 August 2009 shown a turnover of Rs.34.45
crores from a Delhi based toll collection agreement for 2007-08.
The work was executed by SMS Infrastructure Limited on behalf
of Banas Sands TTC JV. The toll collection was on behalf of
Banas Sands TTC JV with whom there was a Government toll
collection contract. Banas Sands TTC JV is a member of another
Consortium, Sadhav-Prakash, which was also one of the bidders for
the present project. This breached the Anti-Collusion Certificate
and was in violation of the eligibility criteria which specified that
“Experience of any activity relating to an eligible project shall not
be claimed by two or more members of the consortium. In other
words, no double counting by a consortium in respect of the same
experience shall be permitted in any manner whatsoever”;
-(ii) One of the Consortium partners of the Sadhav-Prakash
Consortium, is Banas Sands TTC JV, a partnership firm which
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holds 33.34% of the capital of Valancia Construction Pvt.Ltd.
(“Valancia”). Valancia has an 87.36% equity holding by Anil
Sancheti and has been shown as an Associated Company in the
annual report of SMS Infrastructure Ltd. Anil Sancheti is also a
Director in SMS Infrastructure Ltd. The authorised signatory of
Banas Sands TTC JV is an employee of SMS Infrastructure Ltd.
Hence, the Consortium involving the Petitioner and the Sadhav-
Prakash Consortium had a common interest in both the respective
bids;
-(iii) The Consortium of the Petitioner claimed a toll collection
experience of Rs.97.53 crores. The bidder had clarified on 17
August 2009 that the toll collection at Delhi was on behalf of the
Banas Sands TTC JV. Hence, that could not be taken as valid
experience of the Consortium of the Petitioner. If that turnover is
excluded, the Consortium did not satisfy the eligibility criteria for
toll collection turnover;
-(iv) The eligibility criteria of toll experience stipulates that at
least one member of the Consortium must have experience of
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operating a minimum of twenty automated computarized toll lanes
under one contract for at least one year. In October 2008, SMS
Infra while submitting a certificate, during the bidding process, for
a six months’ toll collection tender for five toll stations at the Entry
Points to Mumbai had stated that the toll collection points at
Vidyasagar Setu Kolkatta had eighteen toll lanes. Hence, the
experience certificate submitted less than one year earlier showed
that the number of lanes was less than twenty. As a result, the toll
collection experience did not meet the stipulated criterion;
-(v) The comfort letter of the State Bank of India had not
been signed by a prescribed authority; and
-(vi) The MoU between the members of the Consortium
involving the Petitioner stated that SMS Infrastructure Ltd. would
be a 34% equity partner in the Consortium as lead member of the
Consortium. Reliance Infrastructure Ltd. (RIL) and Reliance
Infrastructure Consultancy Ltd. (RICL) each held 33% equity,
aggregating to 66%. Both these Companies are related Companies
and RIL held 40.17% equity in RICL. Hence, the bid criteria that
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the lead member should hold the maximum share would be
defeated.
6. After receipt of the letter communicating that the bid
submitted by the Petitioner’s Consortium had been found to be
non-responsive, the authorised signatory of the Consortium, by a
letter dated 18 August 2009 applied to MSRDC for refund of the
earnest money deposit of Rs.105 crores and the financial bid. The
letter was signed by the authorised signatory of the Consortium.
MSRDC returned the financial bid and refunded the earnest money
deposit of Rs.105 crores to the authorised representative of the
Consortium on 18 August 2009.
7. After the financial bids were opened, the Third
Respondent was found to be the lowest bidder, having quoted a
concession period of seventeen years and one month. By a letter
dated 18 August 2009, the Superintending Engineer of MSRDC
called the Third Respondent for negotiations in accordance with
Clause 5.25 of Vol.I of the Bid Document. The Third Respondent
by a letter dated 18 August 2009 reduced the concession period to
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sixteen years, eleven months and twenty seven days.
