Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2008 Supreme(Mad) 4397

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P.K. MISRA & THE HONOURABLE MR. JUSTICE A. KULASEKARAN
M/s. MSPL Gases Limited
Versus
M/s. Steel Authority of India Limited through its Executive Director (Operations) ISPAT Bhavan & Others
W.A.Nos.1125 of 2008 and 1126 of 2008
Decided on: 01-12-2008

Advocates Appeared:
For the Appellant:Al. Somayaji, Senior Counsel for Ms. Uma Vijayakumar, Vijay Narayan, Senior Counsel for Ms. Uma Vijayakumar, Advocates.
For the Respondents:R1, Jagdeep Dhankar, Senior Counsel for Mr. A. Ilango, R2 & R3, R. Krishnamurthy, Senior Counsel for Mr. A. Ilango, R4, K. Harishankar, R5, Habibullah Basha, Senior Counsel for C. Manishankar, Advocates.

The Court held that the tender process was not actuated by malice and that the respondents had not acted in an arbitrary or irrational manner. The Court also held that the respondents had acted in accordance with the tender conditions and that they had given the appellant an opportunity to participate in the third tender.

Headnote:
The High Court dismissed the writ appeals filed by the appellant challenging the cancellation of the second tender and issuance of the third tender for the establishment of a new Cryogenic Air Separation Plant (ASP) on Build-Own-Operate (BOO) basis. The Court held that the tender process was actuated by malice and that the respondents had not acted in an arbitrary or irrational manner.
Fact of the Case:

The appellant, a steel company, issued a tender notice for the establishment of a new ASP on BOO basis. The tender was subsequently cancelled and a second tender was issued. The appellant and two other companies participated in the second tender. After evaluating the bids, the fifth respondent, a consultant, recommended that the appellant be considered as the L1 bidder. However, the respondents decided to cancel the second tender and issue a third tender. The appellant challenged the cancellation of the second tender and the issuance of the third tender by filing writ petitions.
Finding of the Court:

The High Court found that the evaluation criteria in the second tender lacked clarity and that the respondents had acted reasonably in cancelling the second tender and issuing a third tender with revised evaluation criteria. The Court also found that there was no evidence of malafide or irrationality on the part of the respondents.
Issues: 1. Whether the tender process was actuated by malice? 2. Whether the respondents acted in an arbitrary or irrational manner?
Ratio Decidendi: 1. The Court held that the tender process was not actuated by malice. The Court noted that the respondents had received several representations from the bidders, including the appellant, claiming that they were the L1 bidder. The Court also noted that the fifth respondent had recommended that the appellant be considered as the L1 bidder, but that the respondents had decided to cancel the second tender and issue a third tender with revised evaluation criteria. 2. The Court held that the respondents had not acted in an arbitrary or irrational manner. The Court noted that the respondents had acted in accordance with the tender conditions and that they had given the appellant an opportunity to participate in the third tender.
Final Decision: The High Court dismissed the writ appeals filed by the appellant.

Judgment :-

Common Judgment: (A. Kulasekaran, J.)

1. The facts involved in the cases on hand is as follows:-

.(i) The first respondent herein is Steel Authority of India (SAIL), which is registered as a government company under the provisions of Companies Act in which 85% shares are held by the Government of India and 15% shares are held by public. The second respondent namely Salem Steel Plant (SSP) is an unit of the first respondent, which was set up by the first respondent for production of stainless steel.

.(ii) The first respondent issued tender notice E/08 dated 13.03.2007, hereinafter referred to as first tender, inviting sealed tenders for establishment of new Cryogenic Air Separation Plant (ASP) in the premises of Salem Steel Plant on Build-Own-Operate (BOO) basis and supply Oxygen, Nitrogen and Argon gases on long term basis to steel melting shop (SMS) being put up under expansion. The first respondent appointed the fifth respondent as Consultant-cum-Project Manager. The tender floated on 13.03.2007 was opened on 09.05.2007 in which six tenderers have participated, out of which two were found ineligible, one tender was rejected and the remaining three namely the appellant, fourth respondent and one M/s. BOCIL were considered as eligible. After holding techno-commercial discussion with them, the price bid was opened on 04.07.2007 in which the fourth respondents bid was rejected. The appellant and M/s. BOCIL were evaluated by the fifth respondent. The fifth respondent, in his letter dated 12.07.2007, after evaluating the price bid and the Net Present Value, hereinafter referred to as NPV, as per the terms of the tender conditions, recommended to consider M/s. BOCIL as L1 for establishment of ASP on BOO basis for supply of industrial gas for fifteen years to the second respondent.

(iii) While things are such, the re-tender in respect of EAF, LF and AOD packages of SMS were issued by the second respondent on 13.08.2007 and the process was on. In view of the re-tendering of SMS packages, the second respondent sent a letter dated 010. 2007 to the fifth respondent requesting to recommend for the course of action with respect to ASP on BOO basis. The fifth respondent, by letter dated 110. 2007 recommended for re-tendering of ASP. Since the ASP specifications required to be reviewed, the fifth respondents letter dated 110. 2007 was placed before the Plant Level Tender Committee (PLTC) of the respondents 1 to 3 which considered it and recommended to re-tender the packages for ASP on BOO basis with revised quantity and delivery period to synchronise with the commissioning of re-tendered EAF, LF and AOD packages. After approval of the said tender committee and the Executive Director of the second respondent, the second re-tender was floated for establishment of the said ASP with revised terms on BOO basis for 15 years and tender notice was published in dailies and web site of the first respondent on 111. 2007.

(iv) In response to the said second tender notice (1) M/s. Goyal MG Gases (2) the appellant (3) the fourth respondent and (4) M/s. Praxair have participated in which the tender of M/s. Goyal MG Gas was rejected and the remaining three were found eligible. On evaluating the technical bids, it was found that the appellant has agreed to the tender conditions in toto but the fourth respondent and M/s. Prag Air deviated, hence, opportunity was granted to all the three tenderers for discussion and clarification by organizing a meeting. The fourth respondent and M/s. Praxair have withdrew all the deviations, however, intended to submit their revised price bids on the ground that the withdrawal of deviation have had a bearing on the price quoted.

.(v) On 10.01.2008, the Techno-Evaluation Committee and Commercial Evaluation Committee of the respondents 1 to 3 recommended that all the three are techno-commercially eligible. The commercial evaluation committee considered the request of the fourth respondent and M/s. Praxair for

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2008 Supreme(Mad) 4397

Cases Referred (9)