{"id":237991,"date":"2009-02-10T00:00:00","date_gmt":"2009-02-09T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-kerala-vs-ms-zoom-developers-p-ltd-ors-on-10-february-2009"},"modified":"2016-06-09T17:13:18","modified_gmt":"2016-06-09T11:43:18","slug":"state-of-kerala-vs-ms-zoom-developers-p-ltd-ors-on-10-february-2009","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-kerala-vs-ms-zoom-developers-p-ltd-ors-on-10-february-2009","title":{"rendered":"State Of Kerala vs M\/S Zoom Developers P.Ltd.&amp; Ors on 10 February, 2009"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">State Of Kerala vs M\/S Zoom Developers P.Ltd.&amp; Ors on 10 February, 2009<\/div>\n<div class=\"doc_author\">Author: S Kapadia<\/div>\n<div class=\"doc_bench\">Bench: Arijit Pasayat, S.H. Kapadia<\/div>\n<pre>                             IN THE SUPREME COURT OF INDIA\n                   CIVIL APPELLATE JURISDICTION\n                    CIVIL APPEAL NOS. 841-842 \/2009\n               (arising out of SLP(C) Nos. 30204-30205\/2008)\n\n State of Kerala                                    ... Appellant(s)\n\n      versus\n\n M\/s Zoom Developers Pvt. Ltd. &amp; Ors.               ... Respondent(s)\n\n                                 with\nCivil Appeal No.843 \/2009 (arising out of S.L.P.(C) No. 30305\/2008) and\n   Civil Appeal No.844\/2009 (arising out of S.L.P.(C) No. 30355\/2008)\n\n\n                            JUDGMENT\n<\/pre>\n<p> S.H. KAPADIA, J.\n<\/p>\n<\/p>\n<p>         Leave granted.\n<\/p>\n<\/p>\n<p> 2.      A short question which arises for determination in these civil<\/p>\n<p> appeals is &#8211; whether the decision of the Bid Evaluation Committee<\/p>\n<p> (&#8220;EC&#8221; for short) dated 6.5.2008 rejecting the Bid Proposal made by<\/p>\n<p> the Consortium led by M\/s Zoom Developers           Pvt. Ltd. as non-<\/p>\n<p> admissible in terms of RFP and thus excluding the said Consortium<\/p>\n<p> from the zone of consideration was unjustified, arbitrary and bad in<\/p>\n<p> law, as held by the impugned judgment of the Kerala High Court<\/p>\n<p> dated 4.12.2008 in Writ Appeal No. 1460\/2008.\n<\/p>\n<p>Facts:\n<\/p>\n<\/p>\n<p>3.    Government of Kerala (GoK) vide G.O. No. 9\/07\/F&amp;PD dated<\/p>\n<p>9.3.2007 decided to invite bids for the Development of International<\/p>\n<p>Deepwater Seaport and Container Transshipment Terminal at<\/p>\n<p>Vizhinjam under Public-Private Partnership. Vide G.O. dated<\/p>\n<p>15.6.2007 GoK decided on the key provisions in the Request For<\/p>\n<p>Proposal (&#8220;RFP&#8221; for short) documents for the bidding of the above<\/p>\n<p>Project. A competitive bid process was thus initiated by M\/s<\/p>\n<p>Vizhinjam International Seaport Ltd. (&#8220;VSL&#8221; for short). VSL was the<\/p>\n<p>Sponsor. IL &amp; FS Infrastructure Development Corporation (&#8220;IDC&#8221; for<\/p>\n<p>short) was the Project Advisor. Accordingly, on 8.8.2007, Press<\/p>\n<p>Notification was issued by M\/s VSL inviting RFP for the<\/p>\n<p>development of the Project. On 23.1.2008 a Bid Opening Committee<\/p>\n<p>was constituted vide G.O. of the same date. Thirty-three firms<\/p>\n<p>obtained the RFP documents. Vide G.O. dated 19.2.2008, Bid<\/p>\n<p>Evaluation Committee headed by the Chief Secretary was also<\/p>\n<p>constituted to Evaluate the Bid Proposals. Ultimately, bids were<\/p>\n<p>received from the following five Consortia by 31.1.2008 (which was<\/p>\n<p>the last date stipulated for receiving the Bids), they were:\n<\/p>\n<pre>(i)     Apollo Enterprises led consortium\n(ii)    Nagarjuna Construction Co. led consortium\n(iii)   Videocon Industries Ltd. led consortium\n(iv)    Lanco Kondapalli Power Pvt. Ltd., Hyderabad, led consortium\n(v)     Zoom Developers Pvt. Ltd., Mumbai led consortium.\n\n\n\n<\/pre>\n<p>4.      The bidders were required to submit their proposals in four<\/p>\n<p>covers, namely, the Outer Cover (containing details of the bidder,<\/p>\n<p>power of attorney in favour of the lead member, consortium<\/p>\n<p>agreement entered amongst the members of the consortium, legal<\/p>\n<p>opinion, security of Rs. 50 million in the form of bank guarantee etc.),<\/p>\n<p>Cover-1 (Statement of Qualification), Cover-2 (Technical Proposal)<\/p>\n<p>and Cover-3 (Financial Proposal). In this case, evaluation was done in<\/p>\n<p>three stages. In the first stage, there was evaluation of Outer Cover<\/p>\n<p>and Cover-1 to check the admissibility of bids and evaluation of<\/p>\n<p>qualifications as stipulated in the RFP. It may be noted that<\/p>\n<p>evaluation of the Technical Proposal had to be done only of those<\/p>\n<p>bidders who met the &#8220;Qualification Criteria&#8221; (vide second stage). The<\/p>\n<p>third stage contemplated evaluation of the Technical Proposal. As<\/p>\n<p>stated above, only five bids were received. These bids (Outer Cover<\/p>\n<p>and Cover-1) were opened on 31.1.2008 by the Bid Opening<\/p>\n<p>Committee. The said firms were found to have satisfied prima facie<\/p>\n<p>the requisite requirements. The bids were accepted by the Bid<br \/>\nOpening Committee for further scrutiny. The bids submitted were<\/p>\n<p>considered at the meeting of the EC on 25.2.2008. In the said meeting<\/p>\n<p>it was observed that, with regard to the bid submitted by the<\/p>\n<p>consortium led by M\/s Zoom Developers Pvt. Ltd. (&#8220;ZDL&#8221; for short),<\/p>\n<p>the Power of Attorney and the Consortium Agreement were<\/p>\n<p>unstamped and they needed to be stamped. It was further pointed