8. In these proceedings under Article 226 of the
Constitution, the Petitioner has inter alia, challenged the decision
of MSRDC to reject its consortium bid and has sought a direction in
the nature of Mandamus to the Corporation to award the contract
for securitization of five entry points to Mumbai pursuant to the
tender notice to the Petitioner or, in the alternative, to invite fresh
bids.
9. The submissions which have been urged on behalf of the
contesting parties can now be summarised.
ARGUMENTS OF THE COUNSEL FOR THE PETITIONERS:
-A) Mr.J.J.Bhat, learned counsel for the Petitioners has
raised following contentions:-
(i) The Petitioners’ technical bid has been held non-
responsive on the basis of the grounds raised in the impugned
communication but none of the grounds is germane to the matter;
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(ii) The Petitioners' bid was for 11 years and 7 months which
is a much shorter period than the offer of Respondent No.3 for 16
years 11 months and 27 days. Since the same amount has to be
paid by the successful bidder i.e. Rs.2,100 crores, the length of
period for which the successful bidder is to be permitted to collect
the toll, should be the only determining criterion for deciding who
should be awarded the contract;
(iii) By awarding the contract to Respondent No.3, MSRDC
will suffer a loss of about Rs.10,000 crores as per the statement
submitted before the Court at the hearing ;
(iv) The CAG has made scathing remarks in respect of various
contracts awarded by the Respondent-Corporation to Respondent
No.3;
(v) In the past, this Court had also an occasion to examine
the legality and bona fides of the decision of MSRDC in favour of
Respondent No.3;
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ARGUMENTS OF THE COUNSEL FOR RESPONDENT NOS.1 & 3:
(i) On the other hand, the learned Counsel Mr.Rafique Dada
and Mr.Nariman appearing for the MSRDC and Respondent No.3
respectively opposed the petition and submitted that the Petitioner
has been disqualified from the tender process and has no right to
challenge the decision of MSRDC in awarding the contract to
Respondent No.3;
(ii) The Petitioner has been held to be ineligible on five
counts and this Court would not sit in appeal over the decision
taken by the Respondent authorities. Judicial review under Article
226 of the Constitution of India does not contemplate a review of
the decision itself but only a review of the decision making process.
Since the tender notice was issued in daily newspapers; seven
bidders had submitted their bids; after a detailed scrutiny only
three bids were held to be qualified and the Petitioner was one of
the four non-responsive bidders, no further judicial scrutiny is
called for ;
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(iii) The petition has been filed by only two members of the
consortium but the lead member, SMS Infrastructure Ltd. with a
34% share in the equity has not come forward to file the petition.
After initial letters dated 12 August 2009 and 18 August 2009 the
authorized signatory and constituted attorney for the consortium
has not signed any document and, therefore, the other two
members of the consortium have no locus standi to file the present
petition;
(iv) Even otherwise, the present two Petitioners hold 66%
share in the equity stake of the consortium (33% + 33%). Since
Petitioner No.2 is holding 40% share in Petitioner No.1 company,
they are inter-related and their total holding exceeds the holding of
the lead member of the consortium;
(v) The calculations given by the Petitioners at the hearing
today are given for the first time but there is no basis for such
calculations;
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(vi) The Petitioner having asked for a refund of the financial
bid and the refund of the earnest money of Rs.105 crores, waived
all its rights and, therefore, the Petition is not maintainable.
