1. Tender disqualification — Eligibility criteria — Experience of wholly owned subsidiaries — Dispute over whether a parent company can utilize subsidiary experience without forming a joint venture. (Para 1 , 4 , 5 , 6 , 7 , 8 , 10 , 11 , 12 , 14 , 15 , 16 , 17 )
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2017 Supreme(SC) 464
SUPREME COURT OF INDIA
Dipak Misra, Amitava Roy, JJ.
M/S. CRRC CORPORATION LTD. – APPELLANT
VERSUS
METRO LINK EXPRESS FOR GANDHINAGAR & AHMEDABAD (MEGA) COMPANY LTD. – RESPONDENT
CIVIL APPEAL NO. 12065 OF 2016
Decided On : 15-05-2017
IMPORTANT POINT
Entity of a Government owned company includes its 100% wholly owned subsidiaries.
Headnote:(a) Government contract – Tender – Clause 4.1 – Eligibility – Single entity construed to be valid bidder – Government owned entity with its 100% wholly owned subsidiaries – Excluded considering them separate entities – Not justified. (Para 34)
(b) Government contract – Tender – Clause 4.1 – Eligibility – Experience of wholly owned subsidiaries should be construed as experience of the Government entity – Appellant-corporation, already adjudicated in Consortium of Titagarh Firema Adler SPA as a single entity bidder – “Single entity” – Held, inclusive of a private as well as a government owned entity – Independent of any combination or formation in the form of a J.V. or a Consortium – Visualised to be one integral and composite whole. (Para 36, 37)
C.A. Nos. 1353-1354 of 2017 – Relied upon
(1995) 1SCC 478; 2016 (8) SCALE 765; 2016 (10) SCALE 69; 2016 (10) SCALE 50; 2011 (59) BLJR 183; (2014) 207 DLT 1 – Referred
(c) Government contract – Tender – Eligibility – Query by respondents – Clarification given to one of the bidders excluding experience of its principal/ holding company/ group companies and advising it to form JV/Consortium – Could not be extended to disqualify appellant-company – Decision, held, arbitrary – Responsibility of its subsidiaries for the execution of the work evinced by formational specifics and functional dynamics of appellant – Disqualification of appellant unsustainable. (Para 38, 39)
Facts of the case:
The dissension centers around the exposition of an eligibility norm engrafted in the tender conditions qua a prestigious project with global participation.
The appellant stands disqualified by the respondent on the touchstone of its perception of the relevant qualifying criterion as endorsed by the High Court vide judgment and order dated 18.11.2016 rendered in Special Civil Application No.18439 of 2016.
Finding of the Court:
Disqualification of appellant is not justified.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Parent company claiming eligibility via wholly owned subsidiaries — Respondent asserting separate legal entity status requiring joint venture or consortium for experience aggregation. (Para 13 , 18 , 21 , 22 , 23 )
3. Analysis of single entity status — Interpretation of pre-bid clarifications — Application of commercial wisdom and structural integrity of government-owned corporations and their subsidiaries. (Para 19 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 38 , 39 )
4. A government-owned company with 100% wholly owned subsidiaries is a single entity, eligible to utilize the experience of its subsidiaries to meet tender qualification norms. (Para 35 , 36 )
5. Appeal allowed — Disqualification set aside — Direction to proceed with the tender process in accordance with law. (Para 40 )
6. Can a parent company use the experience of its 100% wholly owned subsidiaries for tender eligibility?
Yes. A government-owned company with 100% wholly owned subsidiaries is regarded as a single, coherent, and homogeneous entity. Therefore, the experience of its constituent subsidiaries can be construed as the experience of the parent company. (Para 35 , 36 )
7. Does a parent company need to form a joint venture or consortium with its subsidiaries to claim their experience?
No. For a government-owned entity and its wholly owned subsidiaries, there is no necessity to form a joint venture or consortium to avail the benefit of the subsidiaries' experience. (Para 36 )
8. How should pre-bid clarifications be interpreted when they conflict with the status of a bidder?
Clarifications must be read in context. A clarification stating subsidiaries must form a JV to use parent experience does not automatically apply to a parent company seeking to use the experience of its subsidiaries. (Para 38 )
9. What is the court's approach toward the separate legal entity argument in the context of 100% subsidiaries of government companies?
