Samruddha Buildcon Pvt. Ltd. ... Vs Indore Development Authority On 11 February, 2016

Samruddha Buildcon Pvt. Ltd. ...
vs Indore Development Authority on 11 February, 2016
Madhya Pradesh High Court

Samruddha Buildcon Pvt. Ltd. ... vs Indore Development Authority on 11 February, 2016
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W.P. No.4448/2015
HIGH COURT OF MADHYA PRADESH: BENCH AT

INDORE
D.B.:Hon'ble Shri P.K. Jaiswal
Hon'ble Shri J.K. Jain, JJ.
Writ Petition No.4448/2015
SAMRUDDHA BUILDCON PVT LTD.
Versus
INDORE DEVELOPMENT AUTHORITY

& ORS.
*****
Shri Piyush Mathur, learned Senior counsel with
Shri Akash Vijayvargiya, learned counsel for the
petitioner.
Shri A.K. Sethi, learned Senior counsel with Shri
Yogesh Mittal, learned counsel for respondents No.1 &
2 (IDA).
Shri Ajay Assudani, learned counsel for respondent
No.3.
*****
ORDER
(Passed on this 11th day of February, 2016) PER P.K. JAISWAL, J :-
By this writ petition under Article 226 of the Constitution of India, the petitioner - firm is
challenging
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W.P. No.4448/2015 the communication dated 29.6.2015 whereby, its technical bid has been
rejected on the ground that he had not met the eligibility criteria of the tender quoted by the
respondents No.1 and 2 and, therefore, its financial bid will not be considered.
2. As per the factual matrix of the case, by an advertisement published in various newspapers on
23.5.2015, the respondent No.1 - Indore Development Authority, Indore, invited on-line tenders
from the contractor registered with PWD under the Centralised
- e - registration system FOR CONSTRUCTION OF SWIMMING POOL COMPLEX OF

INTERNATIONAL STANDARD AT SCHEME No.94, SECTOR - F RING ROAD, INDORE. In
response to the tender notice four on-line tenders were received by the IDA for participation in the
tender process. As per NIT, the probable amount of contract was to be Rs.1187.77 lacs. The work is
Indian Kanoon - http://indiankanoon.org/doc/83590320/ 1

to be completed within a period of 18 months including rainy season. The tender shall be
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W.P. No.4448/2015 submitted by the tenderer in three separate envelops on-line :-
a) Scan copy of Earnest money Envelope A
b) Scan copy of contractor registration in Envelop B PWD, scan copy of valid employees provident
fund Registration and required other relevant documetns
c) Price bid Envelop C
3. In the first instance, envelop A, containing the earnest money shall be opened on-line and
manually. If the earnest money is found proper the Envelop 'B' containing technical bid shall be
opened in the presence of such contractors who choose to be present. The financial offer in Envelop
'C' shall be opened only if tenderer meet the qualification criteria and availability of bid capacity as
per qualification, criteria of the technical bid documents. Sub Clause 4.1 and 4.2 of Clause 4 deals
with opening and acceptance of tender which reads as under :-
"OPENING AND ACCEPTANCE OF TENDER:
4.1 PLACE AND TIME OF OPENING : The tenders shall be opened online on the
website of IDA i.e. Http: // mpeproc.gov.in as per key
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W.P. No.4448/2015 dates and time by the Executive Engineer in the presence of the
tenders or their duly authorised agents, who may choose to attend. The Executive
Engineer under unavoidable circumstance may depute another officer in his absence
to receive and open the tenders on his behalf.
4.2 Power of Executive Engineer : The Executive Engineer does not bind himself to
accept or to recommend for the acceptance the lowest or any tender or to give any
reasons for his decision."
4. The petitioner is a private limited Company incorporated under the Indian Companies Act, 1956.
Shri Mahesh Hassanandani, one of the Director of the Company was working partner of partnership
firm M/s. Jethanand Arjundas & Sons. On family settlement / arrangement, he retired from the said
partnership firm and formed a private limited Company in the name and style of Samraddha
Buildcon Pvt. Ltd. As per Clause 7 of the partnership firm, after deduction of expenses relating to the
business of the firm as well as the interest and remuneration payable to the partner in accordance
with Clause 5 and 6 shall be divided 1/3 rd

- 1/3rd between the three partners at the closing of the
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W.P. No.4448/2015 accounting years that means the petitioner was having 33.3% partnership in the
said firm. Similarly, as per Clause 8 of the partnership (Annexure P/7), petitioner was working
partner in the said firm. Clause 8 is relevant which reads as under :-
"8.Notwithstanding anything contained in this Indenture every partner and in

particular the working partners shall be attend diligently to their duties in the
conduct of business. The working partners shall discharge their duties according to
the exigencies of the business and shall render such services as are necessary and
expedient in the Interest of the business."
5. After splitting from the partnership firm M/s. Jethanand Arjundas & Sons, he applied for Class 'A'
Contractor Registration Certificate from the Government of M.P. in terms of Government Circular
dated 29.3.2011 (Annexure P/4). Clause 3 of guidelines framed by the State Government for grant of
registration certificate, the petitioner is entitled to use financial and experience credential to the
extend of 33.33% equal to proportionate share of the partners in the erstwhile firm. Clause 3 is
relevant which reads
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W.P. No.4448/2015 as under :-
3- QeZ dk ;fn dksbZ Hkkxhnkj QeZ ls i`Fkd gksdj ;k dksbZ vyx uke ls iathd`r gksuk
pkgrk gS] rks mldk dk;Z vuqHko mldh iathd`r QeZ esa mlds Hkkxhnkjh ds vuq:i
ekU; gksxkA
6. On 6.2.2013, the petitioner - company was granted Class 'A' certificate w.e.f. 6.2.2013, for
unlimited amount ie., the work of more than 10 Crores.
7. Clause 4 of Special Conditions deals with qualification criteria :-
"Qualification Criteria:
4. 1 Minimum Experience : The bidder should have successfully completed one single
work of same nature (Swimming pool, Sump well, Overhead Tank) amounting 80%
of the tender amount or more, as a principal contractor for any govt./semi govt.
department during last three years.
OR The bidder should have successfully completed at least one single civil project
amounting at least equal to tender amount, as principle contractor for any govt./semi
govt. department during last three years.

