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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S. NAGAMUTHU
M/s.MSPL Gases Limited, Represented by its Senior Manger (Sales)
Versus
M/s. Steel Authority of India Limited Through its Executive Director (Operations) & Others
W.P.Nos.6425 & 6426 of 2008 & M.P.Nos.2 to 5 of 2008
Decided on: 31-07-2008
{'MAIN LEGAL POINT': 'The terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice.'}
Fact of the Case:
The petitioner, a company engaged in the production of industrial gases, participated in a tender process floated by the respondent, a public sector company, for the establishment of a new cryogenic air separation plant on a "Build, Own and Operate" (BOO) basis. The petitioner emerged as the lowest bidder (L1) in the initial tender process, but the tender was subsequently canceled due to a lack of clarity in the evaluation criteria. A fresh tender was issued, and the petitioner again participated and emerged as L1. However, the respondent decided to cancel the second tender process and issue a third tender, citing the same reason for the cancellation of the first tender. The petitioner challenged the decision to cancel the second tender and issue a third tender, alleging that it was arbitrary, discriminatory, and mala fide.
Finding of the Court:
The court held that the decision to cancel the second tender and issue a third tender was not arbitrary, discriminatory, or mala fide. The court found that there was a genuine lack of clarity in the evaluation criteria in the second tender, which led to different interpretations by the bidders. The court also found that the respondent had taken steps to address the lack of clarity by incorporating necessary changes in the evaluation criteria in the third tender. The court further held that the petitioner had no locus standi to challenge the decision to cancel the second tender and issue a third tender, as it had not participated in the third tender.
Issues: ['Whether the decision to cancel the second tender and issue a third tender was arbitrary, discriminatory, or mala fide.', 'Whether the petitioner had locus standi to challenge the decision to cancel the second tender and issue a third tender.']
Ratio Decidendi: The court held that the decision to cancel the second tender and issue a third tender was not arbitrary, discriminatory, or mala fide. The court found that there was a genuine lack of clarity in the evaluation criteria in the second tender, which led to different interpretations by the bidders. The court also found that the respondent had taken steps to address the lack of clarity by incorporating necessary changes in the evaluation criteria in the third tender. The court further held that the petitioner had no locus standi to challenge the decision to cancel the second tender and issue a third tender, as it had not participated in the third tender.
Final Decision: The court dismissed the writ petitions filed by the petitioner, challenging the decision to cancel the second tender and issue a third tender.
1. By consent, writ petitions are disposed of.
"M/s. Steel Authority of India Limited "(in short SAIL)" is a public sector company and is an integrated iron and steel producer in India. The second respondent "Salem Steel Plant" (in short SSP) is a plant of the first respondent SAIL which manufactures steel and allied products. The third respondent is the Deputy General Manager in charge of Materials Management of SSP. The fourth respondent "INOX" Air Products Ltd. is a Company registered under the Indian Companies Act and is a manufacturer of industrial gases such as oxygen, nitrogen, helium, argon, carbon dioxide, hydrogen etc., The 5th respondent "M.N. Dastur and Company (P) Ltd" is a consulting company of the respondents 1 and 2 that provides engineering consultancy services for projects in the metallurgical and allied industries.
2. The petitioner is also a registered Company under the Indian Companies Act and claims to be one of the largest producers of Industrial gases and medical oxygen in India. It is further claimed by the petitioner that, the petitioner Company is the first of its kind to set up an air separation plant on "Build Own and Operate" (in short BOO) basis for respondent No.1 SAIL.
3. M/s. Salem Steel Plant evolved an expansion project to set up steel melting and casting facilities to produce stainless steel slabs of about 189,350 tonnes per year and the same was approved by the SAIL Board directors. To achieve the said project, Salem Steel Plant proposed to install in the steel melt shop, an electric arc furnace, ladle furnace, argon oxygen decarburizing (AOD), slab caster and slab grinder among other equipments. According to the petitioner, the estimated requirement of industrial gases for this project was 3500 Nm3/hour of Gaseous oxygen, 1200 Nm3/hour of gaseous nitrogen and 20 tonnes per day (in short TPD) of gaseous argon which was to be out sourced and supplied for the project.
4. It is further stated that in order to meet the above requirement, the respondent Salem Steel Plant proposed that a "New Cryogenic Air Separation Plant" be set up on or near its premises on a "Build, Own and Operate" (BOO) basis for which the respondent Salem Steel Plant issued an invitation for tenders by Tender Document No.PU-E 782801 dated 13. 2007 (hereinafter referred as the 1st tender). In the tender conditions, it was mentioned that while the requirements of oxygen and nitrogen could be met from the air separation plant, but the requirement of argon would exceed the capability of the air separation plant. Therefore, it was proposed that the balance quantity of argon about 18 TPD should be procured by the bidder from an external source and supplied to the respondent Salem Steel Plant. The last date for receiving tenders was 24.04.2007. According to the tender documents, there were three stages to the bid viz (1) Earnest Money Deposit (EMD); (2) Techno-Commercial bid and (3) Price bid. According to the tender document, after opening of the EMD, the tenderers would be evaluated on the eligibility criteria set out in the tender documents. The technical bids of bidders who were found eligible would be further evaluated and the respondent Salem Steel Plant would hold techno-commercial discussions to bring all the tenderers on common comparison on techno-commercial grounds and freeze the same before the price bids were to be opened. After evaluating the techno-commercial criteria, the price bids of techno-commercially qualified bidders would be opened and the respondent Salem Steel plant would award the contract to the L1 bidder. The bidders were to offer fixed facility charges and a variable cost was to be quoted by the bidders for oxygen, nitrogen and argon. The tender document also specified that any discussions/negotiations, post price bids, would be only with the L1 bidder.
5. In pursuance of the said tender invitation dated 13. 2007, there were four tenderers namely, the petitioner, the respondent "INOX", "
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