Leighton Welspun Contractors Pvt Ltd Vs Oil and Natural Gas Corporation Limited and Another - Citation 1102743 - Court Judgment

Judgment:

S.J. Vazifdar, J.

The petitioner seeks a writ of certiorari to quash and set aside a Notification of Award (NOA) dated 19th December, 2012, issued by respondent No.1 Oil and Natural Gas Commission (hereinafter referred to as "ONGC") in favour of respondent No.2 Larsen and Toubro Limited (hereinafter referred to as "LandT") and an order directing ONGC to award the contract relating to the tender in question to it. The petitioner has also sought a declaration that respondent No.2 is not eligible to be awarded the contract and/or to further participate in the tender in question on account of it having allegedly breached the terms and conditions of the Instructions to Bidders and the Integrity Pact.

2. We will summarize the questions that fall for consideration after narrating the facts leading to the contract being awarded in favour of LandT.

3A. On 28th February, 2012, ONGC invited bids for the scope of work described in the bidding documents, which included surveys, design engineering, procurement fabrication, pre-commissioning and commissioning of the entire facilities relating to three unmanned well head platforms and laying of a composite cable. Annexed to the invitation for bids were the bidding documents containing the terms and conditions. The bidding documents were divided into four parts -Part-I to Part-IV being Instructions to Bidders, General Conditions of Contract, Appendices and Scope of Work Specifications and Drawings.

3B. The references in this judgment to the clauses will be to the clauses of the Instructions to Bidders unless otherwise indicated. We will refer to the relevant clauses in the invitation for bids and the various bidding documents while dealing with the issues that arise in the petition. Suffice it to state at this stage that the bids were to be tendered in a two envelope / bid system viz. the unpriced techno-contractual bid (hereinafter referred to as "the technical bid") and the price bid. The technical bids were to be opened on 10th May, 2012. The date of opening of the price bids was to be intimated after evaluation and shortlisting the technical bids.

3C. Clause 3 entitled bidders to pool their resources and experiences to form consortia / joint-ventures. The petitioner and Gulf Piping Company WLL (hereinafter referred to as "GPC") decided to pool their resources to bid for the project and to undertake the same if awarded the contract by forming a consortium. They, accordingly, entered into a pre-bid consortium agreement dated 9th March, 2012. The validity thereof is one of the disputes between the parties. The petitioner was the lead consortium member. We will however, for convenience, refer to the consortium as the petitioner.

4. On 18th May, 2012, the petitioner submitted a bid as per the bid system - the technical bid and the price bid. One of the main issues in this petition is the validity of the manner in which the petitioner filled in the price bid relating to the service tax component.

5. On 18th May, 2012, the technical bids were opened. The petitioner and five others, including LandT were declared to be techno-contractually qualified.

On 9th July, 2012, the price bids of the six qualified bidders were opened. According to the petitioner, it was ranked as L1, as it's bid was the lowest.

6. By a letter dated 27th July, 2012, ONGC requested the petitioner to confirm its unconditional acceptance of the extension of the likely date of placement of the NOA from 27th July, 2012, to 6th August, 2012, keeping all other terms and conditions of the offer, including the project completion date and the price quoted, unaltered. ONGC issued similar letters dated 6th August, 2012, 14th August, 2012, 3rd September, 2012, 17th September, 2012 26th September, 2012 and 12th October, 2012, requesting the petitioner's unconditional acceptance of extension of the likely date of placement of NOA for various periods stipulated therein. Finally, by a similar letter dated 25th October, 2012, ONGC requested the petitioner to confirm its unconditional acceptance of the extension of the likely date of placement of NOA from 6th October, 2012 to 9th November, 2012. The petitioner, by its various corresponding letters communicated its unconditional acceptance as required by ONGC. Â In between, ONGC had also, by a letter dated 4th September, 2012, requested the petitioner to confirm its unconditional acceptance of the validity of its bid upto 15th October, 2012, keeping all other terms and conditions of its offer unaltered. The petitioner by a reply, also dated 4th September, 2012, confirmed the same.

7. In the meanwhile, ONGC, by its letter dated 23rd August, 2012, requested the petitioner to depute for price negotiations the next day, its authorised representative, competent to take a decision on the spot. The petitioner's representative attended the meeting, which was rescheduled to 25th August, 2012, whereat according to the petitioner, he was informed that the petitioner was the L1 bidder. Further, according to the petitioner, at the said meeting, the price negotiations were concluded.

The petitioner, by a letter dated 25th August, 2012, addressed to ONGC, referred to what transpired at the meeting and thanked ONGC for declaring it the L1 bidder and for their on-going efforts to complete the approval process for a speedy award of the project. The petitioner stated that ONGC asked it to submit its views on the new rates proposed by ONGC; that it expressed its concerns about the process of rate negotiations being inconsistent with the defined process; that it, however, considered the matter to be an exceptional case and, accordingly, offered a revised rate only for this contract expressing the hope that the same would assist ONGC in granting a speedy approval of the project at the earliest.

8. During this period, the petitioner read several media reports regarding objections having been raised by LandT with ONGC regarding the petitioner's bid. The first news-item on record is of the Indian Oil and Gas publication dated 18th July, 2012. The news-items are relevant obviously not for the correctness of the contents thereof, but for ascertaining the petitioner's knowledge of the steps taken by the respondents in respect of LandTs representations to ONGC regarding the validity of the petitioner's bid. This is relevant in respect of the petitioner's contention that the impugned decision to award the contract to LandT was in violation of the rules of natural justice. They are also relevant for LandT claims to have acquired information about the petitioner's bid from the same.

The opinions obtained by respondent No.2 from Chartered Accountants and lawyers are also obviously irrelevant as regards the issues dealt with therein. They are, however, relevant as regards the petitioner's contentions that LandT had surreptitiously obtained information regarding its price bid. We will, therefore, refer to the news-items and the opinions at the relevant stage only for these limited purposes.

As the NOA had not been issued in it's favour, the petitioner addressed a letter dated 28th August, 2012, in which, apart from referring to some of the above facts, the petitioner referred to the news-items. The petitioner refuted LandTs contentions and pointed out that its bid was in conformity with ONGC's long-standing and time-tested bid evaluation criteria. This was obviously a reference to the fact that the petitioner had submitted almost identical bids which were found by ONGC to be responsive and ONGC had awarded the contracts to the petitioner. The petitioner also enclosed opinions of it's consultants in respect of the objections raised by LandT. As we noted earlier, even thereafter, ONGC requested the petitioner to keep it's bid pending and, in fact, on 23rd August, 2012, had called the petitioner for bid negotiations and on 25th October, 2012, negotiated the price with the petitioner.

9. The petitioner subsequently, again through media reports, learnt that LandT had made representations to the Independent External Monitors (IEM) appointed by ONGC, contending that the petitioner's bid was not in accordance with the terms and conditions stipulated in the bid documents and that ONGC had attended the hearing before the IEM to respond to the same. On 7th / 12th September, 2012, the IEM granted LandT a hearing in respect of it's objections. The IEM, however, never invited the petitioner to attend the hearing. Nor did the IEM even thereafter seek any clarification from the petitioner.

10. Under cover of a letter dated 21st September, 2012, the IEM tendered it's opinion in the matter to ONGC. The opinion refers to the contentions raised and opinions tendered by LandT and ONGC. ONGC unequivocally refuted every objection raised by LandT. The opinion records ONGC's contention that the alleged deviation in the petitioner's bid was a minor deviation which did not cause any change in the terms and conditions and status of the bid and that the petitioner's bid was neither vague nor uncertain. The IEM heard LandT's representatives. The petitioner was not even invited for the hearing. The IEM found the petitioner's bid to be contrary to the Bidding Documents on the grounds which have been raised by the respondents before us.

11. The petitioner came to know about IEM's report from two news-items dated 26th September, 2012 and 4th October, 2012. The report stated that the ONGC's Tender Committee, however, had reiterated its recommendations despite IEM's opinion and that the issue would now be considered by ONGC's Executive Purchase Committee (EPC) presided over by its Chairman.

12. The petitioner, by a letter dated 4th October, 2012, addressed to ONGC, stated that it understood that it's tender had been accepted by the ONGC's Tender Committee and referred to some of the above facts, including regarding the meeting for negotiating the price. The petitioner referred to the media reports; stated that it was not aware of the specific details or basis of the objections raised by LandT; that ONGC's Tender Committee had rejected LandT's objections; that it understood from the media reports that LandT had approached the IEM with the said objections and that LandT was granted a hearing by the IEM. The petitioner stated that if the media reports in this regard were correct, it entertained a reasonable belief that it would be called upon by the IEM to provide clarifications of LandT's objections. It is important to note that the petitioner referred to the media reports that the Tender Committee, even after considering IEM's opinion, recommended that there were no material deviations in the petitioner's bid; that the contract ought to be awarded to the petitioner and that the decision was now pending with the Executive Purchase Committee for a final decision. The petitioner also dealt with LandT's objections as reported in the news-items. As we have dealt with these issues, it is not necessary to refer to the same at this stage. The petitioner stated that it had not been called upon by the IEM to provide clarifications on LandT's objections and expressed concern that having been declared L1 in the tender process, the IEM published an opinion adverse to it without consulting it or seeking any clarification from it. The petitioner also contended that LandT was guilty of having indulged in unsolicited communication with ONGC thereby contravening clause 35 of the bidding instructions and that, therefore, LandT's bid should be summarily rejected irrespective of the circumstances and such unsolicited communication. The petitioner reiterated that should ONGC require any clarifications in relation to the petitioner's bid, it should be consulted directly. The petitioner objected even to any retender. It also raised a grievance regarding it's confidential information having been made available to other bidders.