Note:
(a) For the purpose of above experience criteria,
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W.P. No.4448/2015 the period of three years will be calculated backward from the
date of NIT.
(b) Certificate issued by Principal Employer (Central Govt./State Govt./ Semi Govt. only) must be
submitted along with Technical bid.
4. The weigh batching and mixing cement concrete plant of 30 cum/hr capacity or more is
essentially required to completed the work, in prescribed time. Therefore, The bidder must be
having 4-bin automatic weigh batching and mixing plant of his own/hired (in support bidder must
submit ownership document and specification of the plant).
OR The bidder must submit an undertaking to install concrete, weigh batching and mixing plant of
30 cum./hr capacity or more in the vicinity of above work within 45 days of issuance of acceptance
letter. This undertaking must be in the form enclosed as appendix-I.
4.3 Even though the applicants meet the above experience criteria they are subject to the
disqualification if they have:
Make misleading or false representation in the form, statements and attachments submitted.
and/or Record of poor performance such as abandoning the work, rescinding of contract for which
the reasons are attributed to the non-
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W.P. No.4448/2015 performance of the contractor, consistent history of litigation

awarded against the applicant or financial due to bankruptcy.
4.4. The Technical Bid shall be examined to ascertain whether the applications :
(i) Have been property prepared and signed.
(ii) Contain all the details called.
(iv) Are otherwise generally in order. 4.5 The following enhancement factor will be
used for the cost of works executed and the financial figures to bring a common base
value for works completed. (Refer para 4.1) Year before Multiplying factor one 1.10
Two 1.21 Three 1.33 Bidder should indicate actual figure of cost and amount for the

works executed by them in the schedule without accounting for the above mentioned
factors.
4.6 Financial bids of only those contractors who will be technially qualified, will be
opened. The financial bids of technically unqualified contractors will be returned
unopended."
From the perusal of the aforesaid conditions, it is clear that the tenderer was required
to possess the
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W.P. No.4448/2015 experience of atleast having executed and completed one

assignment / work of same nature (Swimming pool, Sump well, Overhead Tank) and
magnitude, by himself for least 40% of the tender amount or the tenderer must have
completed one single civil project amounting atleast to tender document. The said
experience for the work done by the petitioner was to be calculated preceding three
years from the date of NIT.
8. The petitioner submitted his bid and annexed all the relevant documents including the certificate
and important declaration. As per experience certificate issued by the principal contractor in the
year 2013, registered partnership firm M/s. Jethanand Arjundas & Sons, of which petitioner was
working partner and having 33.33% share has completed the civil construction work to the tune of
Rs.45.40 Crores and thus, 1/3rd of this work experience would come out to be 15.13 Crores. The
qualifying
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W.P. No.4448/2015 work experience as per the qualification criteria has to be equals to the tender
value of Rs.11.87 Crores. As per the work experience certificate attached by the petitioner with the
tender documents, the petitioner has successfully completed one single contract for more than
tender amount during the last three preceding years. Contractor Experience Certificate of M/s.
Jethanand Arjundas & Sons, which is at Serial No.2 (Annexure P/5) is relevant which reads as under
:-
CERTIFICATE Sr. No. Name of Date & No Cost of Cost of Details of Date of Actual Details of work of
Work work As Work as Revised completion Date of RCC Order & per per Actual Sanction As per
completion expenditure Agreement Agreement Agreement 1 .......... ............ ........... ........... ...........
........... .......... ...........
2 Const. Of 18/12/2009 2526.38/- 45.40 Revised 14.06.2013 May-2

Houses for Lacs Crore vide MIC as per Final
slum under 60/NURM/ Decsion revised
2009 including under

JNNURM No. 341 dt. MIC

escalation prepa
Aheerkhedi 30.08.2012 decision
amounting order n
to no.341 dt.
Rs.39.9751 30.8.2012
Crore
(excluding
escalation)
9. The petitioner gave the following important declaration to the respondents No.1 and 2 along with
the tender documents (Annexure P/6), which reads as under :-
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W.P. No.4448/2015 IMPORTANT DECLARATION "We hereby submit & clarify that
the applicant company SAMRUDDHA BUILDCON PVT. LTD. is formed by splitting
the existing partnership firm M/s. Jethanand Arjundas & Sons of family settlement
arrangement. Therefore pursuant to order of Govt. of M.P.MP.P.W.D No.F17-
1/B/19/2010/PART-4/BHOPAL Dated 29.3.2011. The applicant is entitled to use
financial & experience credentials to the extent of 33.33% equal to proportionate
share of the partners in the erstwhile firm. It is stated that erstwhile firm has
discontinued its business on formation of the applicant company.
All the certificate & information submitted is of our erstwhile firm M/s Jethanand
Arjundas & Sons. We are entitled to use 33.33% of all credentials as per order of
Govt. of M.P. M.P.P.W.D.No.F17-1/B/19/2010/PART-4/BHOPAL Dated 29.3.2011."
10. As per certificate issued by the employer of the petitioner in respect of construction of house for
slum under JNNURM Aheerkhedi (actual cost of work) for Rs.45.40 Crores. The work was actually
completed on 30.5.2013. The work completion certificate (Annexure P/13) is relevant which reads as
under :-
CERTIFICATE This is to certify that M/s. Jethanand Arjundas & Sons has executed following works
with details as below. Their performance is satisfactory.
Sr. No. Name of Date & No Cost of Cost of Details of Date of Actual Det
work of Work work As Work as Revised completion Date of RCC
Order & per per Actual Sanction As per completion exp
Agreement Agreement Agreement
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W.P. No.4448/201
No.
1 ................ .............. .............. .............. .............. ...........