(vii) On account of various projects undertaken by the
Corporation, the Corporation is in dire need of funds to the tune of
Rs.2,100 crores to pay off its debts immediately. On this account,
as per tender conditions, Rs.1,340 crores is required to be paid by
the successful bidder within 90 days from the date of acceptance
letter to be issued by the Respondent Corporation and the
remaining amount in the 2nd to 5th years, but Respondent No.3 has,
by a letter dated 31 August 2010, agreed to pay a substantial sum
of Rs.1,710 crores within 90 days from the date of acceptance
letter of the Respondent Corporation and the remaining amount in
the 2nd to 5th Years. It is, therefore, submitted that the project
should start as early as possible and any further litigation will only
result into uncertainty and unbearable financial burden on the
Respondent-Corporation;
-(viii) Without prejudice to the rights and contentions in this
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petition, Mr.Nariman, the learned senior counsel appearing for
Respondent No.3 has stated that Respondent No.3 is ready to pay
the entire contract amount of Rs.2,100 crores up-front within 90
days from the date of the letter of acceptance by the Respondent-
Corporation and Respondent No.3 is also agreeable to have the
concession period reduced from 16 years 22 months and 27 days to
16 years.
10. The submissions can now be considered.
11. The eligibility criteria specified in clause 5.5.2.1 of the
bid document stipulated a requirement of a minimum annual
turnover in any one of the last three years as per the audited
balance sheet/profit and loss account for a period starting not
earlier than 31 March 2008. In the case of a consortium, the
turnover had to be at least Rs.1250 million (Rs.125 crores) for all
members taken together out of which, the lead member of the
consortium was required to have an average annual turnover
towards toll collection of at least Rs.750 million (Rs.75 crores).
On 13 August 2009, the Petitioners submitted a break up,
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projectwise of the receipt of toll collection of the lead member,
SMS Infrastructure Ltd. For financial year 2007-08 the lead
member of the consortium claimed a turnover of Rs.97.53 crores
in order to meet the requirement of a turnover of at least Rs.75
crores in one financial year. Of this, the lead member claimed a
turnover of Rs.34.45 crores against a toll collection contract at New
Delhi. However, it was found that for 2007-08, the work was
executed by the lead member of the consortium on behalf of
Banas Sands JV. This was clarified by the Petitioners in a letter
dated 17 August 2009. In holding that the bid of the Petitioner
was not responsive, MSRDC has found that the lead member of the
consortium did not satisfy the eligibility criteria of a minimum toll
turnover of Rs.75 crores in one financial year, upon the exclusion
of an amount of Rs.34.45 crores for the Delhi toll contract where
the project was executed on behalf of Banas Sands JV. Banas
Sands JV is independently a consortium member of the Sadhav
Prakash Consortium, which was one of the bidders for the contract
in this case. This conclusion which has been arrived at by MSRDC
cannot be regarded as perverse. The determination is consistent
with the eligibility criteria. The rejection of the bid as non
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responsive on this ground does not suffer from any illegality.
12. Clause 5.5.2.2 of the bid document stipulated as a
condition of eligibility that at least one member of the consortium
shall have experience of operating a minimum of twenty
automated computerized toll lanes under one contract for at least
one year. SMS Infrastructure Ltd., the lead member of the
Petitioners’ consortium, had participated earlier in what is
described as a ‘short tender’ of twenty six weeks in 2008 floated by
MSRDC. In connection with that tender, the lead member had
produced a certificate from the Hooghly River Bridge
Commissioner in respect of Vidyasagar Setu Toll Plaza which
showed that there were eighteen lanes involved in the work under
the contract. The Learned Counsel appearing on behalf of MSRDC
has drawn the attention of the Court to the pre-qualification notice
issued by the Hoogly River Bridge Commissioner which was to the
effect that toll bars will have to be installed at eighteen toll gates of
the toll plaza. Out of the eighteen lanes, one ‘up’ and one ‘down’
lane had been converted into four lanes dedicated for two wheeler
traffic for safety and smooth movement. The position was verified
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by the consultants appointed by MSRDC in a second Report dated
18 August 2009, as stated in the affidavit in reply. A site visit was
jointly conducted together with the representative of the
Petitioners on 13 August 2009. MSRDC has stated in its affidavit in
reply that in a certificate of October 2008 submitted by the lead
member of the consortium for the earlier tender of twenty six
weeks, it had claimed an experience of operating an eighteen lane
facility for the Vidyasagar Setu. Later, in a subsequent certificate
dated 11 August 2009, the experience claimed was of twenty lanes.