out<\/p>\n<p>by the EC that the lead member in terms of the RFP, namely, M\/s<\/p>\n<p>ZDL was required to hold a minimum equity of 26% in the Special<\/p>\n<p>Purpose Company (&#8220;SPC&#8221; for short), which has not been expressly<\/p>\n<p>mentioned in the Consortium Agreement. The EC further pointed out<\/p>\n<p>to M\/s ZDL that one of the consortium member, namely, M\/s Portia<\/p>\n<p>Management Services Ltd. (&#8220;PMS&#8221; for short) had signed the<\/p>\n<p>consortium agreement on behalf of Peel Ports Ltd. (&#8220;PPL&#8221; for short)<\/p>\n<p>but M\/s PPL is not a member of the consortium. Additional<\/p>\n<p>information regarding the financials of M\/s PMS (on its own) and of<\/p>\n<p>M\/s ZDL were also called for. On 25.2.2008, accordingly the EC<\/p>\n<p>granted ten days time to remove the above defects. M\/s ZDL sought<\/p>\n<p>extension of time. Ultimately, time was extended up to 4.4.2008. In<\/p>\n<p>short, meetings of the EC took place on 25.2.2008, 13.3.2008,<\/p>\n<p>8.4.2008 and 6.5.2008. By 2.4.2008, M\/s ZDL submitted all the<br \/>\nrelevant documents duly updated. It may be noted that M\/s Universal<\/p>\n<p>Legal, Bangalore, were appointed as Legal Advisor of the Project by<\/p>\n<p>the EC.\n<\/p>\n<p>5.    As stated above, on 2.4.2008 M\/s ZDL submitted their<\/p>\n<p>modified documents. On 4.4.2008 the said M\/s Universal Legal<\/p>\n<p>furnished their opinion that the Consortium Agreement submitted by<\/p>\n<p>the Consortium led by M\/s ZDL had complied with the requirements<\/p>\n<p>of the RFP and that they had removed all defects pointed out to them<\/p>\n<p>by the EC and accordingly the EC may consider their Bid Proposals.<\/p>\n<p>However, in the third meeting held on 8.4.2008, the EC after having<\/p>\n<p>considered the documents submitted by the Consortium led by M\/s<\/p>\n<p>ZDL came to the conclusion that in the modified consortium<\/p>\n<p>agreement dated 11.3.2008, M\/s PMS has signed the consortium<\/p>\n<p>agreement on its own whereas in its original consortium agreement<\/p>\n<p>dated 4.10.2007, M\/s PMS has signed the consortium agreement on<\/p>\n<p>behalf of M\/s PPL. Accordingly, the opinion of the Law Secretary<\/p>\n<p>(Invitee to the Meeting) was sought. The Law Secretary opined that<\/p>\n<p>the modified consortium agreement dated 11.3.2008 cannot be treated<\/p>\n<p>as a part of the Original Proposal as the modified consortium<\/p>\n<p>agreement stood entered into by a new member, namely, M\/s PMS,<\/p>\n<p>without the authorization of M\/s PPL. According to the Law<br \/>\nSecretary, there was one more defect. There was no provision in the<\/p>\n<p>modified consortium agreement to the effect that the consortium<\/p>\n<p>members shall be jointly and severally liable for the execution of the<\/p>\n<p>Project and that the only expression used was joint and several<\/p>\n<p>&#8220;responsibility&#8221;, which, according to the Law Secretary, was a<\/p>\n<p>concept different from joint and several &#8220;liability&#8221;. This opinion of<\/p>\n<p>the Law Secretary was placed before the EC in its meeting held on<\/p>\n<p>6.5.2008 in which meeting the EC concluded that the Bid submitted<\/p>\n<p>by the consortium led by M\/s ZDL was &#8220;non-responsive&#8221;\/&#8221;non-<\/p>\n<p>admissible&#8221; in terms of the RFP. Accordingly on 24.5.2008, GoK<\/p>\n<p>issued Government Order approving the proposal given by Lanco<\/p>\n<p>Kondapalli Power Pvt. Ltd., Hyderabad (hereinafter referred to as<\/p>\n<p>&#8220;Lanco led Consortium&#8221;). Thus, the Bid Proposal of the consortium<\/p>\n<p>led by M\/s ZDL came to be rejected.\n<\/p>\n<p>6.    Aggrieved by the said decision, M\/s ZDL preferred Writ<\/p>\n<p>Petition (C) No. 15570\/2008 in the Kerala High Court which came to<\/p>\n<p>be dismissed by the learned single Judge on 3.7.2008. It was held by<\/p>\n<p>the learned Single Judge that the concept of &#8220;liability&#8221; was different<\/p>\n<p>from &#8220;responsibility&#8221;. It was further held that since the consortium<\/p>\n<p>members led by M\/s ZDL had not undertaken &#8220;joint and several<br \/>\nliability&#8221;, the EC was right in treating the bid proposal as non-<\/p>\n<p>responsive. It was further held by the learned single Judge that the<\/p>\n<p>original consortium agreement dated 4.10.2007 was signed by M\/s<\/p>\n<p>PMS on behalf of M\/s PPL though no such authorization was found<\/p>\n<p>in that regard. According to the learned single Judge, in the modified<\/p>\n<p>consortium agreement dated 11.3.2008, M\/s PPL, which was the party<\/p>\n<p>to the original consortium agreement, stood deleted and M\/s PMS had<\/p>\n<p>emerged as a member of consortium for the first time only under the<\/p>\n<p>modified consortium agreement dated 11.3.2008 without explaining<\/p>\n<p>under whose authority such change was made and consequently, the<\/p>\n<p>EC was right in treating the Bid Proposal made by M\/s ZDL as non-<\/p>\n<p>responsive. Accordingly, the writ petition stood dismissed. Aggrieved<\/p>\n<p>by the said decision, M\/s ZDL preferred Writ Appeal No. 1460\/2008,<\/p>\n<p>which stood allowed by the Division Bench of the Kerala High Court,<\/p>\n<p>hence, these civil appeals are filed by the State of Kerala (licensor),<\/p>\n<p>M\/s Lanco Kondapalli Power Pvt. Ltd. and M\/s Vizhinjam<\/p>\n<p>International Sea Port Ltd. (Sponsors).\n<\/p>\n<p>Contention:\n<\/p>\n<p>7.    