2 Const. Of 18/12/2009 2526.38/- 45.40 Revised 14.06.2013 30-5-2013

Houses for Lacs Crore vide MIC as per
slum under 60/NURM/ Decision revised
2009 including
JNNURM No. 341 dt. MIC
escalation
Aheerkhedi 30.08.2012 decision
amounting order
toRs.39.97 no.341 dt.
51 Crore 30.8.2012
(excluding
escalation)
11. Four persons including petitioner submitted their tenders. The tenders were opened on
22.6.2015, for the technical clearance. The amount offered by the four tenderers was as under :-
Sr. Name of Tenderer Offer Remark Nos.
1 Samruddha Buildcon Pvt. Ltd. 5.6% below SOR 2 P.C. Snehal Construction Co. 2.49% above SOR
First 3 Kalyan Toll Infrastructure Ltd. 11.88% above SOR Second 4 B.R. Goyal Infrastructure Pvt.
Ltd. 47.47% above SOR Third
12. The technical bid of the petitioner - Company, which was opened on 22.6.2015 was rejected, on
the ground that the company has failed to submit any document to substantiate his submission that
he has successfully completed one single work of
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W.P. No.4448/2015 the same nature amounting to 40% of the tender amount or atleast one single
project amounting atleast equal to tender amount. The information of the cancellation of the bid
submitted by the petitioner - firm was updated on-line by the respondents No.1 and
2. After rejection of the tender of the petitioner, the financial / price bid was opened by the
answering respondents between the three successful tenderers on 29.6.2015.
13. The respondent No.3 - P.C. Snehal Construction Co. was declared as successful bidder for the
tender work in question because, he was lowest and his bid was 2.49 % above SOR. On coming to
know about the rejection of technical bid of the petitioner on 29.6.2015, he immediately gave a
notice on 1.7.2015 (Annexure P/1) and thereafter, challenged the action by filing the present writ
petition, on the ground that mere dissolution of the firm won't take away the work experience of the

petitioner and his
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W.P. No.4448/2015 work experience has to be counted while considering the technical bid.
14. Learned Senior counsel for the petitioner has submitted that as per Clause 4.1 of special
conditions, the qualifying working experience as per the qualifying criteria has to be equal to tender
value ie., 11.87 Crores. The petitioner - Company has been registered as an 'A - Class' contractor with
PWD and the registration certificate has been issued after due scrutiny by the PWD Department.
Annexure P/8 of the petition clarifies that, if any person want to register himself from the
partnership or he wants to register himself independently then, his working experience shall be
counted as per his stake in partnership firm.
15. Admittedly, the erstwhile partnership - firm in which the petitioner was working partner of
33.33% has been completed the single actual work amounting to Rs.45.40 Crores on 30.5.2013 and
thus, on the date of opening of the tender by the respondent No.1 he
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W.P. No.4448/2015 had completed one single civil project amounting to Rs.15.13 Crores, which is
more than equal to tender amount. The tender document of the petitioner has been misread by the
respondents - department in a deliberate manner to oust the petitioner - firm from the tender
process. It is also submitted that the respondents have calculated 1/3rd amount on the basis of the
cost of work as per the agreement, but have deliberately ignored the actual cost of work and so also
the revised sanction amounting to Rs.45.40 Crores as is evident from work completion certificate
Annexure P/13. He also submitted that the respondents have further gone ahead in again creating a
class amongst class by counting the RCC work whereas, there is no provision for making any
segregation or bifurcation in the civil work.
16. As per reply of the respondents No.1 and 2, the petitioner - Company was not having any
experience in its name and failed to submit any such
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W.P. No.4448/2015 work in the name of bidder company thus, the respondents were right in
rejecting the petitioner's tender, as per Clause 4.1 of special condition of the tender. One of the stand
of the respondents is that the petitioner has failed to submit the dissolution deed of M/s. Jethanand
Arjundas & Sons and has also not submitted the memorandum and article of association of the
bidding company and as per mandatory requirement (Clause 4.1) the petitioner shall have to
successfully completed single project / work within the preceding three years, ie., 20.5.2012 to
20.5.2015.

17. As per work completion certificate (Annexure P/9), the petitioner has completed the work of
Rs.45.40 Crores on 30.5.2013. Thus, the said contention of the department is not acceptable. As per
reply of the respondents - department that after opening of technical bid the IDA without evaluating
the same referred the matter to the chartered accountant M/s. Parag Bafna & Co. for financial
appraisal report of
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W.P. No.4448/2015 pre-qualification bid documents (PQBD). The consultant of the IDA reached to
the following financial appraisal report for PQBD which reads as under :-
"d. Conclusion:
Based on the above data the bidder is Un-Qualified. Our Observation in this regard as
as below:-
1 The bidder is claiming that by a certain order of MP Govt. PWD department they
are eligible to consider the financial performance of the partnership firm to the tune
of share enjoyed by one of the director of the bidding company as partner in the
partnership firm of his family. While going through this particular order we are of the
opinion that this order is for registration of the contractors with the PWD
department and not for any other purposes.
The Bidding company is also claiming that this bidding company has been formed by
splitting the existing business of Partnership firm M/s. Jethanand Arjundas & Sons.
We are of the opinion that the bidder has not submitted the dissolution deed of the
above mentioned partnership firm and has also not submitted the memorandum and
article of association of the bidding company. We are mentioning this because of the
reason that if there is splitting of the business of partnership firm then the
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W.P. No.4448/2015 dissolution deed of the partnership firm must contain such
condition that this partnership is dissolved and the assets/liabilities has been
transferred to the respective partner who has taken over those into the bidding
company. Also if the bidding company has been formed by taking over the
assets/liabilities of the partnership firm then its memorandum and article of
association must have these particulars specifically.
Another point is that the Private Limited Company has a separate legal identity then
that of its directors or shareholders. So one cannot claim that my performance can be
counted as company's performance or companies performance should be counted as
mine.