13. As the petitioner did not receive any response to it's representation dated 4th October, 2012, it addressed further letters in this regard to ONGC dated 6th November, 2012, 22nd November, 2012 and 10th December, 2012. The petitioner did not receive a reply to any of these letters either. It is pertinent to note that even after the letter dated 4th October, 2012, ONGC requested the petitioner to extend the bid validity by the said letters dated 12th October, 2012 and 25th October, 2012. Obviously, therefore, upto this stage, ONGC had not taken a final decision in the matter and, in any event, had not communicated any such decision to the petitioner.

14. Ultimately, on 19th December, 2012, ONGC issued the impugned Notification of Award in favour of LandT. ONGC, in it's affidavit dated 24th January, 2013, contends that the contract was awarded to LandT based on the evaluation and re-evaluation of the bids; that the Tender Committee, on 15th December, 2012, recommended the award of the contract in favour of LandT and, accordingly, after detailed deliberations, a decision to that effect was taken by the EPC on 18th December, 2012. The EPC is the final authority in awarding contracts. ONGC relies upon a written delegation of powers in this regard to the EPC.

15. The questions that arise in this Writ Petition may now be summarized as under.

The respondents contend that the petitioner's bid contained essentially two major deviations which rendered it non-responsive. The petitioner, on the other hand, supported the validity of its bid as well as asailed LandT's entitlement to have it's bid considered on two grounds. The rival contentions in this regard are, in a nutshell, as follows.

(A) The respondent's contentions :-

(i) The first section of Appendix A-3 required bidders to mention the lumpsum price for :

(i) materials and services in item I.A;

(ii) taxes and duties in item I.B;

(iii) insurance in item I.C;

(iv) service tax in item I.D, and

(v) total lumpsum price i.e. I.A + I.B + I.C + I.D, in item I.E.

The petitioner in it's unpriced/technical bid against item I.D relating to service tax put the mark "X" indicating that it had quoted a price for the same in the price bid. However, against item I.D in the priced bid, the petitioner mentioned the price of service tax as "INR 0". In the technical bid, the petitioner endorsed a note : "Service tax is considered at 4.944% of contract value". The petitioner, in the priced bid endorsed a note : "Service Tax is considered at 4.944% of contract value but shown as NIL since the entire service tax may be discharged through CENVAT Credit." Relying upon various provisions of the Bidding Documents, the respondents contended that the petitioner was bound to mention the service tax in item I.D in the prescribed bid and having failed to do so, it's bid contained a major deviation.

The petitioner, on the other hand, contended that on a proper interpretation the service tax was bound to be included in the lumpsum price of material and services in item I.A as it intended discharging the entire service tax liability through CENVAT credit. The respondents denied that service tax was, in fact, included in item I.A. We have proceeded on the basis that the petitioner included service tax in item I.A.

(ii) The respondents also contended that the terms and conditions of the MOU between the petitioner and GPC were contrary to the requirements of the Bidding Documents.

(iii) The respondents further contended that in any event LandT's bid was lower on the material date and that LandT is, therefore, entitled to have the contract awarded in it's favour.

(B) The petitioner's contentions :-

(i) LandT's bid contained a deviation as it's technical bid indicated that it had quoted the price for insurance in item I.C in US Dollars and not Indian Rupees.

(ii) The petitioner also assailed LandT's right to have it's bid considered on the ground that LandT had obtained details regarding the petitioner's bid unscrupulously, thereby disentitling itself to be awarded the contract and/or to further participate in the tender in question in view of the terms and conditions of the Bidding Documents and the Integrity Pact executed by LandT as required thereunder.

(C). Thus, the following questions, therefore, fall for consideration in this Writ Petition :

I) Whether the price bid submitted by the petitioner was in accordance with the terms and conditions of the Bidding Documents? On this aspect, three questions arise :

a) Whether the bidders were required to mention the amount of service tax in item I.D or whether they were required to include the same in item I.A of Appendix A-3.?

b) Assuming that the service tax was to be mentioned in item I.D, whether the requirement to do so was to be complied with strictly?

c) Assuming that the amount of service tax was to be mentioned in item I.D, whether the failure to do so is a major deviation that must result in a rejection of the bid?

II. Whether the MOU entered into between the petitioner and its consortium partner - Gulf Piping Company WLL (GPC) was in accordance with clause 3 of the Instructions to Bidders:

III. Whether LandT's bid was in accordance with the terms and conditions of the tender documents :

IV. Whether LandT violated the Integrity Pact. If so, whether it's bid should be disqualified and/or the contract should be terminated:

V. Whether LandTs bid must be considered to be lower than the petitioner's bid in view of clause 23.4 of the Instructions to Bidders:

(D) We have answered Question I in favour of the respondents and the other questions against it.

I) Whether the price bid submitted by the petitioner was in accordance with the terms and conditions of the Bidding Documents?

16. The ONGC held the petitioner's bid to be non-responsive as it did not indicate the amount of the service tax in item I-D of Appendix A-3. Clause 10.2.2 requires the lumpsum prices to be quoted as per Appendix A-2 and stipulates that the breakup of the same shall be submitted as per Appendix A-3.

Appendix A-3 is the "PROFORMA FOR PRICE SCHEDULE". The first section or part thereof is divided into five segments viz. : I.A: Materials and Services, I.B: Taxes and Duties, I.C: Insurance, I.D: Service Tax and 1E: Total Lumpsum price (I.A + I.B + I.C + I.D). I.A) - "Material and Services" is, in turn, divided into 1.A.a -"Material" and I.A.b - "Services".

I.A.aand I.A.b were to be filled up separately in respect of each of the three well platforms of the project viz. :- i) HP well platform;

ii) HK well platform; and iii) HSD well platform.

The pricing of material and service were to be indicated in respect of nine items at serial Nos.(a) to (i) in column 1. The prices of each of the components for each serial number/item were to be indicated as per the following proforma.

âTABLEâ

Though 1.A.a and 1.A.b were to be filled up on separate pages, the proforma for material and services is identical.

The remaining part of Section 1 of Appendix A-3 is as under :-

SEALÂ BID PACKAGEÂ Â Â Â PART-III

ONGCÂ FORÂ Â Â Â Â APPENDICES

HR-II WELL PLATFORM PROJECT

Price (Indicate Currency/Currencies)

1B Taxes and DutiesÂ Â Â Imported Indian Component

1) Customs Duty on imported material/equipments Â NA Â Â X

covered under item A above

2) Â Excise Duty on materials/equipments/items Â NA Â Â X

covered under item A above

3) Â Custom Duty on "Constructional Plant and Â Â NA Â Â X

equipment" as per clause No.3.4.1.3

4) Â Custom Duty on "As Built Documents" as per Â NA Â Â X

clause No.3.4.1.4

Sub Total (1 B)Â Â Â Â NA Â Â X

1C Insurance

1) Builders all risk:

i) Up to a period of low/load-out of material and Â NA Â Â X

Structures etc. For allfacilities covered under

the Bidding Documents

ii) Â For performing remaining activities at offshore Â NA Â Â X

and onshore for all facilities covered in the

Bidding Â Documents

2) Â In-transit insurance (excluding in-transitÂ Â Â NA Â Â X

insurance included in Material cost

at 'A' above).

3) Â Other insurance as per Clause 7.3 of General Â NA Â Â X

Conditions of Contract given in Bidding

Documents

Sub Total (1 C) Â Â Â Â Â NA Â Â X

Total (1A + 1B + 1C) Â Â Â Â NA Â Â X

1D Â Service Tax Â Â Â Â Â NA Â Â X

1E Â Total Lump sum price for execution of the entire scope of work as per Details in the bid document (1A + 1B + 1C + 1D)Â X Â Â X

16(A). The petitioner in the technical bid filled in column I.D as follows :-

1D Â Service Tax Â Â Â Â Â NA Â Â X

(B) The petitioner filled in column I.D in the price bid as follows :-

1D Â Service TaxÂ Â Â Â NA Â Â X

Service Tax is considered at 4.944% of contract Â value but shown as NIL since the entire service tax may be discharged through CENVAT Credit)

(C) Section VI of Appendix A-3 required the bidders to mention the details of certain taxes and duties including service tax for adjustment of the Contract Price in case of change in law.

"VI. CHANGE IN LAWS AND REGULATIONS (Refer clause 3.4 of GCC of tender Documents)

Laws, Acts, Rules, Regulations etc. and the tariffs thereof considered by the Bidder while estimating the incidence of taxes, duties, fees, charges, levies etc. Included in the Bidder's lumpsum prices for the works (as quoted in the Appendix A-3, 1-B) as per relevant provisions of General Conditions of Contract to be used for the purpose of adjustment of Contract Price in the event of change of Law in terms of Clause 7.6 of General Conditions of Contract are as under :

As regards service tax, the petitioner filled in the proforma provided under this section as follows :

ITEM Â Â BiddingÂ Laws/Acts/ Tariff indication of Tax/ Amount included in Â Documents Rules/Reg Duty /Fee /Charge / Â theÂ ClauseÂ ulationsÂ LevyÂ Â lumpsum price Â Reference Reference

3. Service Â 03/04/02 Â Finance Act Â Tariff and Rate of Tax: The service tax on

TaxÂ Â Â 1994Â 4.944% Taxable value composition basis

Â Â Â Â Â consider for service Â at the rate of 4.944%

Â Â Â Â Â Tax : Rs.354,435,952/- Â is Rs.354,435,952/-

Â Â Â Â Â but shown as NIL since Â but shown as NIL

Â Â Â Â Â the entire service tax Â since the entire

Â Â Â Â Â may be discharged Â service tax may be

Â Â Â Â Â through CENVAT Â Â discharged through

Â Â Â Â Â credit Â Â Â CENVATÂ credit

After the form, are Notes to Section VI. Note 2 is as follows :

"NOTE FOR (VI):......