On behalf of State of Kerala, Shri K. Parasaran, learned senior<\/p>\n<p>counsel submitted that after 31.1.2008 (the cut-off date) there was a<\/p>\n<p>change in M\/s ZDL led Consortium which was impermissible in<\/p>\n<p>terms of the RFP and, therefore, the Bid Evaluation Committee was<\/p>\n<p>right in treating the Bid submitted by M\/s ZDL led Consortium as<\/p>\n<p>non-responsive\/non-admissible in terms of the RFP. In support of his<\/p>\n<p>contention, learned senior counsel submitted that as per clause 3.4 of<\/p>\n<p>RFP, only the Lead Member could be changed and that too with the<\/p>\n<p>written consent of M\/s VSL (Sponsor). According to the learned<\/p>\n<p>counsel, RFP did not permit change of consortium member after the<\/p>\n<p>cut-off date. It may be noted that the Proposals of the Bidders were to<\/p>\n<p>be submitted on or before 31.1.2008. Learned counsel pointed out<\/p>\n<p>that along with the Proposal, M\/s ZDL submitted the Consortium<\/p>\n<p>Agreement dated 4.10.2007 in which M\/s PMS signed the consortium<\/p>\n<p>agreement on behalf of M\/s PPL, UK. Therefore, according to the<\/p>\n<p>learned counsel, M\/s PMS singed the Consortium Agreement dated<\/p>\n<p>4.10.2007 as an agent of M\/s PPL, UK. According to the learned<\/p>\n<p>counsel, in the Consortium Agreement dated 4.10.2007, M\/s ZDL did<\/p>\n<p>not stipulate that as a Lead Member it would hold a minimum equity<\/p>\n<p>of 26% in the SPC. The Consortium Agreement dated 4.10.2007 was<br \/>\nnot notarized and stamped. That apart, the said consortium did not<\/p>\n<p>submit documents from M\/s PPL, UK authorizing M\/s PMS to sign<\/p>\n<p>the Consortium Agreement on behalf of M\/s PPL, UK. According to<\/p>\n<p>the learned counsel, all the above circumstances came to be<\/p>\n<p>considered by the EC in its meeting held on 25.2.2008. The EC,<\/p>\n<p>according to the learned counsel, recorded in its Minutes that since<\/p>\n<p>M\/s PPL was the member of the Consortium in terms of Consortium<\/p>\n<p>Agreement dated 4.10.2007, but, since M\/s PPL was not shown in the<\/p>\n<p>Outer Cover, therefore, a query was raised by the EC in its letter<\/p>\n<p>dated 3.3.2008 to the effect that although M\/s PMS has signed the<\/p>\n<p>Consortium Agreement on behalf of M\/s PPL, the latter was not a<\/p>\n<p>member of the Consortium. According to the learned counsel, in the<\/p>\n<p>said letter dated 3.3.2008, there was no direction from the EC to M\/s<\/p>\n<p>ZDL to delete the words &#8220;on behalf of M\/s PPL&#8221; and consequently,<\/p>\n<p>after the cut-off date, it was not open to M\/s ZDL led Consortium to<\/p>\n<p>submit a fresh Consortium Agreement dated 11.3.2008 deleting the<\/p>\n<p>words &#8220;on behalf of M\/s PPL&#8221;. According to the learned counsel,<\/p>\n<p>therefore, there was a change in the membership of the Consortium<\/p>\n<p>led by M\/s ZDL and that too after 31.1.2008. Therefore, according to<\/p>\n<p>the learned counsel, it was not a case of curing of defect. According<br \/>\nto the learned counsel, change of consortium membership after the<\/p>\n<p>cut-off date made the Proposal of M\/s ZDL led Consortium non-<\/p>\n<p>admissible in terms of the RFP.\n<\/p>\n<\/p>\n<p>8.       Shri K. Parasaran, learned senior counsel, next contended that<\/p>\n<p>vide clause 3.5 of the RFP, all members of the Consortium were<\/p>\n<p>&#8220;jointly and severally liable&#8221; for execution of the Project in terms of<\/p>\n<p>the Licence Agreement and a statement to that effect was required to<\/p>\n<p>be stated in the consortium agreement, which statement was not<\/p>\n<p>incorporated in consortium agreement dated 4.10.2007 nor in the<\/p>\n<p>consortium agreement dated 11.3.2008. According to the learned<\/p>\n<p>senior     counsel,   the   two   words,   namely,   &#8220;liabilities&#8221;   and<\/p>\n<p>&#8220;responsibilities&#8221; are not interchangeable. They are distinct and<\/p>\n<p>different concepts. According to the learned counsel, RFP required a<\/p>\n<p>statement regarding &#8220;joint and several liability&#8221; to be incorporated in<\/p>\n<p>the consortium agreement because the word &#8220;liability&#8221; represented an<\/p>\n<p>objective criteria, which criteria has not been satisfied despite<\/p>\n<p>opportunity being given to M\/s ZDL led Consortium to incorporate<\/p>\n<p>such a statement in the consortium agreement. Learned counsel<\/p>\n<p>submitted that despite opportunity being given to M\/s ZDL led<\/p>\n<p>Consortium, even in the fresh Agreement dated 11.3.2008, M\/s ZDL<br \/>\nled Consortium had insisted on using the words &#8220;joint and several<\/p>\n<p>liabilities&#8221; in support of the words &#8220;joint and several responsibilities&#8221;.<\/p>\n<p>Therefore, for non-compliance of the said criteria, the EC was right in<\/p>\n<p>treating the Bid Proposal of M\/s ZDL led Consortium as non-<\/p>\n<p>admissible\/non-responsive in terms of RFP.\n<\/p>\n<p>9.    In short, on two of the aforestated grounds, namely, change of<\/p>\n<p>consortium membership and non incorporation of joint and several<\/p>\n<p>liability Clause in the consortium agreement, learned counsel for the<\/p>\n<p>State of Kerala submitted that the EC was right in treating the Bid<\/p>\n<p>Proposal of M\/s ZDL as non-responsive.\n<\/p>\n<p>9A.   Shri A. Sharan, learned Additional Solicitor General appearing<\/p>\n<p>on behalf of M\/s VSL substantially adopts the contentions advanced<\/p>\n<p>by Shri K. Parasaran, learned senior counsel for the State of Kerala.<\/p>\n<p>10.   