2. The bidder has not submitted Income Tax Clearance Certificate for NIL Income
Tax Liability.
18. On the basis of opinion given by the Chartered Accountants, the respondents No.1 and 2 -
department rejected the technical bid of the petitioner, on the ground that he had not met the
eligibility criteria of the tender quoted by the respondents No.1 and 2 and, therefore, its financial bid
will not be considered.
fo"k; dzekad & 20
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W.P. No.4448/2015 ;kstuk dzekad 94 fjaxjksM+ lsDVj&,Q essa varj&jk"Vªh; Lrj ds Lohfeax iqy
dkEiysDl ds fuekZ.k dk;Z gsrq izkIr fufonkvksa ij fopkj djus ckcn~A ladYi dzekad & 141 fn- &
18-9-2015 ¼'kk[kk & rduhdh½ ;kstuk dzekad 94 esa esa varj&jk"Vªh; Lohfeax iqy dkEiysDl ds
fuekZ.k dk;Z gsrq izkIr fufonkvksa esa ls esa- le`) fcYMdkWu izk-fy- dks VsDuhdy fcM esa
fMlDokyQkbZ djus dh izkf/kdkjh dh dk;Zokgh dks daiuh }kjk eku- mPp U;k;ky; ds le{k ;kfpdk
izLrqr dj pqukSrh nh xbZ gSA daiuh dh vksj ls izkIr i= dk izkf/kdkjh cksMZ }kjk voyksdu fd;k x;kA
pwWfd daiuh dh fufonk fofHkUu vk/kkjksa ij fujLr dh tkdj 'ks"k 03 fufonknkrkvksa dh Qkbusuf'k;y
fcM [kksyh tk pqdh gS ,oa daiuh dks eku- U;k;ky; ls LFkxu Hkh izkIr ugha gqvk gS] vr% leLr
ifjfLFkfr;ksa dks ns[krs gq, izkf/kdkjh }kjk esa- ih-lh- Lusgy daLVªD'ku daiuh dh 2-49 izfr'kr vf/kd
dh fufonk Lohd`r djus dk fu.kZ; fy;k x;kA
19. Thereafter, on 29.6.2015, financial bid ie., envelop B of the three successful bidders were opened
and the committee of respondent No.1, which includes Chief Executive Officer and Chief Engineer of
the IDA, decided to award the work to the respondent No.3 - M/s. P.C. Snehal Construction Co. The
aforesaid proposal was accepted by the Board vide resolution No.141 on 18.9.2015.
20. The petitioner on coming to know that the respondent No.3 have been declared as successful
bidder and his bid being accepted, challenged the said
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W.P. No.4448/2015 action by filing the present writ petition on 3.7.2015. The department
immediately on 8.7.2015, ie., after receipt of show cause notice from the Court accepted the proposal
vide board resolution No.141 on 18.9.2015 and issued letter of acceptance on 3.12.2015 and
thereafter, executed an agreement on 18.12.2015, but no work order has been issued in favour of the
respondent No.3, since the matter is sub- judice.
21. It is also submitted by the department that the law related to the award of contract by the State
and Public Sector Corporation has been reviewed by Hon'ble the Supreme Court from time to time
and held that the award of a contract , whether by a private party or a State, is to arrive at a decision
and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a
relaxation. Even when some defect is found in the decision-making process, the Court must exercise

its discretionary powers under
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W.P. No.4448/2015 Article 226 with great caution and should exercise it only in furtherance of the
public interest and not merely on the making out of a legal point. The Court should always keep the
larger public interest in mind in order to decide whether its intervention is called for or not. Only
when it comes to a conclusion that overwhelming public interest requires interference, the Court
should interfere. They placed reliance in the case of Master Marine Services (P) Ltd v/s. Metcalfe &
Hodgkinson (P) Ltd & Anr. reported as 2005 (6) SCC 138, Tata Cellular v/s. Union of India reported
as 1994 (6) SCC 651, Director of Education & Ors. v/s. Educomp Datamatics Ltd. & Ors. reported as
2004 (4) SCC 19, Raunaq International Ltd. v/s. Arabia Construction Ltd. reported as 1999 (1) SCC
492 and the Division Bench of this Court in the case of Samruddha Buildcon Pvt. Ltd., Indore v/s.
Western Railways, Mumbai & Ors. reported as [2014 (3) M.P.L.J. 310 and submitted that the
principles of judicial review would
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W.P. No.4448/2015 apply to the exercise of contractual powers by the Government bodies in order
to prevent arbitrariness or favoritism. The scope of judicial review is open to judicial interference
only when it is arbitrary, discriminatory or bias, but not open to interference merely because court
feels that some other terms would have been more preferable. The decision to accept the tender or
award the contract is reached by process and negotiations through several tires and the Court does
not sit as a Court of appeal, but merely reviews the manner in which the decision was made. With
the aforesaid, it is submitted that the IDA has followed the terms and conditions of the NIT in letter
and spirit and since the petitioner was not having requisite eligibility criteria, therefore, the work
contract for construction of swimming pool was not awarded to the petitioner and the said decision
of the respondent No.1 is neither arbitrary, capricious nor actuated with malice and prayed for
dismissal of the writ petition.
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W.P. No.4448/2015
22. To counter the submissions of the learned counsel for the respondents, Shri Piyush Mathur,
learned Senior counsel for the petitioner submitted that other Government agencies have accounted
the work experience of the petitioner - Company and had allotted the work to the petitioner -
Company, on the strength of same set of documents. The Police Housing Corporation had issued a
tender notice wherein the petitioner - company had participated in the bid. The qualification
criteria, which is 1.17 of the bid and the petitioner - company was awarded the work order. The IDA
is adopting the discriminatory procedure and is interpreting the rules differently in the present case,
which cannot be allowed. He submitted that in the matter of entering into a contract, the State does
not stand on the same footing as a private person, who is free to enter into a contract with any
person he likes. The State, in exercise of its various functions, is governed by the mandate of Article