2. The taxes and duties shown above shall tally with the same quoted in Lump sum price - I.B. and I-D Taxes and Duties."

17. The petitioner contends that it included the service tax arising on account of the output services rendered by it to the ONGC in item I.A i.e. prices in relation to material and services. It contends that the service tax was liable to be shown by it only in item I.A and not in item I.D as it had availed of CENVAT credit. Mr. Dwarkadas, the learned senior counsel appearing on behalf of the petitioner submitted that even assuming that the petitioner's bid in this regard was contrary to the terms of the bidding documents, it was a minor deviation which did not justify its bid being held ineligible / non-responsive. The respondents, on the other hand, contend that this was a major deviation as the bidders were bound to fill in Appendix A-3 strictly in accordance with the terms thereof and the petitioner's bid is liable to be rejected, as it had failed to do so. The respondents further contend that the petitioner had not, in fact, included the service tax in item I.A and the contention in this regard is an after-thought.

18. The following questions, therefore, arise in respect of this aspect of the matter :-

a) Whether the bidders were required to mention the amount of service tax in item I.D or whether they were required to include the same in item I.A of Appendix A-3.?

b) Assuming that the service tax was to be mentioned in item I.D, whether the requirement in this regard was to be complied with strictly?

c) Assuming that the amount of service tax was to be mentioned in item I.D, whether the failure to do so is a major deviation that must result in a rejection of the bid?

19. It is necessary first to note some of the provisions of the Bidding Documents relating to service tax and CENVAT. Under clause 12.8.1(a) service tax, if any, applicable on input services required to meet the scope of work, is to be borne by the bidders within their quoted prices. The bidder is also required to avail eligible CENVAT credit of tax/duty paid on input services/capital goods. Input and benefit of CENVAT credit is required to be passed on to ONGC and, accordingly, the bidders were required to quote the rates net of CENVAT credit i.e. gross value of service adjusted by CENVAT credit available to the bidder.

(A) We have set out clause 12.8.1(a)in its entirety later. Clause 1.2.8.1(b) reads as under :

"12.8.1(b) For Foreign bidder who does not have any fixed establishment or permanent address in India

Total lump sum price for foreign bidders shall be inclusive of Custom Duty and Excise Duty, if any.

Bidders are required to ascertain themselves, the prevailing rates of Customs and Excuse duties, as applicable on the scheduled date of submission of Price Bids / revised Price Bids (if any) and the Company would not undertake any responsibility whatsoever in this regard.

Bidder, who does not have any fixed establishment or permanent address in India, should not include the Service Tax in his quoted price. At present, for Works Contract Services, the works covered under the existing tenders are leviable to Service Tax. As per the relevant rules applicable for Works Contract Services, the Service Tax liability can be discharged under any of the following options and hence Service tax shall be loaded with lower of the two options available as under:

Option-I

Present rate of Service Tax as specified in section-66 of Finance Act 1994 including education cess is 10.30% (*). If the service component quoted by the bidder in his offer is upto 40% of the total contract value, the Company would pay service tax @ 10.30% (*) on the value of service indicated in the offer. Hence, under this option, service component quoted by the bidder will be loaded by 10.30% (*) of the value of service indicated in the offer.

Option -II

At present, composite rate of Service Tax under Works Contract Service including education cess is 4.12% (*). If the value of service quoted by the bidder in his offer is more than 40% of the total contract value, ONGC would pay service tax @ 4.12% (*) of the total contract value indicated in the offer. Hence, in such situation, total quoted value of bidder will be loaded by 4.12% (*) of total contract value towards service tax.

Bidders should invariably give a break-up of the material and service component in their price bid, failing which their offer shall be rejected straightway, as per BEC clause No.A.1.3.

If Customs Duty/Excise Duty/Sales Tax/ Service are being taken into account for the purpose of evaluation of bids than the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax as prevailing on the date of bid closing/ date of revised price bid closing, as the case may be, will be taken into consideration for the purpose of evaluation of bids. However, if there is any change in the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax after the date of bid closing/ date of revised price bid closing, but prior to award of the contract due to which there is any change in the original ranking of bidders, then the bidder who has emerged lowest based on the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax as prevailing on the date of bid closing/ bid submission/opening of revised prices would be considered for award of contract but subject to matching his prices with the Bidder who has emerged lowest as a result of modification in duties and taxes. In case originally evaluated L-1 bidder fails to match the price (with the bidder who emerges L-1 due to change in Duties) then the award of contract will go to the Bidder who subsequently emerges L-1 due to change in Duties.

In case of foreign bidder not having a fixed establishment or permanent address in India, Service Tax, if applicable and levied in future, shall be borne by Company.

(*) The rates of service tax indicated in the clause are the prevailing rates as applicable. However, for the purpose of evaluation, the rates as applicable on the date of submission of original or revised price bids (as the case may be) shall be considered.

(B) Clauses 3.4.1.7.1 and 3.4.2.1 of the General Conditions of Contract read as under :-

"3.4.1.7.1 CONCESSIONS PERMISSIBLE UNDER STATUTES

(a) Bidder, while quoting against this tender, must take cognizance of all concessions permissible under the statutes including the benefit under Central Sales Tax Act, 1956, failing which it will have to bear extra cost where Bidder does not avail exemptions/concessional rates of levies like customs duty, excise duty, VAT/sales tax, etc. ONGC will not take responsibility towards this. However, ONGC may provide necessary assistance, wherever possible, in this regard.

Bidders must also consider benefits of CENVAT credit under the CENVAT Credit Rules 2008 as amended from time to time, for excise duty, service tax etc against their Input materials/Services, while quoting the prices. Similarly, the benefits of input VAT credit against their Input materials, under the relevant VAT Act of the State, should also be duly considered by the Bidders while quoting the prices.

(b) Undertaking to provide necessary documents, for enabling ONGC to avail Input VAT credit and CENVAT credit benefits (wherever applicable),

Further, the Contractor shall undertake to provide all the necessary certificates / documents for enabling ONGC to avail Input VAT credit and CENVAT credit benefits (wherever applicable), in respect of the payments of VAT, Excise Duty, Service Tax etc. which are payable against the contract (if awarded). The Contractor should provide tax invoice issued under rule-4A of Service Tax for the Services; and tax invoice issued under Central Excise rule-11 (indicating education cess and Secondary and Higher Education Cess) for Excise Duty and tax invoice under respective State VAT Act for VAT separately for the indigenous goods. .............

3.4.2.1. CONTRACTOR, unless specified otherwise in the CONTRACT, shall bear all tax liabilities, duties, Govt. levies etc. including Service tax, customs duty, Corporate and personnel taxes levied or imposed on the CONTRACTOR on account of payments received by it from the CORPORATION for the work done under this CONTRACT. It shall be the responsibility of the CONTRACTOR to submit to the concerned Indian authorities, the returns and all other concerned documents required for this purpose and to comply in all respects with the requirements of the laws in this regard, in time.

CONTRACTOR shall provide all the necessary certificates / documents for enabling ONGC to avail Input VAT credit and CENVAT credit benefits in respect of the payments of VAT, Excise Duty, Service Tax etc. which are payable against the CONTRACT. The CONTRACTOR should provide tax invoice issued under rule-4A of Service Tax Rules for the Services (indicating service tax, education cess and Secondary and Higher Education Cess) and tax invoice issued under Central Excise rule-11 for Excise Duty (indicating excise duty education cess and Secondary and Higher Education Cess) and tax invoice under respective State VAT Act for VAT separately for the indigenous goods. Payment towards the components of Excise Duty, VAT, CVD, SAD, Service Tax etc shall be released by ONGC only against appropriate documents ie tax invoice/Bill of entry for availing CENVAT / VAT credit (as applicable). The tax invoices as per above provisions should invariably contain the following particulars:

(i) Name, Address and the Registration Number (under the relevant Tax Rules) of the Service Provider (Contractor).

(ii) Name and Address of the Service Receiver (Address of ONGC).

(iii) Description, Classification and Value of taxable service / goods and the amount of applicable tax (i.e. Service tax / Excise Duty / VAT - separately indicating education cess and Secondary and Higher Education Cess, wherever applicable)

In case of imported goods, contractor/supplier is required to provide original Bill of entry or copy of Bill of Entry duly attested by Custom authority which is required for availing CENVAT Credit."

Re. : a) :- Whether the bidders were required to mention the amount of service tax in item I.D or whether they were required to include the same in item I.A of Appendix A-3?

20. It would be convenient to set out the provisions of the Bidding Documents relied upon by the parties in this regard. In our view clauses 10.2, 10.5, 12.8.1(a) of the Instructions to Bidders, General Notes 1, 2 and 8 to Appendix A-3 (Section 1) and Appendix 6 Section A-A-13, 25(e) and Section C - C-7.1(a) (sub-paragraph 3) establish the respondents' case that the service tax was to be mentioned in item I.D and was not to be included in item I.A of Appendix A-3. Some of the other provisions also support their case, although not as clearly. None of them, however, militate against it. Mr. Dwarkadas's case mainly rests on clause 12.3(a) read with General Note 8 to Appendix A-3. We will deal with his argument after analyzing the other clauses.

