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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIPIN SANGHI, JASMEET SINGH, JJ.
Ursapharm India Private Limited – Appellant
Versus
Employees State Insurance Corporation – Respondent
W.P.(C) 8214 of 2021 & CM APPL. 25478 of 2021
Decided on : 27-08-2021
Turnover Criteria - Bid Rejection - Clause 7 of RFP - [TURNOVER CRITERIA] - [Clause 7 of RFP] - [The judgment discusses the rejection of the petitioner's bid based on the turnover criteria specified in Clause 7 of the RFP. The petitioner, being a subsidiary of a German company, argued that the turnover of the German company should have been considered to meet the eligibility criteria. The court analyzed the relevant provisions, the petitioner's legitimate expectations, and the commercial decisions of the respondent in rejecting the bid. The court held that the turnover criteria were reasonable and the petitioner's bid was rightly rejected based on its own financial performance.]
Fact of the Case:
The petitioner challenged the rejection of its bid for a drug supply contract by the respondent authority, arguing that the turnover criteria should have considered the turnover of its German parent company.
Finding of the Court:
The court found that the rejection of the petitioner's bid based on the turnover criteria was reasonable and not arbitrary. The court emphasized that the turnover criteria were essential to assess the financial and supply capacity of the bidder.
Issues: The main issue was whether the rejection of the petitioner's bid based on the turnover criteria was unreasonable or arbitrary.
Ratio Decidendi: The court held that the turnover criteria set out in the RFP were reasonable and essential for assessing the bidder's financial and logistical capacity. The court also emphasized that the petitioner, being an Indian registered company, had to meet the turnover criteria based on its own financial performance.
Final Decision: The court dismissed the writ petition, upholding the rejection of the petitioner's bid based on the turnover criteria, and left the parties to bear their respective costs.
JUDGMENT :
VIPIN SANGHI, J.
1. The petitioner has preferred the present petition to assail the letter/ order dated 03.08.2021 passed by the respondent authority informing the petitioner of the rejection of its Bid in response to E-Tender Enquiry No. U- 25/12/142C-146C/2019– Med.V for DG ESIC rate Contract No. 142C for supply of Drugs for use of ESI institutions all over the country.
2. The petitioner also seeks a direction to set aside the decision of the respondents contained in their communication dated 06.07.2021, as being non-jurisdictional, predetermined, and arbitrary. Petitioner seeks a further direction to the respondents to issue the Letter of Award to the petitioner in terms of the aforesaid E-Tender Enquiry for supply of drugs for use in ESI Institutions in the country.
3. The case of the petitioner is that the petitioner is an Indian Company, and is a subsidiary of the German Company, namely, Ursapharm Germany. Petitioner states that Ursapharm Germany is engaged in the manufacture of, inter alia, the drug Povidone: eye lubricant which is “preservative free” and “phosphate free”. Petitioner also states that it is the alter ego of Ursapharm Germany, and acts as the local supplier and marketer of the drugs manufactured by UrsaPharm Germany.
4. Petitioner narrates that in the year 2018, the respondent issued a Tender Enquiry calling for submission of bids at fixed rates for several Drugs for supply to ESI Institutions across the country.
5. The petitioner submitted its bid for the Drug Povidone: eye lubricant and the same was accepted by the respondent. The contract in relation to the said Tender Enquiry was for the period 2018-2020. The contract was further extended till 31.08.2021.
6. The petitioner issued another identical Tender Enquiry, calling for submission of bids for fixing the rates of several Drugs, including “Povidone’, again for supply to ESI Institutions across the country for a period of 2 years. The petitioner again participated in the tender process, and had a legitimate expectation of success in the present Tender process as well.
7. On 06.07.2021, the petitioner received an E-mail communication from the respondent, informing the petitioner that its bid had been rejected. The petitioner states that no reasons were communicated except that “Annexure TS in the audited report of the principal firm (imported) does not adhere to the terms and conditions in pre-bid Corrigendum”.
8. The petitioner then sent a representation on 13.07.2021, seeking review of the respondent’s decision to reject the petitioner’s technical bid. On 03.08.2021, the respondent rejected the petitioner’s representation. Consequently, the petitioner has preferred the present petition.
9. The relevant clause of the tender, which forms the basis for rejection of the petitioner’s bid may now be taken note of. Clause 7 of the RFP lays down the turnover criteria. The relevant part of the same reads as follows:
I. Turnover for schedule drugs
a) Participating Pharmaceutical firm should have annual turnover of each of the last three preceding financial years (2016-17, 2017-18, 2018-19) equal or more than the sum total of the amount of individual turnover of the quoted list of the drugs. Individual Turnover for each drug has been indicated in drug Schedule.
Example:
If Drug A has X turnover, Drug B has Y turnover and Drug C has Z turnover.
| S No. | Name of the Drugs | Annual Turnover of the bidder for the last three preceding years (2016-17, 2017-18 & 2018-19) equal or more |
| 1. | A, B & C | X+Y+Z |
| 2. | A & B | X+Y |
| 3. | B & C | Y+Z |
| 4. | C | Z |
d. Group turnover (other than drugs and their formulations) will not be considered for determining the eligibility and such tenders will be rejected summarily.
e. Please fill Annexure TO. ………………………”
10. It is not in dispute that the petitioner, by itself, (whi
The turnover criteria in tendering processes are essential to assess the financial and supply capacity of the bidder. The bidder must meet the turnover criteria based on its own financial performance....
The turnover criteria in bidding must be met independently by the bidder without considering the parent's financial performance, ensuring procedural integrity in the tendering process.
Tender evaluation must prioritize fairness, and the interpretation of criteria should avoid hyper-technical disqualifications that undermine competitive bidding processes.
Interpretation of tender documents in favor of the bidder in case of ambiguity and the importance of adhering to the standards and norms laid down in the tender documents.
The imposition of arbitrary turnover requirements in tender processes, lacking rational justification, violates Articles 14 and 19(1)(g) of the Constitution, ensuring fair opportunity and competition....
Judicial review is permissible in tender matters only to prevent arbitrariness; criteria should ensure fairness and cannot favor specific bidders without rational basis.
The court established that significant deviations from tender guidelines and arbitrary evaluation criteria violate the principles of fairness and proportionality under Article 14 of the Constitution.
Bidders must provide complete and accurate documentation as required by tender specifications, and courts should exercise restraint in reviewing decisions made by tender authorities unless there is c....
In procurement matters, minimum eligibility criteria set by State authorities must be reasonable and not arbitrary; courts should exercise restraint in judicial review of such criteria.
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