Shri K.K. Venugopal, learned senior counsel appearing on<\/p>\n<p>behalf of M\/s Lanco led Consortium submitted in addition to the<\/p>\n<p>above contentions that, in any event, the figures submitted by M\/s<\/p>\n<p>ZDL led Consortium indicated that, on its own M\/s PMS did not<\/p>\n<p>fulfill the financial parameters of net worth, total turnover and cash<\/p>\n<p>accruals and that M\/s PMS was solely dependent upon the financials<br \/>\nof M\/s PPL, UK, consequently, the Bid Proposal of M\/s ZDL led<\/p>\n<p>Consortium was not admissible in terms of RFP. Learned senior<\/p>\n<p>counsel further submitted that in the Consortium Agreement dated<\/p>\n<p>4.10.2007, there was a clause under the caption &#8220;Relationship of<\/p>\n<p>Parties&#8221;. Reading of that clause, according to the learned counsel,<\/p>\n<p>indicated that the consortium members were to act on principal-to-<\/p>\n<p>principal basis and despite opportunity, even in the fresh Consortium<\/p>\n<p>Agreement dated 11.3.2008, the said clause stood retained. Therefore,<\/p>\n<p>according to the learned counsel, the criteria of joint and several<\/p>\n<p>liability was not satisfied by M\/s ZDL led Consortium.<\/p>\n<p>11.   On the other hand, it was submitted on behalf of M\/s ZDL led<\/p>\n<p>Consortium that the interpretation given by the Sponsor\/Advisor on<\/p>\n<p>various terms and conditions of the RFP should be read as a standard<\/p>\n<p>to evaluate the admissibility of the bids. According to Shri Harish N.<\/p>\n<p>Salve, learned senior counsel appearing on behalf of M\/s ZDL, the<\/p>\n<p>Minutes of the EC held on 25.2.2008 indicated that the words<\/p>\n<p>&#8220;responsibility&#8221; and &#8220;liability&#8221; were used interchangeably. That, it is<\/p>\n<p>only after the Law Secretary gave his opinion that the question of the<\/p>\n<p>connotation of the two words &#8220;liability&#8221; and &#8220;responsibility&#8221; were<\/p>\n<p>made an issue, which was clearly an afterthought. According to the<br \/>\nlearned counsel, the said hair-splitting exercise was undertaken as an<\/p>\n<p>afterthought only after the Law Secretary gave his opinion, which<\/p>\n<p>opinion was &#8220;off the record&#8221; advice (which expression is used by the<\/p>\n<p>Law Secretary in his affidavit). According to the learned counsel,<\/p>\n<p>there was no change in the membership of the Consortium led by M\/s<\/p>\n<p>ZDL because right from the inception, at the time of submitting the<\/p>\n<p>Proposals, it was made clear that M\/s PMS would be the member of<\/p>\n<p>M\/s ZDL led Consortium. It was submitted that M\/s PMS was the<\/p>\n<p>subsidiary of M\/s PPL, UK, and the words &#8220;on behalf of&#8221; were used<\/p>\n<p>in the Consortium Agreement dated 4.10.2007 only to indicate the<\/p>\n<p>relationship between M\/s PMS and M\/s PPL, UK. This position,<\/p>\n<p>according to the learned counsel, is indicated by the Bid documents<\/p>\n<p>submitted on 31.1.2008, Power of Attorney dated 18.10.2007, Notary<\/p>\n<p>Certificate, Covering letter dated 31.1.2008 and annexures to the Bid<\/p>\n<p>documents submitted by M\/s ZDL.\n<\/p>\n<p>12.   On the question of financials, Shri Arun Jaitley, learned senior<\/p>\n<p>counsel for M\/s ZDL, submitted that the Chart submitted before this<\/p>\n<p>Court by the learned counsel for M\/s Lanco led Consortium was<\/p>\n<p>defective because the Financials for FY 2006-2007 has not been<\/p>\n<p>projected. In this connection, it was pointed out that M\/s ZDL had<br \/>\nsubmitted the details for FY October, 2003 to September, 2004,<\/p>\n<p>October, 2004 to September, 2005 and October, 2005 to September,<\/p>\n<p>2006 as on 31.1.2008. It was pointed out that, M\/s ZDL was<\/p>\n<p>following the Accounting Year from October to September. It was<\/p>\n<p>submitted that the last date for submission of Bids was 31.10.2007<\/p>\n<p>initially, which stood extended later on till 31.1.2008. According to<\/p>\n<p>the learned counsel, the Balance Sheet for FY 2006-2007 was in the<\/p>\n<p>process of being prepared when the Bid documents were submitted on<\/p>\n<p>31.1.2008 and consequently, the Balance Sheet for FY 2006-2007<\/p>\n<p>could not be submitted. According to the learned counsel, if the<\/p>\n<p>Financials for the year including FY 2006-2007 are taken into<\/p>\n<p>account, then M\/s ZDL lead Consortium satisfies all the financial<\/p>\n<p>parameters of net worth, turnover and cash accruals.<\/p>\n<p>13.   Points for Consideration:\n<\/p>\n<\/p>\n<blockquote><p>      (A)   Whether the modified Consortium Agreement<\/p>\n<p>            dated 11.3.2008 resulted in a change in the<\/p>\n<p>            constituents membership of the Consortium led by<\/p>\n<p>            M\/s ZDL.\n<\/p><\/blockquote>\n<p>      (B)   Whether use of the expression &#8220;joint and several<\/p>\n<p>            responsibility&#8221; in place of &#8220;joint and several<\/p>\n<p>            liability&#8221; would justify rejection of the Bid<\/p>\n<p>            Proposal made by the Consortium led by M\/s ZDL<\/p>\n<p>            as non-responsive\/non-admissible in terms of the<\/p>\n<p>            RFP.\n<\/p>\n<p>\nFindings on Point No. (A):\n<\/p>\n<\/p>\n<p>14.   As per the scheme of RFP, at the stage of Submission of<\/p>\n<p>Proposals, the bidders were required to furnish the names of the Lead<\/p>\n<p>Member and other members of the consortium. In this case, one of the<\/p>\n<p>members of the consortium was M\/s PMS. While furnishing &#8220;Details<\/p>\n<p>of Bidders&#8221;, the name of the consortium member was shown as PMS.