(A) The clauses from Part I i.e. Instructions to Bidders are as follows:-

"10.2.2 The lumpsum prices shall be quoted by the bidder as per Appendix A-2 and the breakup of the same shall be submitted as per Appendix A-3 as provided in tender documents. ...........

10.5 The proposal form incorporating the schedule of prices is enclosed as Appendix A-3. For filling the Appendix A-3 the bidder should follow the instruction given therein. ....................

11.1 UNPRICED TECHNO-CONTRACTUAL BID .........

n) Copy of priced Commercial Bid with price column / figures duly blanked out.

11.2 PRICED COMMERCIAL BID

a) The lumpsum price for all the work described in the Bidding Documents shall be itemized as shown in Proforma Schedule for Prices given in Appendix A-3.

12.0 PRICES........

12.3 The bidder shall quote all his prices for all the facilities covered under this tender in a manner as shown in Appendix A-3 and as given at a) to c) below.

a) The lump sum prices for the facilities and Works described for the materials, fabrication, load out and transportation, taxes and duties, weather risk and services including vendor representatives during testing/pre commissioning of equipment and system as specified in part IV of the bidding document shall be tendered separately as described. The prices shall be shown in the Schedule of Prices under item I-A and I-B.

b) The lump sum price for Builder's all risk and In-Transit property Insurance shall be shown on the schedule of prices as item I.C.1 and I.C.2. All other insurance required as per the General Conditions of Contract shall be shown as Item I.C.3 on the Schedule of Prices.

c) The TOTAL LUMPSUM PRICE for the works as defined in the Bidding Documents shall be shown as item I.E of the Schedule of Prices. ............

12.8 DUTIES AND TAXES

12.8.1 (a) For Indian Bidder as well as Foreign bidder who have fixed establishment or permanent address in India.

Total lump sum price for Indian as well as foreign bidders shall be inclusive of Custom Duty, Excise Duty and Service Tax, if any.

Bidders are required to ascertain themselves, the prevailing rates of Customs Duty, Excise duty and Service Tax, as applicable on the scheduled date of submission of Price Bids/ revised Price Bids (if any) and the Company would not undertake any responsibility whatsoever in this regard.

Bidders should quote the rates giving complete break-up of all the material component and service component separately as per the price format, in their price bid, failing which their offers shall be rejected straightway, as per BEC clause No.A.1.3.

At present, under Works Contract Service, the works covered under the existing tenders are leviable to Service Tax. As per provisions under Works Contract Service, the Service Tax liability can be discharged under following options:...........

13.0 BID CURRENCIES

The bidders are to quote firm prices. They may bid in any currency (including Indian Rupees). Payment will be made accordingly. However, the payment towards Custom Duty and Excise Duty and Service Tax (wherever applicable) will be made by ONGC in Indian rupees at actuals limited to the amount indicated in their bid. In case of bidders indicating the custom duty in foreign currency, the foreign exchange rate at which actual payment is made by the contractor to the customs authorities will be used for regulating the custom duty reimbursement. In the case of bidders quoting the excise duty and service tax (wherever applicable) in foreign currency, the TT buying rate of State Bank of India on the date of invoice cum excise duty gate pass in the case of excise duty and on the date of payment in the case of service tax (wherever applicable) shall be used for regulating the reimbursement of excise duty and service tax. The freight and insurance elements must be quoted by Indian bidders in Indian Rupees only and payment will be made accordingly.

Currency once quoted will not be allowed to be changed."

(B). We set out the format of the "Proforma for Price Schedule" in Appendix A-3. Below the same are the following General Notes :-

"GENERAL NOTES

1. Bidder in his priced bid shall quote his price against all items wherever required, in the proforma of schedule of prices. For items where no price is applicable, may be quoted as NA.

2. Bidder shall retain 'x' and X marks in the Proforma Schedule of Prices in the unpriced (techno-contractual) Bid as a confirmation that he has quoted against that particular item. Bidder may indicate NA wherever prices not applicable. .............

7. All material/Equipment cost in A. i to iii above, shall be the CIF cost and shall include the cost of providing labour, services, and any other inputs etc. required for procurement of material and associated costs incidentals to delivery of material to the site including all taxes and duties except custom duty and excise duty which the bidder is liable directly to Indian Tax Authorities. CIF value against material is inclusive of landing charges, if any, and same shall be considered as assessed value for levy of Customs Duty. Bidder shall quote for the quantities of materials as per the description and requirement of the bid document.

8. Bidders to ascertain Custom duty and Excise duty and include in their offer, as applicable, and also to indicate the Custom duty, Excise duty and Service tax, which the bidder is liable directly to tax authorities, separately in 1.B and 1.D of Schedule of Prices. Reimbursement of Custom Duty / Excise Duty would, however, be made at actual in Indian Rupees upon submission of documentary proof of duty assessment and payment thereof and would further be limited to the amount of taxes/Duty indicated in price schedule. For Service tax the payment will be made in Indian Rupees along with each invoice as stipulated in Appendix A-10 wherever applicable as per Rule 4A of Service Tax Act.

APPENDIX A-6

(BID EVALUATION CRITERIA (BEC)

HRP-II 3 WELL FOR PLATFORM PROJECT

SECTION - A: CRITERIA FOR ACCEPTANCE OF BIDS

The following requirements shall be strictly complied with, by the bidder failing which the bid will not be considered:

A-1) COMMERCIAL .....

3) Submission of prices shall be strictly in Proforma enclosed at Appendix A-3 as described in Clauses 12.0 and 13.0 of Part I of Volume I of Bidding Documents. ........

25) Offers of following kinds will be rejected: .....

d. Offers where prices are not firm and/ or with any qualifications.

e. offers which do not conform to ONGC's on line price format as given in the e-bidding engine.......

SECTION - C : CRITERIA FOR PRICE EVALUATION OF BIDS .....

C-1) Base Price Definition Total lump sum amount for the entire Scope of Work as per Bidding Documents including addendum(s), if any, shall be taken as a base price for the purpose of evaluation. The Lumpsum price given at Appendix A-3-I of bid documents will be the basis of evaluation......

C-7) Duties and Taxes.

C-7.1(a) For Indian Bidder as well as Foreign bidder who have fixed establishment or permanent address in India

Total lump sum price for Indian as well as foreign bidders shall be inclusive of Custom Duty, Excise Duty and Service Tax, if any.

SECTION-D: GENERAL

D-1: Exceptions/deviations if any, to tender terms, conditions and specifications are to be sorted out during Pre-Bid Conference (PBC), before submission of Bids. ONGC expects bidders to confirm compliance to tender terms, conditions and specifications which have been frozen after PBC, failing which the Bids are liable to be rejected.

D-2: Unless the Company seeks any clarifications, bidder shall not make any alteration / changes in the bid after the closing date and time of the tender. Unsolicited correspondences from the bidders will not be considered.

D-3: In case of any contradiction between BEC and a clause appearing elsewhere in the Bidding Documents, provisions of BEC shall supersede all such clauses.

D-4: Any other point, which arises at the time of evaluation, shall be decided by the Company under intimation to the bidders."

21. Clause 10.2.2 stipulates that the breakup of the lumpsum price "shall" be submitted as per Appendix A-3. One of the components of the total lumpsum price in item I.E of Appendix A-3 is the service tax mentioned in item I.D. Clause 10.5 states that the bidder "should" follow the instructions in Appendix A-3, which includes filling up items in I.A to I.E. The language of these clauses makes compliance with the requirements thereof mandatory.

22. General Notes, 1, 2 and 8 of Appendix A-3 also support the respondents' submission that the amount of service tax was to be mentioned in item I.D of Appendix A-3.

General Note 1 requires the bidder in his price bid to quote his price "against all items wherever required in the proforma of schedule of prices". The proforma of schedule of prices is Appendix A-3. In fact, the title of Appendix-3 is "PROFORMA FOR PRICE SCHEDULE". I.A to I.E are items of Appendix A-3. I.A to I.E are in the Bid Documents referred to as items. For instance the second sentence of clause 12.3(a) is : "The prices shall be shown in the Schedule of Prices under item I-A and I-B." Similarly, clauses 12.3(b) and (c) refer to item I.C and item I.E respectively. Thus, I.D in Appendix-3 is an item. Further service tax is a "price" of the item of service tax. General Note 1, therefore, required it to be quoted "wherever required in the proforma of schedule of prices i.e. Appendix A-3". Item I.D to Appendix A-3 refers to service tax. It follows therefore that General Note required the "price" i.e. the amount of service tax, mentioned in item ID of Appendix A-3.

23. These and other provisions also indicate that the various prices to be mentioned "wherever required" in Appendix A-3. Thus, if a price is required to be mentioned in more than one place in Appendix A-3, it must be mentioned in each of the places. The petitioner having mentioned Service Tax in schedule VI of Appendix A-3, therefore, did not absolve it of the requirement to also mention it in item I.D of Appendix A-3. That ONGC may have chosen this to constitute substantial compliance is another matter.

24. Indeed in the proforma of the technical bid, the petitioner retained the mark "X" against item I.D confirming thereby in view of General Note 2, that it had quoted the amount of service tax in the price bid.

Mr. Dwarkadas however, submitted that the service tax was included in item I.A and therefore, the petitioner having placed the mark "X" did not violate any term. The mark "X" did not indicate that the amount of service tax was mentioned against item I.D. It merely indicated that the service tax was mentioned somewhere in the price bid and indeed it was in item I-A of Appendix A-3.