In any event, from October 2008 until August 2009 when the fresh
certificate of experience was produced, the experience of twenty
lanes was for the period of less than one year. The material upon
which reliance has been placed by MSRDC before the Court
supports the finding of ineligibility of the Petitioners’ consortium.
This finding essentially turns upon an evaluation of facts by
MSRDC. The conclusion which was drawn by MSRDC cannot be
regarded as perverse or contrary to the weight of the evidence on
record. In the exercise of the jurisdiction under Article 226 of the
Constitution, this Court would not be justified in reappreciating a
determination of fact based upon which an inference of ineligibility
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has been drawn.
13. Finally, the attention of the Court has been drawn to the
fact that on 18 August 2009, the consortium of the Petitioners was
intimated of its tender being held to be non-responsive.
Thereupon, Mr.D.V. Deshkar, who was the authorized
representative of the consortium applied by his letter dated 18
August 2009 for refund of the earnest money deposit of Rs.105
crores and Envelope 2 containing a financial bid. By the letter,
MSRDC was requested to issue a demand draft or cheque towards
refund of the EMD, in favour of the First Petitioner. Accordingly
EMD of Rs.105 crores was returned to an authorized representative
on 18 August 2009 together with the financial bid. Once the
financial bid was returned on the request of the authorized
representative together with the earnest money deposit, no valid
bid remained in the field. This petition has been instituted by
two members of the consortium. SMS Infrastructure Ltd., the lead
member has not joined in the Petition.
14. It was urged on behalf of the Petitioners that the
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Consultants had underestimated the revenue realization. The
Consultants, while computing the estimated concession period
adopted an IRR of 11.50% and a 5% traffic growth rate. On this
basis, the concession period was worked out as fifteen years. We
do not propose to examine the contentions assailing the working
out of the period by the Consultants, which was done on the basis
of upfront payment of only Rs.1350 crores to be made within
ninety days of acceptance and the rest to be paid over a period of
2-3 years. Now that Respondent No.3 has agreed to pay the entire
amount of Rs.2100 crores within ninety days, the contention pales
into insignificance. In any event due consideration would now be
given to the circumstance that the Third Respondent has agreed to
make a payment of the entire amount of Rs.2100 crores upfront,
while reducing the concession period to sixteen years.
15. For these reasons, we are of the view that MSRDC was
justified in coming to the conclusion that the bid submitted by the
Petitioners was not responsive on the ground that it did not meet
the eligibility criteria. That apart, upon the communication of
ineligibility by MSRDC, the earnest money deposit was withdrawn
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and the financial bid was returned. The plea which was urged
before the Court at the hearing was that if the financial bid of the
Petitioners were to be opened, it would be found to be more
favourable, in terms of the period of concession, than the bid
which has been accepted. The submission is lacking in substance.
Such an argument would have been open to a bidder who is found
to be eligible and who had a grievance about the award of the
contract. A bidder who does not meet the eligibility criteria,
cannot complain of the award of the contract on the ground that its
financial bid offers better terms. The question of comparing
financial bids arises as between bidders who are eligible. The bid
submitted by the Petitioners was non-responsive since the
Petitioners did not fulfill the conditions of eligibility. There is
hence no merit in the submission.
16. While we find that there is no substance in the petition,
for the reasons noted earlier, Learned Senior Counsel appearing on
behalf of the Third Respondent stated that the Third Respondent is
ready and willing to pay the entire contract amount of Rs.2100
crores upfront within ninety days from the date of the letter of
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acceptance of MSRDC and the Third Respondent has reduced the
concession period from 16 years 11 months 27 days to 16 years.
We record that statement.
17. For the reasons aforesaid, we do not find any merit in
the Petition. The Petition is accordingly dismissed.
CHIEF JUSTICE
(DR.D.Y.CHANDRACHUD, J.)
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