<\/p>\n<p>Similarly, against the column &#8220;Brief Description of the Company&#8221;,<\/p>\n<p>the name of M\/s PMS was mentioned as the international arm of M\/s<\/p>\n<p>PPL. Therefore, at the stage of Submission of Proposals, M\/s ZDL<\/p>\n<p>had stated that M\/s PMS was the member of its Consortium. There<\/p>\n<p>was one more column which was required to be filled-in by the<\/p>\n<p>bidders, namely, &#8220;Ownership of the Organisation&#8221;. In this column,<\/p>\n<p>M\/s ZDL indicated that M\/s PMS was a consortium member which<br \/>\nwas the wholly subsidiary company of M\/s PPL, UK. It may be noted<\/p>\n<p>that, under the Scheme of RFP, the bidders had to offer a firm<\/p>\n<p>commitment to form SPC to implement and operate the above Project<\/p>\n<p>in Kerala, should the Sponsor (M\/s VSL) select one of the five<\/p>\n<p>bidders as Licensee. Therefore, the Proposal had to be made in a<\/p>\n<p>prescribed format. On reading the said Proposal, therefore, it becomes<\/p>\n<p>clear that on the date, namely, 31.1.2008, being the cut-off date (when<\/p>\n<p>the bids were opened), M\/s PMS was the member-constituent of the<\/p>\n<p>consortium led by M\/s ZDL. At this stage, one must keep in mind that<\/p>\n<p>Section 212 of the Companies Act, 1956 which makes it obligatory<\/p>\n<p>on behalf of the holding company to annex to its Balance Sheet the<\/p>\n<p>Balance Sheet and P&amp;L account and other financial particulars of its<\/p>\n<p>subsidiary. Section 212 requires the legal relationship of holding<\/p>\n<p>company and subsidiary company to be disclosed to all its members.<\/p>\n<p>In the world of globalization, we have consortium agreements\/ joint<\/p>\n<p>venture agreements. It appears from the particulars given by the<\/p>\n<p>consortium led by M\/s ZDL that M\/s PMS is a part of an international<\/p>\n<p>group of companies headed by M\/s PPL, UK. The prescribed Form<\/p>\n<p>warranted Disclosure giving particulars of the consortium members.<\/p>\n<p>The particulars furnished indicate that the Lead Member was M\/s<br \/>\nZDL. It is an Indian company. One of the consortium member was<\/p>\n<p>M\/s PMS, which is incorporated in UK. It is the 100% subsidiary of<\/p>\n<p>M\/s PPL, UK. This information also became necessary because the<\/p>\n<p>format required the Bidder to disclose &#8220;Ownership&#8221; of the member-<\/p>\n<p>company. Therefore, if one reads the Proposal of the Lead Member,<\/p>\n<p>M\/s ZDL, in the form prescribed, which Proposal was of 31.1.2008,<\/p>\n<p>one finds that M\/s PMS alone on its own was indicated as a member<\/p>\n<p>of the consortium and M\/s PPL was not shown as the member of the<\/p>\n<p>consortium.    However,   the   original   consortium\/joint   venture<\/p>\n<p>agreement dated 4.10.2007 signed by the member-constituent of the<\/p>\n<p>consortium led by M\/s ZDL stood signed by M\/s PMS on behalf of<\/p>\n<p>M\/s PPL, UK. Therefore, on 3.3.2008, IDC (Project Advisor) wrote to<\/p>\n<p>M\/s ZDL inter alia pointing out the defect in the consortium<\/p>\n<p>agreement dated 4.10.2007 in the following words:<\/p>\n<blockquote><p>              &#8220;M\/s PMS has signed consortium agreement<br \/>\n              dated 4.10.2007 on behalf of M\/s PPL but<br \/>\n              M\/s PPL is not a member of the<br \/>\n              consortium.&#8221;\n<\/p><\/blockquote>\n<p>Thus, the Project Advisor treated the above irregularity in the<\/p>\n<p>execution of the consortium agreement dated 4.10.2007 as a curable<\/p>\n<p>defect for which time was given to M\/s ZDL up to 4.4.2008. Further,<br \/>\nthe Project Advisor clearly understood the Proposal to have had been<\/p>\n<p>given by M\/s ZDL as the Lead Member of the Consortium, whose<\/p>\n<p>constituent inter alia included M\/s PMS and not M\/s PPL. By the<\/p>\n<p>said letter, the Project Advisor also called for Annual Reports of three<\/p>\n<p>financial year of M\/s ZDL and Annual Reports of last 3 years of M\/s<\/p>\n<p>PMS (its own). This query indicates that the Project Advisor not only<\/p>\n<p>treated the above irregularity in the execution of the consortium<\/p>\n<p>agreement dated 4.10.2007 as the curable defect but it further shows<\/p>\n<p>that even, according to the Project Advisor, M\/s PMS alone was the<\/p>\n<p>constituent member of the consortium led by M\/s ZDL and it is for<\/p>\n<p>this reason that the Project Advisor called for the annual reports of<\/p>\n<p>M\/s PMS (its own). This defect was cured by M\/s PMS within the<\/p>\n<p>extended period. It is interesting to note that the question of<\/p>\n<p>&#8220;authorization&#8221; by M\/s PPL,UK, was not raised by the Project<\/p>\n<p>Advisor in its letter dated 3.3.2008. That aspect was raised only by<\/p>\n<p>the Law Secretary who came to be Invited as a special invitee by the<\/p>\n<p>Chief Secretary in the meetings of the EC held on 8.4.2008 and<\/p>\n<p>6.5.2008 (which is after the extended date 4.4.2008). It is not in<\/p>\n<p>dispute that M\/s PPL, UK is the holding company of M\/s PMS. M\/s<\/p>\n<p>PMS is a subsidiary company. It is the separate legal entity. We are<br \/>\nsatisfied that at the stage of Submission of Proposal itself and right<\/p>\n<p>from the inception, it was M\/s PMS, who alone was the constituent<\/p>\n<p>member of the consortium. The question of authorization raised by<\/p>\n<p>the Law Secretary, in his opinion, is clearly an afterthought. In fact,<\/p>\n<p>there is a contradiction in his opinion. If M\/s PPL was the member of<\/p>\n<p>the consortium, as construed by the Law Secretary, there was no need<\/p>\n<p>for M\/s PPL to authorize M\/s PMS to execute the consortium<\/p>\n<p>agreement. On the other hand, if M\/s PMS being the separate legal<\/p>\n<p>entity was a member of the consortium it had to sign the consortium<\/p>\n<p>agreement in its own capacity. The modified consortium agreement<\/p>\n<p>dated 11.3.2008 is supported by a Resolution. The said consortium<\/p>\n<p>agreement is in line with the Proposal submitted on 31.1.2008.