However, as the Advocate General Mr. D.J. Khambatta rightly indicated General Note.2 requires the mark "X" to be retained as confirmation that the bidder had quoted the cost against that particular "item" meaning thereby item I.A or I.B or I.C or I.D or I-E and not generally anywhere in Appendix A-3.

25. General Note 8 has been set out earlier. It would be convenient to reproduce General Note 8 only insofar as it relates to the service tax. It would then read as under :-

"8. Bidders to indicate ....... Service tax, which the bidder is liable directly to tax authorities, separately in 1.D of Schedule of Prices. ............ For Service tax the payment will be made in Indian Rupees along with each invoice as stipulated in Appendix A-10 wherever applicable as per Rule 4A of Service Tax Act." (emphasis supplied)

Â Nothing could be clearer. The first sentence of General Note 8 makes it clear that the bidder is to indicate the service tax in item I.D of the schedule of prices. It did not entitle the bidders to include service tax in any other portion of Appendix A-3. The bidder must indicate the service tax "separately in I.D of Schedule of Prices". Subject to Mr. Dwarkadas's submission, which we will refer to later, the petitioner ought to have mentioned the service tax in item I.D.

26. Appendix A-6 Section A-1(3) and 25(e) also require the prices to be strictly as per Appendix A-3. The language is clear and not ambiguous. It does not permit service tax to be included in item I.A. It requires it to be mentioned as per the proforma at Appendix A-3 i.e. in item I.D thereof.

27. Similarly, the third sub-paragraph of Appendix 6, Section C -C-7 1(a) also required the bidders to quote the rates, giving complete breakup of all the "material component" and "service component" separately as per the price format. The breakup, therefore, is not merely to be in respect of the rates for material and service, but for the material component and service component. Service tax would be a part of these components. A separate provision is made for the same in item I.D of the price format. There is nothing in this clause that permits the service tax to be mentioned in item I.A of Appendix A-3.

28. Where the Bidding Document required a particular item in Appendix A-3 to be mentioned and / or also to be mentioned under another item, it was specifically so provided. For instance, the first sub-paragraph of clause 12.8.1(a) required the "Total lump sum price .... to be inclusive of .... service tax ...". The total lumpsum price is to be mentioned in item I-E of Appendix A-3. Thus, service tax mentioned in item I.D was also required to be included in item I-E. This inclusion was specifically provided for. There is no such provision either in the said clause or in any other part of the Bidding Documents which required or permitted bidders to include service tax in any of the other items, including item I-A of Appendix A-3.

29. Clause 13, relied upon by Mr. Chagla, the learned senior counsel appearing on behalf of LandT however, is of no assistance in answering the question. Mr. Chagla relied upon Clause 13, as it limits the payment, inter-alia, of service tax to the actual amount indicated in the bid. If the amount of service tax is not mentioned in the bid, ONGC may well not be liable to pay the same. That, however, does not help in answering the question whether the service tax was to be included in item I.A or mentioned in item I.D of Appendix A-3. The consequence of not mentioning the service tax is another matter altogether, which would result in a dispute between ONGC and the successful bidder an aspect unconnected with the present issue.

30. Appendix-6, Section D, does not answer the question either. The term merely provides that the exceptions / deviations to tender terms and conditions and specifications are to be sorted out during Pre-Bid Conference (PBC) before submission of bids and that failure to comply with the tender terms and conditions is liable to result in the bids being rejected. The consequence mentioned in this term depends upon the answers to the question under consideration and does not answer the question.

31. Mr. Dwarkadas submitted that General Note 7 of Appendix A-3 is an indication that the service tax is not included in item I.D. General Note 7 of Appendix A-3 is of no relevance. It refers to the costs of material / equipment in the Appendix in respect of the three well platforms to be the CIF costs. It further provides that this cost shall include all costs required for procurement of the material and delivery thereof to the site including all taxes and duties except customs duty and exercise duty which bidder is liable to be paid directly to the Indian Tax Authority. The taxes are in respect of providing labour, services and other imports required for the procurement of the material and delivery thereof at the site. It has no reference to service tax.

32. This brings us to the most important part of the dispute between the parties. The clauses we have discussed so far, clearly establish the requirement of bidders to mention the service tax component in item I.D of Appendix A-3. Mr. Dwarkadas, however, submitted that clause 12.3(a) read with General Note 8 establishes the contrary.

33. Mr. Dwarkadas relied upon General Note 8 to Appendix A-3 and clause 12.3(a) in support of his contention that where a bidder avails of CENVAT credit, the amount of service tax is to be included in item I.A and not mentioned in item I-D. According to him only the amount of service tax paid in cash to the authorities is to be mentioned in item I.D.

He firstly relied upon the requirement in General Note 8 of a bidder to indicate the service tax that it is liable for "directly to the tax authorities separately in ....... I.D of schedule of prices". He submitted that the requirement to mention the amount of service tax in item I.D is only in cases where the service tax is to be paid "directly" to the tax authorities. The phrase "liable to be paid directly to the authorities" according to him, relates to the discharge of the liability of the service tax by payment in cash to the authorities and not where the liability is discharged by availing of CENVAT credit.

34. We do not find anything in General Note 8 or in the other provisions of the Bidding Documents that supports this contention. The term "directly" refers to the bidders' liability per-se as opposed to the liability being that of another. A bidder, liable to pay the service tax, is entitled to discharge the same either by payment of cash or by availing of the CENVAT credit that he may have. The mode of discharge of liability is irrelevant. ONGC's liability to reimburse the service tax on the output component is not dependent upon the mode of discharge of service tax by the bidder. This view does not render the word "directly" otiose. There may be situations or circumstances when a bidder is not liable to the authorities himself/directly for discharging the tax liabilities referred to therein. For instance, customs duty and excise duty may in certain circumstances be payable or may have been paid by the bidders suppliers directly to the tax authorities.

35. Nor do we find Mr. Dwarkadas's reliance upon clause 12.3(a) in this regard to be well founded. He submitted that under clause 12.3(a), the lumpsum price in item I.A of Appendix A-3 was to include the taxes and duties. He relied upon the fact that in the first sentence of clause 12.3.a, the lumpsum prices to be shown included "taxes and duties" which expression according to them would include service tax. This, he submitted, becomes evident in the second sentence which requires such prices to be shown in items I.A and I.B.

36. Service tax is not mentioned in the first sentence. Mr. Dwarkadas, however, contended that it is included in the words "taxes and duties". That is not so. The phrase "taxes and duties", as Mr. Chagla rightly contended, refers to item I.B of Appendix A-3 which is also captioned "Taxes and Duties."

37. The error in Mr. Dwarkadas's submission arises on account of misconstruing the first sentence of clause 12.3(a). The opening phrase "Lumpsum Prices" in clauses 12.3(a) and 12.3(b) does not refer to "Total lumpsum price" referred to in item I-E of Appendix A-3. They merely refer to lumpsum prices of the categories referred to therein viz. I.A and I.B and I.C. It is necessary, therefore, to analyze the first sentence.

Â The lumpsum prices referred to in the first sentence are in respect of the items specified therein and fall in three categories as under :-

(i) facilities and works described for the materials, fabrication, load out and transportation,

(ii) taxes and duties, and

(iii) weather risk and services including vendor representatives during testing/pre-commissioning of equipments and system as specified in part IV of the bidding documents.

38. The first part relates to "facilities and works described for materials, fabrication, load out and transportation". This part clearly refers only to item I.A. This is clearer, inter-alia, from the fact that the proforma for price schedule (Appendix A-3) relating to item I.A refers to fabrication in columns 9 and 10 - load out in column 11 and transportation in column 11. The facilities and works are described for materials in the other columns. There is no mention in this part of service tax.

The second part of the first sentence comprises of the words "taxes and duties" which refers to item I.B. "Taxes and Duties" are, in fact, the precise words of item I.D. As we will see in a moment, this is consistent with the second sentence.

The third part of the first sentence refers to weather risk and services as specified in part IV of the Bidding Documents. Part IV admittedly does not deal with service tax. The third part viz. weather risk and services including vendor's representative during testing/pre-commissioning of equipment and system as specified in part 1V of the Bidding Documents is in fact, covered by General Note 11 to Appendix A-3 which reads as under :-

"11. The cost of materials and services in A.(i) to (iii) above shall also include weather risk in-transit insurance from vendors sub-contractors' works to the contractors' yard, construction plant and equipments, its mobilization / demobilization, breakdown etc."

The same is, therefore, liable to be included in Section I-A. Thus, all three parts of the first sentence of clause 12.3(a) fall either under section I-A or I-B. The first sentence of clause 12.3(a), therefore, deals exclusively with items I.A and I.B of Appendix A-3. The sentence ends by providing that the lump sum prices in respect of these three parts "shall be tendered separately as described". Thus, these three parts must be tendered separately to wit without including therein any other price including service tax.

39(A). The second sentence in clause 12.3(a) then immediately falls into place. It is consistent with the first for it provides that the prices shall be shown in the schedule of prices under item I.A and I.B. As the first sentence in clause 12.3(a) deals only with the items at I.A and I.B, the second sentence obviously provides that the prices shall be shown in the schedule of prices under items I.A and I.B. As service tax is not referred to in the first sentence, item I.D is not referred to in the second sentence.