14 of
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W.P. No.4448/2015 the Constitution, which excludes arbitrariness in State action and requires the
State to act fairly and reasonably. The action of the State in the matter of award of a contract has to
satisfy this criterion. Moreover, a contract would either involve expenditure from the State
exchequer or augmentation of public revenue and consequently, the discretion in the matter of
selection of the person for award of the contract has to be exercised keeping in view the public
interest involved in such selection. Therefore, while dealing with the public, whether by way of
giving jobs or entering into contracts or issuing quotas or licences or granting other forms of
largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal
with any person it pleases, but its action must be in conformity with the standards or norms, which
are not arbitrary, irrational, or irrelevant. The Director of the petitioner - company was working
partner erstwhile firm M/s. Jethanand Arjundas & Sons
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W.P. No.4448/2015 and he was having 33.33% partnership and as per Clause 4.1 of qualification
criteria, he was required to posses the experience atleast having executed and completed one
assignment / work of some nature and magnitude, by himself for least 40% of the tender amount or
he must have completed one single civil project amounting atleast to tender document. As per
certificate (Annexure P/5) of M/s. Jethanand Arjundas & Sons - firm had completed the single work
of one single contract of 45.40 Crores on 30.5.2013 and as per order of Government of M.P., the
petitioner is entitled to use financial experience credential to the extend of 33.33% equal to
proportionate share of the partner in the erstwhile firm, which comes more than 13 Crores and as
per instructions/ circular of Government of M.P., PWD department dated 29.3.2011, the petitioner
had executed the single work equal to the tender value of Rs.11.87 Crores. It is nowhere, stated by
the department in their return that
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W.P. No.4448/2015 they are not following the circular issued by the Government of M.P. PWD
department on 23.9.2011 because on the basis of the aforesaid circular, the State Government, PWD
department of the State Government issued certificates of Class A contract to the petitioner as well
as other contractor and respondent No.3. He further submitted that as per Clause 4 of NIT, on
looking to the value of the contract, which has been mentioned in the NIT, the Committee of the IDA
shall take a decision to accept or not to accept the technical bid. In the present case, the IDA has
adopted a noble method by referring the matter to the Chartered Accountant for financial appraisal
report for PQBD and on the basis of report of chartered accountant, decided to exclude the
petitioner and rejected his technical bid because, he met an offer of 5.6% below SOR whereas,
respondent No.1, who was second lowest, he met an offer of above 2.49% of above SOR. Otherwise,
they have to award the work to

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W.P. No.4448/2015 the petitioner - company.
23. Similar issue was cropped up in the matter of New Horizons Ltd & Anr. v/s. Union of India &
Ors., reported as 1995 (1) SCC 478 wherein, it has been held that, even if it be assumed that the
requirement regarding experience as set out in the advertisement inviting tenders was a condition
about eligibility for consideration of the tender, the said requirement regarding experience cannot
be construed to mean that the said experience should be of the tenderer in his name only and held
that the decision of the tender evaluation committee to exclude the tender of NHL New Horizons
Ltd (petitioner therein) from consideration was, therefore, not warranted by the terms and
conditions for submission of tender as contained in the notice for inviting sealed tenders under
which the matter of past experience has to be considered after the tender has otherwise been found
to be suitable for acceptance and a tender is not liable
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W.P. No.4448/2015 to be rejected at the threshold without consideration on the ground that the
tenderer lacks experience. Para 22, 23, 27, 31 and 40, are relevant which reads as under :-
22. In the said notice the expressions 'tenderer' and "successful tenderer" have been
used. While the expression 'tenderer' has been used in paragraphs 5, 7, 11 and 14, the
expression "successful tenderer" is used in paragraphs 7, 9(a), 10 and 12. Since
paragraph 10 provides for execution of the agreement by the successful tenderer, the
said expression is intended to mean the tenderer whose tender has been found
suitable for acceptance. The use of the expression "successful tenderer" instead of the
expression 'tenderer' in paragraph 12, therefore, indicates that the documentary
proof, by way of credentials of past experience, has to be submitted after the tender
has been considered and is found suitable for acceptance by the concerned
authorities. This would mean that the past experience is a matter which is to be
considered after the tender has been examined and evaluated and the tenderer whose
tender is found acceptable is required to submit documentary proof regarding his
past experience. In other words, a tender is
------ 44 ------
W.P. No.4448/2015 not liable to be excluded from consideration on the ground of

non-
eligibility on account of lack of past experience. This inference is strengthened by paragraphs 8 and
11 of the notice dated 26-4-1993,. In paragraph 8 it is provided that a tender is liable for summary
rejection if it is submitted without the Demand Draft of Rs 5,00,000. Similarly in paragraph 11 it is
provided that tender is liable to be excluded from consideration if the income tax clearance
certificate is not furnished with the tender. There is no similar provision for excluding from

consideration a tender' on the ground of failure to furnish with the tender the required material by
way of credentials of past experience. It means that the matter of past experience has to be
considered after the tender has otherwise been found to be suitable for acceptance and a tender is
not liable to be rejected at the threshold without consideration on the ground that the tenderer lacks
experience. The decision of the Tender Evaluation Committee to exclude the tender of NHL from
consideration was, therefore, not warranted by the terms and conditions for submission of tender as
contained in the notice for inviting sealed tenders dated 26-4-1993.
23. Even if it be assumed that the requirement regarding experience as set out in the advertisement
dated 22-4-
------ 44 ------
W.P. No.4448/2015 1993 inviting tenders is a condition about eligibility for