<\/p>\n<p>15.   One more aspect needs to be pointed out. The RFP prescribes<\/p>\n<p>the form in which a bidder has to make his proposal. However, bidder<\/p>\n<p>was free to submit the consortium agreement in its own format. M\/s<\/p>\n<p>Universal Legal (legal advisor to the Sponsor) cleared the proposal on<\/p>\n<p>4.4.2008 stating that all requisite defects stood cured. It is only after<\/p>\n<p>4.4.2008 that the Law Secretary came into picture and gave an<\/p>\n<p>opinion to the contrary. Moreover, as found by the High Court in the<\/p>\n<p>impugned judgment, when the Law Secretary was asked to file his<br \/>\naffidavit he came out with the statement that his advice was &#8220;off the<\/p>\n<p>record&#8221; advice. It was not given through Official Channel. At this<\/p>\n<p>stage, we may also point out that no material has been placed before<\/p>\n<p>the High Court as to the reference made by the Chief Secretary to the<\/p>\n<p>Law Secretary. Whenever opinion is sought, the persons seeking<\/p>\n<p>opinion has to formulate the query for which opinion is sought. We<\/p>\n<p>do not know the query raised by the Chief Secretary before the Law<\/p>\n<p>Secretary. No material has been placed before us in this regard. In<\/p>\n<p>fact, the very purpose of routing the query through Official Channel<\/p>\n<p>is that the querist formulates the query on which opinion is given. In<\/p>\n<p>this case, there is no formulation of such a query. In the<\/p>\n<p>circumstances, we find that the High Court was right in not giving<\/p>\n<p>weightage to the &#8220;off the record&#8221; advice of the Law Secretary. This is<\/p>\n<p>one of the circumstances which vitiates the process of decision<\/p>\n<p>making by the EC. The bid was declared as non-admissible in the IVth<\/p>\n<p>meeting of the EC held on 6.5.2008. The Minutes indicate that, before<\/p>\n<p>the EC, there were two Opinions. First opinion was that of M\/s<\/p>\n<p>Universal Legal and the second opinion was that of the Law<\/p>\n<p>Secretary. There is nothing to indicate in the Minutes as to why the<\/p>\n<p>opinion of the legal advisor, M\/s Universal Legal, stood rejected.<br \/>\nThere is no reason given as to why the opinion of the Law Secretary<\/p>\n<p>came to be accepted. Be that as it may, we are of the view that the<\/p>\n<p>modified consortium agreement was between members of the<\/p>\n<p>consortium led by M\/s ZDL in which the member was M\/s PMS and<\/p>\n<p>not M\/s PPL, UK, right from the inception. Therefore, the entire<\/p>\n<p>exercise was to cure the defect. Time was given to M\/s ZDL to cure<\/p>\n<p>the defect which in fact was cured before 4.4.2008. For the<\/p>\n<p>aforestated reasons, we hold that there was no change in the<\/p>\n<p>membership of the consortium led by M\/s ZDL after 31.1.2008. In<\/p>\n<p>fact, even prior to the IVth meeting the EC did not call upon M\/s<\/p>\n<p>ZDL\/PMS to obtain Letter of Authority from M\/s PPL, UK.<\/p>\n<p>16.   For the above reasons we hold that there was no change in the<\/p>\n<p>membership of the Consortium led by M\/s ZDL.\n<\/p>\n<p>\nFindings on Point No. (B):\n<\/p>\n<\/p>\n<p>17.   As stated above, the second ground for treating the Bid<\/p>\n<p>Proposal of the consortium led by M\/z ZDL as non-responsive was<\/p>\n<p>that, in the consortium agreement, M\/s ZDL has failed to incorporate<\/p>\n<p>the expression &#8220;joint and several liability&#8221;. That, M\/s ZDL has<br \/>\nincorporated the clause under the expression &#8220;joint and several<\/p>\n<p>responsibility&#8221; in place of &#8220;joint and several liability&#8221; and<\/p>\n<p>consequently,    the   Bid   Proposal       became   non-admissible\/non-<\/p>\n<p>responsive in terms of the RFP. This was the basic argument<\/p>\n<p>advanced on behalf of GoK.\n<\/p>\n<\/p>\n<p>18.   At the outset, it may be stated that in letter dated 3.3.2008 no<\/p>\n<p>such point was ever raised by the Project Advisor. As stated above,<\/p>\n<p>by the said letter dated 3.3.2008 curable defects were pointed out<\/p>\n<p>regarding M\/s PMS having signed the consortium agreement dated<\/p>\n<p>4.10.2007 on behalf of M\/s PPL, UK, but no query was ever raised on<\/p>\n<p>the above point. On the contrary, as can be seen from the Minutes of<\/p>\n<p>the meetings held prior to 8.4.2008, the Project Advisor\/Sponsor has<\/p>\n<p>used the word &#8220;responsibility&#8221; interchangeably with the word<\/p>\n<p>&#8220;liability&#8221;. It is only in the opinion of the Law Secretary that, for the<\/p>\n<p>first time, the above objection is taken.\n<\/p>\n<\/p>\n<p>19.   