(B). Even the price of insurance is not shown in clause 12.3(a) and, therefore, there is no reference to item I.C in the second sentence therein. Insurance is referred to in clause 12.3(b). Clause 12.3(b), therefore, provides that the lump sum prices of the insurance referred to therein shall be shown on the schedule of prices at item I.C.1, I.C.2 and I.C.3 on the Schedule of Prices - Appendix A-3.

40. It was probably not necessary for clause 12.3 to have a similar provision for service tax because the service tax is a single composite component, whereas the price of items I.A, I.B and I.C are divided into various components / categories, as is evident from Appendix A-3 set out earlier.

41. Once Mr. Dwarkadas's argument based on General Note 8 of Appendix A-3 and clause 12.3 of Instructions to Bidders is rejected, it follows from the other clauses that we have discussed that the amount of service tax was required to be mentioned in item I.D and was not to be included in item I.A of Appendix A-3.

Re. (b) Assuming that the service tax was to be mentioned in I.D, whether the requirement in this regard was to be complied with strictly?

42. In view of what we have held we proceed on the basis that the amount of service tax was to be mentioned in item 1.D and not included in item 1.A of Appendix A-3.

43. Clause 10.2.2 provided that the breakup of the lumpsum prices "shall" be submitted as per Appendix A-3. Clause 11.2 provides that the lumpsum prices for all works described in the Bidding Documents "shall" be itemized and shown in the proforma schedule for prices given in Appendix A-3. The term "shall" in these clauses indicates that the prices were to be itemized as per Appendix A-3. No exception of the sort suggested by Mr. Dwarkadas in cases where the service tax is paid by availing of CENVAT credit is provided.

44(A). A similar provision is made under clause 12.8.1.a, which reads as under :-

"12.8 DUTIES AND TAXES

12.8.1 (a) For Indian Bidder as well as Foreign bidder who have fixed establishment or permanent address in India.

Total lump sum price for Indian as well as foreign bidders shall be inclusive of Custom Duty, Excise Duty and Service Tax, if any.

Option-I

Pay Service Tax at the rate specified in section-66 of Finance Act 1994 only on the value of service quoted in the bid. Present rate of Service Tax as specified in section-66 including education cess is 10.30% (*).

Option-II

Under Composite Scheme, pay service tax at the composite rate as specified under Works Contract Service on total contract value (including value of material). At present, composite rate of Service Tax under Works Contract Service including education cess is 4.12%(*).

*The rates of service tax indicated in the clause are the prevailing rates as applicable. However, for the purpose of evaluation, the rates as applicable on the date of submission of original or revised price bids (as the case may be) shall be considered.

Considering the value of material and service component in his price bid, the bidders may go in for the composite scheme i.e. Option-II, if the Service Component provided in relation to the execution of a Works Contract is more than 40% of the gross amount charges for the Works Contract. Bidders should note that CENVAT credit shall not be available on inputs while exercising this option.

Considering the above, bidder may choose, as to under which option he should submit his offer. Bidder should also note that option once exercised can not be changed later on.

Service Tax, if any, applicable on input services required to meet the scope of work will be borne by the bidder within their quoted prices. The bidder must avail eligible CENVAT credit of tax/ duty paid on input services /capital goods/ Inputs and benefit of CENVAT credit should be passed on to ONGC. Accordingly, the bidder must quote rate(s) net of CENVAT credit i.e. gross value of service adjusted by CENVAT credit available to the bidder.

If Customs Duty/Excise Duty/Sales Tax / Service Tax are being taken into account for the purpose of evaluation of bids then the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax as prevailing on the date of bid closing/date of revised price bid closing, as the case may be, will be taken into consideration for the propose of evaluation of bids. However, if there is any change in the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax after the date of bid closing/date of revised price bid closing but prior to award of the contract due to which there is any change in the original ranking of bidders, then the bidder who has emerged lowest based on the rate of Customs Duty/Excise Duty/Sales Tax / Service Tax as prevailing on the date of bid closing/bid submission /opening of revised prices would be considered for award of contract but subject to matching his prices with the bidder who has emerged lowest as a result of modification in duties and taxes. In case originally evaluated L-1 bidder fails to match the price (with the bidder who emerges L-1 due to change in Duties), then the award of contract will go to the bidder who subsequently emerges L-1 due to change in Duties. However, due to any subsequent change in law, liability of the Company as regards to payment of duties and taxes would be governed by Clause 7.6 of General Conditions of Contract on "Subsequent Legislation". VAT/Sales Tax on works/Work Contract Tax (Central or State), if any applicable for Offshore Works will not be taken into account for the purpose of evaluation and would be paid to Indian bidders at actuals (upon submission of relevant documents), if applicable."

(B) The third paragraph thereof provides that the bidders "should" quote the rates giving complete breakup of all the material components and service components separately as per the price format, failing which their offers "shall be rejected straightaway" as per (Bid Evaluation Criteria) BEC clause A.1.3. The extent of strictness in adhering to the format by the use of the term "should" is emphasised, indeed enhanced by providing the drastic consequence that a non-responsive bid "shall be rejected straightaway".

45. Clause A(1).3 of BEC reads as under :-

" APPENDIX A-6

(BID EVALUATION CRITERIA (BEC)

HRP-II 3 WELL FOR PLATFORM PROJECT

SECTION - A: CRITERIA FOR ACCEPTANCE OF BIDS

The following requirements shall be strictly complied with, by the bidder failing which the bid will not be considered:

A-1) COMMERCIAL.....

3) Submission of prices shall be strictly in Proforma enclosed at Appendix A-3 as described in Clauses 12.0 and 13.0 of Part I of Volume I of Bidding Documents."

This is probably the most clear indication of the requirement of strict compliance regarding the submission of prices as per the proforma enclosed as Appendix A-3. Section A-1.3 provides that the prices "shall be strictly" in the proforma enclosed as Appendix A-3. What is more important are the opening words of Section A which provide that the requirement is to be strictly complied with "failing which the bid will not be considered."

46. Though clause 3 of the Invitation For Bids and clauses 1.4 and 23 of the Instructions to Bidders are not by themselves decisive of the question of whether or not strict compliance was required in filling Appendix A-3, read with the other provisions of the Bidding Document, they support the respondents' contention in this regard. This is for the reason that they indicate the urgency of the matter and keeping that in mind, ONGC justifiably desired an absence of any ambiguity or vagueness.

47. Clause 1.4 of the Instructions to Bidders provides the scheduled Completion Date(s) for the works described in the bidding documents. The likely date of Notification of Award (NOA) was 20.07.2012 and the three well head platforms were to be completed by 31st December, 2013, 31st January, 2014 and 28th February, 2014.

48. Clause 3 of the Invitation For Bids reads as under :-

"3.0 Resolution of Clarifications / Exceptions / Deviations to tender terms, Conditions and Specifications.

3.1 ONGC has to finalise its purchase within a limited time schedule. Therefore, it may not be feasible for ONGC to seek clarifications in respect of incomplete offers.

Prospective bidders are advised to ensure that their bids are complete in all respects and conform to ONGC's terms, conditions and bid evaluation criteria of the tender, for avoiding rejection of their offers.

3.2 In order to avoid clarification / confirmation after opening of bids, all the bidders must ensure that their bid is complete in all respects and conforms to tender terms and conditions, BEC and the specifications in toto failing which their bid would be straightaway rejected without seeking any clarifications on any exception/ deviation taken by the bidder in their bid. Bidder to ensure that after award of Work and during execution, the Contractor shall not seek to alter any agreed contractual terms, conditions and Specifications. In such an event, dealing with such Contractor for future tenders of the Company would be adversely affected."

49. Clause 23 is also relevant in this regard :

"23.0 EVALUATION

23.1 The Company wishes to finalize the award of work of the facilities covered under this Bidding Documents within a limited time schedule. ONGC expects bidders to confirm compliance to tender term, conditions and Specifications, which shall stand frozen after Pre-Bid Conference, failing which the Bids are liable to be rejected. Hence the bidders in their own interest are advised to submit their bids complete in all respects conforming to all terms and conditions of the bid document.

Bids shall be evaluated based on the information/documents available in the bid. Hence bidders are advised to ensure that they submit appropriate and relevant supporting documentation along with their proposal in the first instance itself. Bids not complying to the requirements of bid documents are liable to be rejected. Bidders are advised to fill up proforma A-9 carefully and provide reference to all relevant documents given in their bid offer..........."

50. Clause 23.1 indicates two things. Firstly, it indicates the need to complete the process within a limited time schedule. In all probability, it is for this reason that in clause 23.1 ONGC informed the bidders that their bids ought to conform to all the terms and conditions of the Bidding Documents, failing which, their bids were liable to be rejected. Appendix A-9, in turn, stipulated that the bidders ought to complete all the details "without any ambiguity" in the space provided or in the format/tables/annexure specifically asked for with the Appendix. Secondly it provides that bids submitted with incomplete details or no response against any query "shall be treated as non-responsive bids and shall be liable for rejection without any further opportunity". Thus, clause 23 and Appendix 9 at least entitled ONGC to reject the bids if they did not conform to the terms and conditions of the bid documents . 51. The Attorney General and Mr. Chagla also relied upon Appendix-9 to contend that if the bidder had any query or found any inconsistency between the various clauses in the bid documents he could always seek a clarification at the pre-bid conference. They stated that the petitioners did not raise any query as to whether the service tax ought to be included in item I.A or mentioned in item I.D of Appendix A-3.

