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High Court of Judicature at Calcutta
DIPANKAR DATTA
Sidwal Refrigeration Industries Ltd. & Another
Versus
Union of India & Another
W.P. No. 4004 (W) of 2010
Decided On : 16-06-2010
TENDER TERMS - SUBCONTRACTOR - UNREASONABLE CONDITION - REASONABLE AND OBJECTIVE CRITERIA - ARTICLE 14 VIOLATION - JUDICIAL INTERFERENCE: The court held that a tender condition requiring a minimum number of products supplied to countries other than the country of manufacture for Indian companies to be eligible as subcontractors was unreasonable and violated Article 14 of the Constitution. The court directed the tendering authority to consider the quality of products manufactured by Indian companies, rather than their use in foreign countries, as the primary criterion for subcontractor selection.
Fact of the Case:
The petitioners, a company and its managing director, challenged a condition in a tender issued by Kolkata Metro Railway Corporation Ltd. (KMRCL) for the selection of contractors for the East-West Metro Corridor Project. The condition required that subcontractors for certain items must have supplied a minimum number of products to countries other than the country of manufacture.
Finding of the Court:
The court held that the impugned condition was unreasonable and violated Article 14 of the Constitution. The court found that the condition was not based on objective considerations, was inconsistent with other conditions of the tender, and was in conflict with the guarantees enshrined in Articles 14 and 19 of the Constitution. The court also found that the condition was opposed to public policy.
Issues: Whether the impugned condition in the tender was unreasonable and violated Article 14 of the Constitution.
Ratio Decidendi: The court held that the impugned condition was unreasonable and violated Article 14 of the Constitution because it was not based on objective considerations, was inconsistent with other conditions of the tender, and was in conflict with the guarantees enshrined in Articles 14 and 19 of the Constitution. The court also found that the condition was opposed to public policy.
Final Decision: The court allowed the writ petition and directed KMRCL to proceed to consider the bid of the short-listed party in accordance with law uninfluenced by the fact that the company may not have provided 100 (hundred) units to countries other than the country of manufacture.
The first petitioner is a company registered under the Companies Act, 1956 (hereafter the company). The second petitioner is the managing director of the company.
It is claimed in the petition that the company, more than three decades old and ISO-9001-2008 certified, is the largest manufacturer of air-conditioning units for railway coaches in India. It claims credit for supplying more than 6000 air-conditioners for leading trains, like Rajdhani Express and the Shatabdi Express apart from five ‘Palace on Wheel’ trains for different States in India. It is further claimed that the company has been selected by the Delhi Metro Rail Corporation (hereafter the DMRC) for manufacturing air-conditioners for the coaches (EMUs) in Phases - I and II of the Delhi Metro Project. As on date, it has delivered 574 units including 42 air-conditioned driver cabins to the DMRC and is continuing to supply units regularly.
Construction of East-West Metro Corridor Project from Howrah Maidan to Salt Lake, Sector V, Kolkata for the present with scope for future extension from Dasnagar to other neighbouring areas of Howrah was approved by a study cabinet in its meeting held on 14.6.2007 pursuant whereto the Kolkata Metro Railway Project (hereafter the project) was conceived with target date of completion being October, 2014. The project cost would be borne by the Japan International Corporation Agency (hereafter JICA), the Central Government and the State Government of West Bengal in the ratio of 45:25:30 respectively.
Kolkata Metro Railway Corporation Ltd. (hereafter KMRCL), being a joint venture company of the Government of India and the Government of West Bengal, formed for implementation of the East-West Metro Corridor Project at Kolkata, had issued Pre-qualification Tender Notification (Revised) dated 25.3.2009 (hereafter the notification) with a view to shortlist “Passenger Rolling Stock Design & Manufacturing Companies” through a pre-qualification process for the design, manufacture, supply, testing and commissioning of electric multiple units and training of personnel. The notification provided that KMRCL would appoint ‘General Consultant’ for assisting it in evaluating the tenders. Indian as well as international companies, either by themselves or as a joint venture/consortium were invited to complete the pre-qualification enquiry documents in pro-forma format. The applicants were required to have a good financial standing and performance record, requisite experience and capacity in the fields for which the notification was issued.
The notification envisaged a three-tier process. Those applicants succeeding in the pre-qualification stage would be entitled to have the tender documents for submission of technical bid and financial bid.
In this writ petition, the petitioners seek to challenge a particular condition incorporated by KMRCL. The condition which the petitioners say is malafide, arbitrary and unreasonable and, therefore, would have the effect of prejudicially affecting the right of the company finds place in the general conditions of the contract.
Mr. Banerjee, learned senior advocate appearing for the petitioners, while contending that the tender terms and conditions encouraged the interested parties to prepare a list of sub-contractors for such items as may be procured from them invited my attention to various conditions in the tender documents for proper appreciation of the petitioners’ grievance.
I shall presently refer to the contents of the tender documents to which my attention was invited.
The definition of various terms appearing in the ‘General Conditions of Contract’ under ‘A. Contract and Interpretation’ read as follows:
“1. Definitions
1.1 The following words and expressions shall have the meanings hereby assigned to them:
(g) ‘Contractor’ means the person(s) whose bid to perform the Contract has been accepted by the Employer and is named as such in the Contract Agreement and SCC, and includes the legal succe
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