consideration of the tender, though we find no basis for the same, the said
requirement regarding experience cannot be construed to mean that the said
experience should be of the tenderer in his name only. It is possible to visualise a
situation where a person having past experience has entered into a partnership and
the tender has been submitted in the name of the partnership firm which may not
have any past experience in its own name. That does not mean that the earlier
experience of one of the partners of the firm cannot be taken into consideration.
Similarly, a company incorporated under the Companies Act having past experience
may undergo reorganisation as a result of merger or amalgamation with another
company which may have no such past experience and the tender is submitted in the
name of the reorganised company. It could not be the purport of the requirement
about experience that the experience of the company which has merged into the
reorganised company cannot be taken into consideration because the tender has not
been submitted in its name and has been submitted in the name of the reorganised
company which does not have experience in its name.
Conversely there may be a split in a company and persons looking after a particular field of the
business of the
------ 44 ------
W.P. No.4448/2015 company form a new company after leaving it. The new company, though
having persons with experience in the field, has no experience in its name while the original
company having experience in its name lacks persons with experience. The requirement regarding
experience does not mean that the offer of the original company must be considered because it has
experience in its name though it does not have experienced persons with it and ignore the offer of
the new company because it does not have experience in its name though it has persons having
experience in the field. While considering the requirement regarding experience it has to be home in
mind that the said requirement is contained in a document inviting offers for a commercial
transaction. The terms and conditions of such a document have to be construed from the standpoint

of a prudent businessman. When a businessman enters into a contract whereunder some work is to
be performed he seeks to assure himself about the credentials of the person who is to be entrusted
with the performance of the work. Such credentials are to be examined from a commercial point of
view which means that if the contract is to be entered with a company he will look into the
background of the company and the persons who are in control of the same and their capacity to
execute tile work. He would go not by
------ 44 ------
W.P. No.4448/2015 the name of the company but by the persons behind the company. While
keeping in view the past experience he would also take note of the present state of affairs and the
equipment and resources at the disposal of the company. The same has to be the approach of the
authorities while considering a tender received in response to the advertisement issued on
22-4-1993. This would require that first the terms of the offer must be examined and if they are
found satisfactory the next step would be to consider the credentials of the tenderer and his ability
to perform the work to be entrusted. For judging the credentials past experience will have to be
considered along with the present state of equipment and resources available with the tenderer. Past
experience may not be of much help if the machinery arid equipment is outdated. Conversely lack of
experience may be made good by improved technology arid better equipment. The advertisement
dated 22-4-1993 when read with the notice for inviting tenders dated 26-4- 1993 does not preclude
adoption of this course of action. If the Tender Evaluation Committee had adopted this approach
and had examined the tender of NHL in this perspective it would have found that NHL, being a joint
venture, has access to the benefit of the resources and strength of its parent/owning companies as
well as to the experience
------ 44 ------
W.P. No.4448/2015 in database management, sales and publishing of its parent group companies
because after reorganisation of the Company in 1992 60% of the share capital of NHL is owned by
Indian group of companies namely, TPI, LMI, WML, etc. and Mr Aroon Purie and 40% of the share
capital is owned by IIPL a wholly-owned subsidiary of Singapore Telecom which was established in
1967 and is having long experience in publishing the Singapore telephone directory with yellow
pages and other directories. Moreover in the tender it was specifically stated that IIPL will be
providing its unique integrated directory management system along with the expertise of its
managers and that the managers will be actively involved in the project both out of Singapore and
resident in India.
27. The conclusion would not be different even if the matter is approached purely from the legal
standpoint. It cannot be disputed that, in law, a company is a legal entity distinct from its members.
It was so laid down by the House of Lords in 1897 in the leading case of Salomon v.
Salomon & Co.8 Ever since this decision has been followed by the courts in England as well as in this
country. But there have been inroads in the doctrine of corporate personality propounded in the said
decision by

------ 44 ------
W.P. No.4448/2015 statutory provisions as well as by judicial pronouncements. By the process,

commonly described as "lifting the veil", the law either goes behind the corporate personality to the
individual members or ignores the separate personality of each company in favour of the economic
entity constituted by a group of associated companies. This course is adopted when it is found that
the principle of corporate personality is too flagrantly opposed to justice, convenience or the interest
of the Revenue. (See : Gower's Principles of Modem Company Law, 4th Edn., p.
112.) This concept, which is described as "piercing the veil" in the United States, has been thus put
by Sanborn, J. in US v. Milwaukee Refrigerator Transit Co.9: "When the notion of legal entity is
used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard
the corporation as an association of persons."
31. In DHN Food Distributors Ltd. v. London Borough of Tower Hamlets12 the Court of Appeal was
dealing with three companies, out of which one was the holding company and the other two were its
subsidiaries. After quoting the views of Prof. Gower that "there is evidence of a general tendency to
ignore the separate legal entities of various companies within a group, and to look instead at the
economic entity of
------ 44 ------
W.P. No.4448/2015 the whole group" Lord Denning, M.R. has observed : "This group is virtually the
same as a partnership in which all the three companies are partners. They should not be treated
separately so as to be defeated on a technical point." (p.
467) In the same case, Goff, L.J. has said : "[T]his is a case in which one is entitled to look at the
realities of the situation and to pierce the corporate veil." (p.468) The observations of Shaw, L.J.
were to the following effect: "Why then should this relationship be ignored in a situation in which to
do so does not prevent abuse but would on the contrary result in what appears to be a denial of
justice?" (p.473).
In this case the holding company was held entitled to compensation for disturbance from premises
in its occupation on account of compulsory purchase of the property which belonged to one of the
subsidiaries and in which the holding company had no interest. This was a case in which the court
lifted the corporate veil so as to confer a benefit on the company.
40.Thus the approach from the legal standpoint also leads to the conclusion that for the purpose of
considering whether NHL has the experience as contemplated by the advertisement for inviting
tenders dated 22-4-1993, the experience of the constituents of NHL, i.e., the Indian group of
companies (TPI, LMI and WML) and the Singapore- based company, (IIPL) has
------ 44 ------