Appendix A-9 referred to in clause 23.1 reads as under:-

"APPENDIX A-9

INFORMATION / CONFIRMATION / CLARIFICATIONS TO BE FURNISHED BY BIDDER

Technical evaluation of the bids shall be based on the information / details / confirmation provided by the bidder in response to the technical queries asked for in this Appendix. Hence bidders are advised to ensure that they submit complete details without any ambiguity in the space provided or in the format / tables / Annexure specifically asked for with this Appendix, along with their proposal. Some of the points will require confirmation from the bidders and / or submission of documentary evidence in support of their claims. Bids submitted with incomplete details or no response against any query shall be treated as non-responsive bids and shall be liable for rejection without any further opportunity.

Bidder to note that Company does not intend to issue further technical queries / clarification after opening of technical bids and accordingly Bidder's offer shall be evaluated based on the response provided against each technical query listed herein below. In case bidders wish to seek any clarification to the bid package, they shall submit a hard and soft copy of same in a proper format giving reference of bid volume number, section number, clause number, page No.and description of bid clause and clarification sought in Microsoft Word file. Company shall provide clarifications to their queries either through addendum or during Pre-Bid Conference prior to the dead line of submission of bids.

Sl. Company's QueryÂ Â Â Bidder'sÂ RemarksNo.Â Â Â Â Â Â Response

1 Â Bidder to confirm that he has gone Â Â Â Â No

Â through the bid package, addendum Â Â Â Â conditional

Â (if any) and any other information Â Â Â Â Â confirmation

Â given to the bidder,Â Â Â Â Â is acceptable.

Â and quoted for the complete scope of

Â work including optional items (if any)

Â described therein. (Refer clause No.

Â 1.0 of technical BEC)

52. The reliance upon Appendix A-9 in this regard is, however, not well founded. The petitioner understandably proceeded on the basis that no clarification in this regard was required and that their bid was in conformity with the bid documents in view of the fact that ONGC had raised no such objection in the two earlier contracts in respect whereof the petitioner's bids were on the same basis.

Indeed, had the petitioners sought a clarification, in all probability, ONGC would have responded by stating that the service tax may be included in item I.A of Annexure A-3. This presumption is justified for two reasons. Firstly, ONGC had found the similar, if not identical, bids in the earlier contracts to be responsive. Secondly, the Tender Committee and all other wings of ONGC had, in fact, contended throughout that the petitioners bid was responsive and the deviation was only minor. Even after the IEM gave its opinion to the contrary, ONGC's Tender Committee appears to have reiterated its stand. Had such a clarification been sought and had ONGC responded by stating that the service tax component could be included in item I.A, the petitioners bid could not have been held to be non-responsive for such a clarification would have been given either by way of an addendum or in the pre-bid conference as required by the sub-paragraph which is above the table in Appendix-9. This would have been so irrespective of a view to the contrary by ONGC subsequently for all the parties would then have been informed of the same and the clarification issued by way of an addendum would have been a term of the Bidding Document.

53. In the result therefore the provisions of the Bidding Documents which required the amount of service tax to be mentioned in item I.D of Appendix A-3 were therefore to be strictly complied with.

c) Assuming that the amount of service tax was to be mentioned in item I.D, whether the failure to do so is a major deviation that must result in a rejection of the bid?

54. Mr. Dwarkadas placed considerable reliance upon the fact that, in any event, in Appendix A-3, Section VI, "Change in Laws and Regulations", the petitioner had given the details of the service tax. We had set the same out earlier. Further, the service tax was also included in item I.A of Appendix A-3. Thus, he submitted, the deviation, if any, was only minor.

55(A). It was strongly contended on behalf of the respondents that the case argued in Court that service tax was included in item I-A of Appendix A-3 is an after-thought. The petitioner never stated the same either in the correspondence that preceded the petition or in the petition. In view of what we have held, it is not necessary to consider this aspect for even if the petitioner did include service tax in item I-A it would make no difference for we have held that it ought to have been mentioned in item I-D and not included in item I-A.

56. Had the petitioner not included service tax in I-A, it indeed would have been the end of the matter for, in that event, the bid would be deviant not, merely because the prices were not mentioned as required by the terms and conditions of the Bidding Documents but because it would have resulted in enormous financial implications. This is obvious as in that event the petitioner would be entitled to the benefit of CENVAT credit even in respect of the output services and ONGC would be denied the same. We, therefore, proceed on the basis that the service tax was mentioned in item I-A of Annexure A-3.

57. To establish that the deviation, if any, was minor and that the petitioner had substantially complied with the provisions of the Bidding Documents, Mr. Dwarkadas submitted that it was obvious that the service tax was included in item I-A on the basis of an inference. The various clauses of the contract indicate that a bidder would be entitled only to the amount mentioned in item I-E of Appendix A-3 and nothing more. The provisions, therefore, justify a inference that service tax is included in item I-E. The bids were also to be evaluated on the basis of the total lumpsum price mentioned in item I-E. If that is so, neither the competing bidders nor ONGC would be prejudiced in any manner whatsoever. The competing bidders would not be prejudiced for the petitioner's bid would be evaluated on the amount mentioned in item I-E and the petitioner would indeed not be entitled to recover anything more than that from ONGC. ONGC correspondingly would not be prejudiced for it would not have to pay the petitioner anything more than the amount mentioned in item I-E of Annexure A-3 and the petitioner would, as per the express terms and conditions of the Bidding Documents, be liable to raise invoice indicating the service tax thereby entitling ONGC to avail of CENVAT credit for the said amount.

58. The terms and conditions of the Bidding Documents requiring such compliance by the bidders to mention service tax in item I-D, however, are mandatory. The terms and conditions entitled ONGC to reject the bids that did not comply in that respect.

59. We must, however, in fairness to the petitioner mention that we find nothing dishonest about its conduct. There is nothing on record that even remotely suggests that the petitioner did what it did with a view to gain any advantage against competing bidders or to deprive ONGC of any financial benefit. Every question from the Court regarding the petitioner's perception of the rights and liabilities of ONGC and itself was answered not merely satisfactorily, but instantly in total conformity with the actual liabilities of the petitioner and ONGC had the contract been awarded to the petitioner. The petitioner confirmed from the outset that the total lumpsum price mentioned in item I-E of Appendix A-3 included the service tax; that nothing more than what was mentioned in item I-E was ever intended to be claimed by the petitioner and that the petitioner would be bound to issue tax invoices indicating the service tax component from out of the total lumpsum price thereby entitling ONGC to claim the benefit of CENVAT credit. Moreover, the petitioner confirmed that this would be the position even under the previous contracts.

60. In this regard, it must be noted that Mr. Dwarkadas himself fairly pointed out clauses 12.1, 12.2, 12.8.1(a) and 23.1 of the Bidding Documents set out above that establish that the bidder was not to receive anything more than the total lumpsum price mentioned in item I.E.

(a) Clause 12.1 establishes that the bidders responsibility was to carry out design engineering "and everything else required for the Works" including the provision of everything required for the works "within its contract price and within the required time schedule."

Clause 12.2 makes this even clearer by providing that the lumpsum price shall cover everything necessary for the complete facilities and services as described in the Bidding Documents but not limited to various items/activities mentioned therein. The doubt, if any, is set at rest by the first sub-paragraph of clause 12.8.1(a) which provides :

"Total lump sum price for Indian as well as foreign bidders shall be inclusive of customs duty, excise duty and service tax, if any." (emphasis supplied)

(b) Clause C 7.1(a) of Section C of Appendix A-6 also confirms the total lumpsum price for India as well as foreign bidders shall be inclusive, inter-alia, of service tax, if any.

"1.1.12 "Contract Price" means the total amount specified in the substantive article in the contract (i.e. Clause 3.1) subject to any additions thereto, or deductions there from which may be made through applications of the relevant provisions of the Contract."

"Clause 3 of the General Conditions of Contract relates to payment. Under clause 3.1 ONGC is liable to pay the contractor in consideration of satisfactorily completion of all the work covered by the scope of work under the contract, the contract price as per the details and breakup of price given in the schedule of prices. It further provides that unless otherwise specified in the contract the cost of execution of the works on turn key basis and tests etc. and all expenses, duties, tax in relation to or in connection therewith "shall be deemed to be included in the contract price."

61. There can be no doubt, therefore, that item I-E included service tax as far as ONGC was concerned. Any attempt on the part of the bidder to subsequently raise a dispute in this regard, including by denying ONGC's entitlement to CENVAT credit on account of the service tax element would be unsustainable. The petitioner not only did not suggest the same, but confirmed ONGC's entitlement in this regard.

62. In this view of the matter and especially the fact that in the previous contracts ONGC had endorsed the manner in which the petitioner had submitted its bids, it occurred to us that the deviation may be overlooked as a mere technicality on the basis of an acceptable and/or an accepted deviation. Acceptable because the deviation will not prejudice any of the rival bidders. The bids of all the bidders were evaluated on the basis of the lumpsum price as is indeed provided in the terms and conditions of the Bidding Documents. Acceptable also because ONGC has not suffered and will not suffer any prejudice on account of the deviation. Accepted because of ONGC having in the past accepted and endorsed in the manner in which the petitioner had submitted its bids in respect of the earlier contracts with ONGC. We, however, find that it is not open for this Court to consider or pursue this line of reasoning in view of the judgments of the Supreme Court which we will now refer to.

63. We wish to clarify expressly that our decision rests on ONGC being entitled to reject the bid for non-compliance with an essential condition. We do not for a moment suggest that ONGC was bound to reject the petitioner's bid for non-compliance with the said condition. Had the contract been awarded to the petitioner, it is doubtful if a challenge thereto in Court by LandT or any other party would have succeeded.