Be that as it may, the question is whether in the modified<\/p>\n<p>consortium agreement dated 11.3.2008 responsibilities and allocation<\/p>\n<p>of works stood clearly demarcated between the members of the<br \/>\nconsortium? We have examined the consortium agreement dated<\/p>\n<p>11.3.2008. It clearly indicates that M\/s ZDL is an Indian company. It<\/p>\n<p>is a lead member of the consortium. The agreement further indicates<\/p>\n<p>that there were two members in the consortium apart from M\/s ZDL,<\/p>\n<p>namely, M\/s PMS and M\/s Peter Fraenkel &amp; Partners. The agreement<\/p>\n<p>indicates that M\/s ZDL shall be responsible for implementation of the<\/p>\n<p>Project along with M\/s PMS and M\/s Peter Fraenkel &amp; Partners. M\/s<\/p>\n<p>ZDL had to submit technical and financial bids. M\/s ZDL had to act<\/p>\n<p>as project developers and principal coordinators. M\/s ZDL had to<\/p>\n<p>arrange finances. On the other hand, M\/s Peter Fraenkel &amp; Partners<\/p>\n<p>had to do the work of designing and budget preparations whereas M\/s<\/p>\n<p>PMS had to provide operational support during the implementation of<\/p>\n<p>the Project. Therefore, under the said Agreement, duties and<\/p>\n<p>responsibilities of each of the members stood carved out. Vide clause<\/p>\n<p>7, members of the consortium were made &#8220;jointly and severally<\/p>\n<p>responsible&#8221; for every stage of implementation of the Project. The<\/p>\n<p>only objection raised by the GoK is that the word &#8220;liable&#8221; ought to<\/p>\n<p>have been used instead of the word &#8220;responsible&#8221; in clause 7 and<\/p>\n<p>since that word has not been used, the Bid Proposal of M\/s ZDL<\/p>\n<p>needs to be dismissed. As stated above, in the meetings held prior to<br \/>\n8.4.2008, no such objection was ever raised. In fact, no opportunity<\/p>\n<p>was given to M\/s ZDL to cure this defect though it was given to the<\/p>\n<p>consortium led by M\/s Apollo (see page 81 of the SLP paper book in<\/p>\n<p>SLP (C) Nos. 30204-30205\/2008 entitled State of Kerala v. M\/s<\/p>\n<p>Zoom Developers Pvt. Ltd. &amp; Ors.). The important point is that the<\/p>\n<p>EC treated the above objection as a curable defect. It is only after the<\/p>\n<p>Law Secretary came on the scene that the above objection was raised<\/p>\n<p>even after the clearance by M\/s Universal Legal. Therefore, it is<\/p>\n<p>clearly an afterthought. Further under the consortium agreement dated<\/p>\n<p>11.3.2008, it was stated that M\/s ZDL, PMS and Peter Fraenkel &amp;<\/p>\n<p>Partners shall be fully responsible for their individual portions of<\/p>\n<p>work. Under the said Agreement, it was further stated that, in case the<\/p>\n<p>Project stood awarded to the Consortium, the Consortium commits to<\/p>\n<p>hold a minimum stake of 51% in the SPC. This shows that in the<\/p>\n<p>matter of liability, the Consortium Agreement was only a step-in-aide<\/p>\n<p>to the formation of SPC. Further, as rightly held by the High Court in<\/p>\n<p>the impugned judgment, the apprehension of GoK that in the event of<\/p>\n<p>disputes between members of the consortium or in the event of non-<\/p>\n<p>implementation of the Project, GoK would not be in a position to<\/p>\n<p>enforce its claim was ill-founded because the licence agreement<br \/>\nbetween the successful bidder and the licensor (GoK) was yet to be<\/p>\n<p>entered into in which a provision as to &#8220;joint and several liability&#8221;<\/p>\n<p>had to be made, as mentioned in the RFP. The consortium agreement<\/p>\n<p>was only an assurance or a commitment to abide by the licence<\/p>\n<p>agreement. Lastly, it may be stated that the word &#8220;responsibility&#8221; is<\/p>\n<p>no doubt different from the word &#8220;liability&#8221;. What is submitted before<\/p>\n<p>us is that the expression &#8220;joint and several liability&#8221; was required to<\/p>\n<p>be incorporated in the consortium agreement in terms of RFP. What<\/p>\n<p>was submitted before us was that the said expression constituted an<\/p>\n<p>objective criteria. What was submitted before us was that since the<\/p>\n<p>above expression in the RFP was treated as an objective criteria, the<\/p>\n<p>manner in which the said expression stood understood by the EC was<\/p>\n<p>irrelevant. We do not find merit in this argument. As stated above,<\/p>\n<p>though the Form of Proposal was prescribed, the bidder was free to<\/p>\n<p>submit the consortium agreement in its own Form. In our view, in the<\/p>\n<p>absence of a prescribed format and in the absence of the definition of<\/p>\n<p>the word &#8220;responsibility&#8221; vis-`-vis the word &#8220;liability&#8221; in the RFP, it<\/p>\n<p>cannot be said that the said expression &#8220;joint and several liability&#8221;<\/p>\n<p>was an objective criteria. It is true that in terms of RFP, the bidder<\/p>\n<p>was required to stipulate the words &#8220;joint and several liability&#8221; in the<br \/>\nconsortium agreement. But it is equally true that in certain cases<\/p>\n<p>objective words can be interpreted subjectively. For example, the<\/p>\n<p>word &#8220;regulate&#8221;. It has several times been decided that the power to<\/p>\n<p>regulate does not extend to a power to prohibit. But this very word<\/p>\n<p>has been held in some other cases to include the power to prohibit. In<\/p>\n<p>U.K., the Railway Board was entitled to impose a ban on smoking in<\/p>\n<p>trains under this very power to regulate. Therefore, one has to<\/p>\n<p>construe each of these words in that context. (see Administrative Law<\/p>\n<p>by H.W. Wade and Forsyth- 9th ed. at pp. 432-435). In this very case,<\/p>\n<p>various bids were considered by the Project Advisor\/Sponsor. They<\/p>\n<p>have themselves used the words &#8220;liability&#8221; and &#8220;responsibility&#8221;<\/p>\n<p>interchangeably. They have treated this defect as a curable defect.