W.P. No.4448/2015 to be taken into consideration. As per the tender of NHL, one of its Indian
constituents (LMI) had printed and bound the telephone directories of Delhi and Bombay for the
years 1992 and its Singapore-based constituent (IIPL) has 25 years' experience in printing the
telephone directories with " yellow pages" in Singapore. The said experience has been ignored by the
Tender Evaluation Committee on an erroneous view that the said experience was not in the name of
NHL and that NHL did not fulfil the conditions about eligibility for the award of the contract. In
proceeding on that basis the Tender Evaluation Committee has misguided itself about the true legal
position as well as the terms and conditions prescribed for submission of tenders contained in the
notice for inviting tenders dated 26-4-1993. The non- consideration of the tender submitted by NHL
has resulted in acceptance of the tender of Respondent 4. The total amount of royalty offered by
Respondent 4 for three years was Rs 95 lakhs whereas NHL had offered Rs 459.90 lakhs, i.e., nearly
five times the amount offered by Respondent 4.
Having regard to this large margin in the amount of royalty offered by NHL and that offered by
Respondent 4, it must be held that decision of the Tender Evaluation Committee to refuse to
consider the tender of NHL and to accept the tender of Respondent 4
------ 44 ------
W.P. No.4448/2015 suffers from the vice of arbitrariness and irrationality and is liable to be
quashed.
24. Thereafter, in the year 2009, the Apex Court in the case of Ganpati RV-Talleres Alegria Track (P)
Ltd. v/s. Union of India, reported as 2009 (1) SCC 589, relying on the decision of New Horizons Ltd
& Anr. v/s. Union of India & Ors., (supra) has held that the view taken by the High Court that the
appellant did not fulfill the eligibility criteria was not correct. The appellant - committee was
directed to consider the bid of the appellant along with the two persons who had been selected and
take final decision.
25. Similarly, in the case of Comptroller & Auditor-General v/s. Kamlesh Vadilal Mehta reported as
2003 (2) SCC 349, the appellant therein challenged the order by which his tender was rejected on
the ground that he had not met eligibility criteria of the tender quoted by the respondents and,
therefore, its commercial bid will not be considered, the Apex
------ 44 ------
W.P. No.4448/2015 Court relying on the decision of the New Horizons Ltd & Anr. v/s. Union of
India & Ors., (supra) has held that the view taken by the High Court that the appellant did not fulfill
the eligibility criteria was not correct and directed the evaluation committee to consider the bid of
the appellant along with the two persons, who had been selected and take a final decision. Para 9 of
the judgment Comptroller & Auditor-General v/s. Kamlesh Vadilal Mehta is relevant which reads as
under :-

"The appellant insists that it is only a smaller group of Chartered Accountants firms
that would be eligible for being brought on the panel for audit of public sector
undertakings or government concerns. The audit work of public sector undertaking,
no doubt, is to be done by the qualified and efficient Chartered Accountants. Once a
person is qualified, experienced and efficient, it is difficult to understand how he
could be discriminated against only for the reason that he has chosen to act alone in
the professional career and has not been able to form a
------ 44 ------
W.P. No.4448/2015 partnership firm. The efficiency, as pointed out by the High
Court, springs from the personal experience, proficiency and personal capacities. It
is, therefore, not possible to link these characteristics and professional acumen to a
person or persons in a firm alone. A single individual as an auditor in a proprietary
concern can have such characteristics and professional acumen by himself and also
through the assistance of experienced auditor who could be in his services as
efficients as any partnership firm. It is often seen in many cases that some of the
partners of the partnership firm are sleeping partners with no professional duties to
discharge. A partnership concern is not a legal entity like company; it is a group of
individual partners. In a partnership firm, it is the partner who will be assisted in
carrying out the work but quite remains the eligible Chartered Accountant. It is the
same situation as in a proprietary concern where a Chartered Accountant would be
carrying on audit work all-in-one.
Merely because some of the Chartered Accountants have formed a partnership firm, it cannot be
assumed that they become more efficient for carrying out audit work than the individual Chartered
Accountant who forms proprietary
------ 44 ------
W.P. No.4448/2015 concern. It is, therefore, evident that the appellant himself erroneously
assumed that the partnership firms are more efficient than the proprietary concern in the matter of
audit of accounts of the public sector undertakings or of the government concerns."
26. In the case of Samruddha Buildcon Pvt. Ltd., Indore v/s. Western Railways, Mumbai & Ors.
(supra), the Western Railway has floated a tender inviting bids for construction of Inspection-cum-
Washing Pit Lines Facilities, including dismantling of existing pit line/track at Indore in connection
with Ratlam-Mhow (Phase-I) Gauge Conversion Project. In the aforesaid case, as per Clause 2.2.1 of
the tender document, there was no provision for relaxation of the condition, so as to include
experience gained by the Director of the tenderor, the company in the capacity of the partner in the
partnership of the firm. The Division Bench held that the amount received by the partnership firm,
cannot be said to be the amount
------ 44 ------