The court rejects a hyper-technical approach, holding that a government-owned corporation and its wholly owned subsidiaries act as a composite unit based on structural integrity and functional unity. (Para 39 )
JUDGMENT
AMITAVA ROY, J.
The dissension centers around the exposition of an eligibility norm engrafted in the tender conditions qua a prestigious project with global participation. The appellant stands disqualified by the respondent on the touchstone of its perception of the relevant qualifying criterion as endorsed by the High Court vide judgment and order dated 18.11.2016 rendered in Special Civil Application No.18439 of 2016, thus propelling it to this Court for redress.
2. We have heard Mr. C.A. Sundaram, learned senior counsel for the appellant and Mr. Mukul Rohatgi, learned senior counsel for the respondent.
3. The pleaded facts though encompass various facets, those having a direct bearing on the issue raised, only would be alluded to.
4. The appellant-corporation has introduced itself to be an amalgam of M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd., both claimed to be the world's largest and oldest suppliers of rail transport equipments with most complete product lines and leading technologies with their business activities enfolding R&D design, manufacture, repair, sale, lease and technical services for railway rolling stock, EMUs, metro coaches, urban rail transit vehicles, engineering machinery, consulting services etc. along with several subsidiaries under their full control. On 09.03.2015, these two entities namely; M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd. got merged after securing the approval of the concerned state authorities, as a result whereof, all assets of these two integrant corporations, together with liabilities, businesses, qualifications, staff, contracts along with all rights and obligations stood transferred to the appellant-corporation w.e.f. 01.06.2015. Following such assimilation, the appellant-corporation was, as a joint stock limited company incorporated in the Peoples Republic of China with limited liability and owned and controlled by the Chinese Central Government. As a consequence of such merger, the subsidiaries of M/s CSR. Corporation Ltd. and M/s CNR. Corporation Ltd., became the subsidiaries of the appellant-corporation and their names were changed as well. According to the appellant, thereafter it successfully participated and was awarded various international contracts, based on the experience of its subsidiary companies.
5. On 15.01.2016, the respondent company (hereinafter to be referred to also as “MEGA”) invited tenders/bids for the project “Design, manufacture, supply, installation, testing, commissioning of 96 nos. of standard gauge cars and training of personnel” and organized a pre-bid meeting, amongst others on 12.03.2016 inviting all prospective bidders. The last date for submission of the bids was eventually fixed on 25.05.2016.
6. As per the tender conditions, the offer was to be made in three envelopes, to be submitted simultaneously, as hereunder:
(i) First Envelope called – “Initial Filter–cum-Qualification Requirement Bid”.
(ii) Second Envelope - “Technical Bid”
(iii) Third Envelope - “Price Bid”
7. In response to the notice inviting tender, the appellant and three others namely; (i) Consortium of Bombardier Transportation India Pvt. Ltd. & Bombardier Transportation GmbH; (ii) M/s. Hyundai Rotem Company (HRC) and (iii) Consortium of Alstom Transport India Ltd., & A1stom Transport SA, offered their bids by the date fixed.
8. As per the tender prescriptions, an affirmative determination of the eligibility and qualification criteria, on the basis of the particulars furnished in the first envelope was to be the pre-requisite for the opening of the envelopes containing the “technical bids” and the “price bids” in that order applying the same test. Prior thereto, pre-bid meetings were held, as referred to hereinabove, in which representatives of various participating bidders attended and submitted their queries for clarifications as per clause No.7 of Instructions to Bidders, which were accordingly deliberated upon. Clarifications, as sought for, we