<\/p>\n<p>They have not rejected the Bid Proposal on 25.2.2008 in the first<\/p>\n<p>meeting on the above ground because the EC thought that the said<\/p>\n<p>defect was a curable defect.\n<\/p>\n<\/p>\n<p>20.   It was vehemently urged on behalf of M\/s Lanco led Consortium<\/p>\n<p>that in the consortium agreement dated 4.10.2007 as well as in the<\/p>\n<p>consortium agreement dated 11.3.2008, there was a clause under the<\/p>\n<p>heading &#8220;Relationship of Parties&#8221; which indicated that each member of<\/p>\n<p>the consortium shall deal with the other on principal-to-principal basis<br \/>\ntill the formation of SPC. In the said clause, it was further stated that,<\/p>\n<p>nothing contained in the agreement shall be deemed to constitute any<\/p>\n<p>of the parties as agent of the other. Therefore, the members of the<\/p>\n<p>consortium led by M\/s ZDL cannot be said to be jointly and severally<\/p>\n<p>liable at every stage of implementation of the Project. We do not find<\/p>\n<p>merit in this argument. As stated above, the consortium agreement<\/p>\n<p>dated 11.3.2008 spelt out the work allocation and the responsibility of<\/p>\n<p>each member of the consortium. It made the consortium responsible<\/p>\n<p>jointly and severally for implementation of the Project. The clause<\/p>\n<p>dealing with &#8220;relationship of the parties&#8221; merely stated that till the<\/p>\n<p>formation of the SPC, each member shall be related to each other on<\/p>\n<p>principal-to-principal basis. This is because the consortium is formed to<\/p>\n<p>make a bid for this Project only. Till the formation of SPC and till the<\/p>\n<p>consortium becomes a successful bidder, the parties relate to each other<\/p>\n<p>on principal-to-principal basis. But once that consortium becomes a<\/p>\n<p>successful bidder and commits to hold the minimum equity stake of<\/p>\n<p>51% in the SPC, then the question of joint and several liability would<\/p>\n<p>certainly arise. Therefore, the High Court rightly held that the licence<\/p>\n<p>agreement between GoK and the successful bidder (consortium) has<\/p>\n<p>still to be executed and it is at that stage that, in any event, the clause of<br \/>\njoint and several liability shall stand incorporated in the licence<\/p>\n<p>agreement.\n<\/p>\n<p>21.   Before concluding, an attempt was made on behalf of<\/p>\n<p>M\/s Lanco Kondapalli Power Pvt. Ltd. (appellant in the civil appeal<\/p>\n<p>arising out of SLP (C) No. 30305\/2008) to demonstrate before us that<\/p>\n<p>but for the financials of M\/s PPL, the consortium led by M\/s ZDL<\/p>\n<p>would not have met the financial qualification criteria as on the date<\/p>\n<p>of the submission of the Bid Proposal (31.1.2008). Learned counsel<\/p>\n<p>appearing on behalf of M\/s Lanco Kondapalli Power Pvt. Ltd.<\/p>\n<p>submitted a Chart in support of his above contention. We find no<\/p>\n<p>merit in this argument. The said Chart refers to the Financial Years<\/p>\n<p>October, 2003 to September, 2004, October 2004 to September, 2005,<\/p>\n<p>October, 2005 to September, 2006 as far as M\/s ZDL is concerned.<\/p>\n<p>However, it may be noted that initially the last date for submitting the<\/p>\n<p>bid was 31.10.2007, which was extended to 31.1.2008. The Balance<\/p>\n<p>Sheet and P&amp;L account of M\/s ZDL for the year ending 30.9.2007<\/p>\n<p>stood adopted after audit only on 20.3.2008. If the figures for that<\/p>\n<p>year are taken into account then the financial qualification criteria<\/p>\n<p>stands satisfied.\n<\/p>\n<p>22.    For the aforestated reasons, we find no infirmity in the<\/p>\n<p>impugned judgment of the Division Bench of the Kerala High Court<\/p>\n<p>which has given a declaration to the effect that the Outer Cover and<\/p>\n<p>Cover-1 submitted by the consortium led by M\/s ZDL is<\/p>\n<p>admissible\/responsive in terms of RFP. Consequently, we declare that<\/p>\n<p>the Technical and Financial Proposals submitted by the said<\/p>\n<p>Consortium (respondent no. 1) are liable to be considered within 15<\/p>\n<p>days from the date of this judgment.\n<\/p>\n<\/p>\n<p>23.    Accordingly, the civil appeals stand dismissed with no order as<\/p>\n<p>to costs.\n<\/p>\n<\/p>\n<p>                                               &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J.\n<\/p>\n<p>                                              (Dr. Arijit Pasayat)<\/p>\n<p>                                               &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J.\n<\/p>\n<p>                                              (S. H. Kapadia)<br \/>\nNew Delhi; the<br \/>\nFebruary 10, 2009.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India State Of Kerala vs M\/S Zoom Developers P.Ltd.&amp; Ors on 10 February, 2009 Author: S Kapadia Bench: Arijit Pasayat, S.H. Kapadia IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 841-842 \/2009 (arising out of SLP(C) Nos. 30204-30205\/2008) State of Kerala &#8230; Appellant(s) versus M\/s Zoom Developers Pvt. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-237991","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>State Of Kerala vs M\/S Zoom Developers P.Ltd.&amp; Ors on 10 February, 2009 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-kerala-vs-ms-zoom-developers-p-ltd-ors-on-10-february-2009\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Kerala vs M\/S Zoom Developers P.Ltd.&amp; 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