W.P. No.4448/2015 received by the petitioner - company for the purposes of Clause 2.2.1 (b), as it is
not the case of the petitioner - company that the aforesaid amount received by the said partner of
the partnership firm was given to the petitioner - company and, therefore, the Division Bench has
held that the petitioner - company is lacking in the experience as also has failed to establish that it
has itself received the amount to the extent of 150% of the advertised value as provided under
sub-clause (b) of Clause 2.2.1, from the partnership firm and dismissed the writ petition by holding
that no case for judicial interference in the matter is made out.
27. The factual matrix are not in dispute. It is not in dispute that Shri Mahesh Hassanandani, one of
the Director of the Company was working partner of partnership firm M/s. Jethanand Arjundas &
Sons. It is also not in dispute that the petitioner - company is a registered contractor for execution of
Class A civil
------ 44 ------
W.P. No.4448/2015 works. It is also not in dispute that petitioner was partner of a registered firm
M/s. Jethanand Arjundas & Sons and the said firm has executed the work of 45.40 Crores on
30.5.2013. In view of the law laid down by the Apex Court in the in the matters of New Horizons Ltd
& Anr. v/s. Union of India & Ors. (supra), Comptroller & Auditor-General v/s. Kamlesh Vadilal
Mehta (supra) and Ganpati RV-Talleres Alegria Track (P) Ltd. v/s. Union of India (supra), there is
no provisions for exclusion of the petitioner's technical bid on the ground that he did not fulfill
Clause 4 of the special conditions. Thus, matter of past experience has to be considered after the
tender has otherwise been found to be suitable for acceptance and a tender is not liable to be
rejected at the threshold without consideration on the ground that the tenderer lacks experience.
The decision of the chartered accountant and tender evaluation committee to exclude the tender of
petitioner for consideration was therefore, not
------ 44 ------
W.P. No.4448/2015 warranted by terms and conditions for submission of tender as contained in the
notice for inviting sealed tenders on 23.5.2015. The law on the subject is well settled. It is difficult to
appreciate the stand taken by the IDA. We have not been able to appreciate as to how the IDA could
have brought in the question of the petitioner - company capability as a contractor or his past
experience in executing works, the reasoning given by the respondents No.1 and 2 is wholly
irrelevant to say the least. The IDA did not have any authority under NIT to refuse the certificate of
past experience or refuse the credentials of past experience when there is no dispute about carrying
out the work of the partnership firm of which the partner had carried out the work to the magnitude
of Rs.45.40 Crores and thus the petitioner is entitled to use financial and experience credential to
the extend of 33.33% equal to proportionate share of the petitioner in the erstwhile partnership
firm. Thus, we are of the view that the
------ 44 ------

W.P. No.4448/2015 decision making-process by which the petitioner was excluded was not
reasonable, rational under Article 14 of the Constitution of India. Admittedly, the petitioner's tender
was lowest and, therefore, work to the respondent No.3 can be granted only after excluding him and
thus, the respondents No.1 and 2 had adopted the method that the petitioner did not fulfill the
qualification criteria of technical bid. Thus, we are of the view that the view taken by the
respondents No.1 and 2 - department that petitioner - company did not fulfill the eligibility criteria
is incorrect. As per tender document, which prescribes the special conditions to be fulfilled for
submission of tender particularly Clause 4, we are of the view that the petitioner - company did not
fulfill the eligibility criteria is arbitrary and unreasonable. The respondents No.1 and 2 took
erroneous decision in consideration of totality of facts; the decision of IDA is not impartial. The rate
quoted by the petitioner was lowest. The IDA, which is an agency
------ 44 ------
W.P. No.4448/2015 of the Government is expected to protect the finances and it's action must be in
public interest.
28. For these reasons, we quash the order of rejection of technical bid and acceptance of tender of
respondent No.3 and direct the respondents No.1 and 2 to consider the bid of the petitioner -
company along with respondent No.3, who had been selected and shall take a final decision
expeditiously.
29. The petition is allowed to the extend as indicated herein above, but without any order as to cost.
(P.K. JAISWAL) (JARAT KUMAR JAIN)

JUDGE JUDGE
SS/-

Samruddha Buildcon Pvt. Ltd. ... Vs Indore Development Authority On 11 February, 2016

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Copyright:

Samruddha Buildcon Pvt. Ltd. ... Vs Indore Development Authority On 11 February, 2016

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Samruddha Buildcon Pvt. Ltd. ...

vs Indore Development Authority on 11 February, 2016

Madhya Pradesh High Court

HIGH COURT OF MADHYA PRADESH: BENCH AT

Writ Petition No.4448/2015

SAMRUDDHA BUILDCON PVT LTD.

INDORE DEVELOPMENT AUTHORITY

(Passed on this 11th day of February, 2016) PER P.K. JAISWAL, J :-

- e - registration system FOR CONSTRUCTION OF SWIMMING POOL COMPLEX OF

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 1

W.P. No.4448/2015 submitted by the tenderer in three separate envelops on-line :-

a) Scan copy of Earnest money Envelope A

c) Price bid Envelop C

"OPENING AND ACCEPTANCE OF TENDER:

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 2

- 1/3rd between the three partners at the closing of the

"8.Notwithstanding anything contained in this Indenture every partner and in

W.P. No.4448/2015 as under :-

7. Clause 4 of Special Conditions deals with qualification criteria :-

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 3

(a) For the purpose of above experience criteria,

W.P. No.4448/2015 performance of the contractor, consistent history of litigation

(i) Have been property prepared and signed.

(ii) Contain all the details called.

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 4

W.P. No.4448/2015 experience of atleast having executed and completed one

2 Const. Of 18/12/2009 2526.38/- 45.40 Revised 14.06.2013 May-2

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 5

JNNURM No. 341 dt. MIC

1 ................ .............. .............. .............. .............. ...........

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 6

2 Const. Of 18/12/2009 2526.38/- 45.40 Revised 14.06.2013 30-5-2013

Sr. Name of Tenderer Offer Remark Nos.

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 7

petitioner and his

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 8

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 9

fo"k; dzekad & 20

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 10

its discretionary powers under

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 11

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 12

W.P. No.4448/2015 the petitioner - company.

W.P. No.4448/2015 not liable to be excluded from consideration on the ground of

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 13

W.P. No.4448/2015 1993 inviting tenders is a condition about eligibility for

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 14

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 15

W.P. No.4448/2015 statutory provisions as well as by judicial pronouncements. By the process,

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 16

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 17

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 18

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 19

(P.K. JAISWAL) (JARAT KUMAR JAIN)

Indian Kanoon - http://indiankanoon.org/doc/83590320/ 20

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