64. It would be appropriate to first note two broad principles relied upon by the Attorney General in such matters. The first relates to the extent of judicial review and the second to the need for bidders for such contracts to exercise a high degree of care while submitting its bids.

65. The learned Attorney General relied upon the judgments of the Supreme Court in Sterling Computers Limited v. United Database (India) Pvt. Ltd. (1993) 1 SCC 445; Tata Cellular v. Union of India (1994) 6 SCC 651, Master Marine Services (P) Ltd. v. Metcalpe and Hodgkinson (P) Ltd. and Anr. (2005) 6 SCC 138; Jagdish Mandal v. State of Orissa and Ors. (2007) 14 SCC 517 and Siemens Public Communication Networks Pvt. Ltd. and Anr. v. Union of India and Ors. (2008) 16 SCC 215 to indicate the parameters of judicial review in such cases. It is held that the modern trend is towards judicial restraint in administrative action; that the Court does not sit in appeal over such decisions, but merely reviews the decision making process; that the Court does not have the expertise to correct the administrative decision and ought not to substitute its view for that of the authorities. It is sufficient to refer to the following observations in Jagdish Mandal v. State of Orissa and Ors. (2007) 14 SCC 517, the Supreme Court held as under:-

"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR

Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";

(ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."

66. The learned Attorney General also placed considerable reliance upon the judgment of the Supreme Court in W.B. State Electricity Board v. Patel Engineering Co. Ltd. and Ors., (2001) 2 SCC 451 in support of his submission that in contracts of this nature, it is imperative for bidders to be careful and to follow scrupulously the requirements of the bidding documents. The reliance upon this judgment was essentially to meet Mr. Dwarkadas's alternative submission that the deviation, if any, was minor and did not warrant a rejection of the petitioner's bid on that ground. The Supreme Court held :-

"24. The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant, Respondents 1 to 4 and Respondents 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfil prequalification alone are invited to bid, adherence to the instructions cannot be given a go-by by branding it as a pedantic approach, otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the rule of law and our constitutional values. The very purpose of issuing rules/instructions is to ensure their enforcement lest the rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provided under the ITB, by the State or its agencies (the appellant) in favour of one bidder would create justifiable doubts in the minds of other bidders, would impair the rule of transparency and fairness and provide room for manipulation to suit the whims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity. In our view such approach should always be avoided. Where power to relax or waive a rule or a condition exists under the rules, it has to be done strictly in compliance with the rules. We have, therefore, no hesitation in concluding that adherence to the ITB or rules is the best principle to be followed, which is also in the best public interest."

"25. For all these reasons, in such a highly competitive bid of global tender, the appellant was justified in not permitting Respondents 1 to 4 to correct the errors of the nature and the magnitude which, if permitted, would have given a different complexion to the bid. The High Court erred in directing the appellant to permit Respondents 1 to 4 to correct the errors in the bid documents."

67. Mr. Dwarkadas relied upon paragraphs 13 and 14 of the judgment of the Supreme Court in G.J. Fernandez v. State of Karnataka and Ors. (1990) 2 SCC 488 in support of his submission that even assuming that there was a deviation as alleged by the respondent, it was a minor deviation, which ought not to have resulted in the drastic consequences of a rejection of the petitioner's bid. It is necessary, however, to see the context in which the Supreme Court made the observations in paragraphs 13 and 14 of the judgment. In respect of a construction contract, one of the respondents - KPC issued a notice inviting tenders from registered contractors. Paragraph I of the Notification listed three "minimum qualifying requirements". Paragraph V required the tenderers to furnish certain information "alongwith the application for issue of blank tender books". The petitioner challenged the award of the contract to one of the respondents viz. MCC on the ground that MCC had not complied with the requirements of paragraphs I and V. It was contended that even the conditions in paragraph V pertained to prequalifying requirements.

The Supreme Court held that the harmonious and practical way of construing the tender conditions was by saying that before the tender book could be supplied, an intending tenderer should satisfy KPC by supplying such of the documents called for in paragraph V as were material in assessing the fulfillment of the conditions in paragraph I. This was in view of the fact that apart from paragraph I, there were other requirements in the tender conditions which had to be complied with before the applicant could be eligible for supply of tender forms. These included such of those documents referred to in para V as had a direct bearing on the three conditions outlined in para I. The petitioner challenged the award in favour of MCC on the ground that two items of information required by para V(d) were not supplied with the request for application of tender forms, but were supplied much later. The Supreme Court held that the documents that had a direct bearing on para I had been supplied in time. The document which was supplied later was of no importance in judging the pre-qualification requirements.

Thus, what the Supreme Court considered was not the pre-qualifying requirements, but requirements which were necessary for judging the pre-qualifying requirements. It is in this context that paragraph 13 of the judgment ought to be read. So read, the ratio of the judgment is distinguishable from the case before us. Paragraph 13 reads as under :-

"13. Interesting as this argument is, we do not see much force in it. In the first place, although, as we have explained above, para V cannot but be read with para I and that the supply of some of the documents referred to in para V is indispensable to assess whether the applicant fulfils the pre-qualifying requirements set out in para I, it will be too extreme to hold that the omission to supply every small detail referred to in para V would affect the eligibility under para I and disqualify the tenderer. The question how far the delayed supply, or omission to supply, any one or more of the details referred to therein will affect any of the pre-qualifying conditions is a matter which it is for the KPC to assess. We have seen that the documents having a direct bearing on para I viz. regarding output of concrete and brick work had been supplied in time. The delay was only in supplying the details regarding "hollow cement blocks" and to what extent this lacuna affected the conditions in para I was for the KPC to assess. The minutes relied upon show that, after getting a clarification from the General Manager (Technical), the conclusion was reached that "the use of cement hollow block masonary may not be required at all and instead the brick masonary may be used". In other words, the contract was unlikely to need any work in hollow cement blocks and so the document in question was considered to be of no importance in judging the pre-qualifying requirements. There is nothing wrong with this, particularly as this document was eventually supplied."

The ratio of the judgment, therefore, pertained not to a situation where the non-fulfillment of the pre-qualifying conditions were concerned, but where the non-fulfillment of a condition unnecessary for judging the pre-qualifying condition was concerned. The decision then rested on the finding that the said condition was unnecessary for judging the pre-qualifying condition.

68. Mr. Dwarkadas also relied upon paragraph 14 of the judgment of the Supreme Court in G.J. Fernandes's case which reads as under:-

"14. Secondly, whatever may be the interpretation that a court may placed on the NIT, the way in which the tender documents issued by it has been understood and implemented by the KPC is explained in its "note", which sets out the general procedure which the KPC was following in regard to NIT's issued by it from time to time. Para 2.00 of the "note" makes it clear that the KPC took the view that para I alone incorporated the "minimum pre-qualifying/eligibility conditions" and the data called for under para V was in the nature "general requirements". It further clarifies that while tenders will be issued only to those who comply with the pre-qualifying conditions, and deficiency in the general requirements will not disqualify the applicant from receiving tender documents and that data regarding these requirements could be supplied later. Right or wrong, this was way they had understood the standard stipulations and on the basis of which it had processed the application for contracts all along. The minutes show that they did not deviate or want to deviate from this established procedure in regard to this contract, but, on the contrary, decided to adhere to it even in regard to this contract. They only decided, in view of the contentions raised by the appellant that para V should also be treated as part of the pre-qualifying conditions, that they would make it specific and clear in their future NITs that only the fulfillment of pre-qualifying conditions would be mandatory. If a party has been consistently and bona fide interpreting the standards prescribed by it in a particular manner, we do not think this Court should interfere though it may be inclined to read or construe the conditions differently. We are, therefore, of opinion that the High Court was right in declining to interfere."

There is a difference between the case in G.J. Fernandez and the present case. In G.J. Fernandez's case, KPC had understood and implemented the notice inviting tenders in a particular manner throughout. In respect of the contract in question, it adhered to the same. It is in this context that the Supreme Court observed that if a party has been consistently and bona fide interpreting the standards prescribed by it in a particular manner, the Court should not interfere although it may be inclined to read or construe the conditions differently. That was not a case, as it is here, where the party inviting the tender, took a stand different from the one it took in the past. This judgment may well have been of assistance to ONGC and the petitioner had the contract been awarded to the petitioner. Suffice it to state at this stage that in G.J. Fernandez, the Supreme Court did not deal with a similar situation. The judgment in G.J. Fernandez, therefore, by itself cannot support the petitioner.

69. Paragraph 15 of the judgment in G.J. Fernandez, however, poses a major hurdle in the petitioner's way. Paragraph 15 reads as under :-

"15. Thirdly, the conditions and stipulations in a tender notice like this have two types of consequences. The first is that the party issuing the tender has the right to punctiliously and rigidly enforce them. Thus, if a party does not strictly comply with the requirements of para III, V or VI of the NIT, it is open to the KPC to decline to consider the party for the contract and if a party comes to court saying that the KPC should be stopped from doing so, the court will decline relief. The second consequence, indicated by this Court in earlier decisions, is not that the KPC cannot deviate from these guidelines at all in any situation but that any deviation, if made, should not result in arbitrariness or discrimination. It comes in for application where the non-confirmity with, or relaxation from, the prescribed standards results in some substantial prejudice or injustice to any of the parties involved or to public interest in general. For example, in this very case, the KPC made some changes in the time frame originally prescribed. These changes affected all intending applicants alike and were not objectionable in the same way, changes or relaxations in other directions would be unobjectionable unless the benefit of those changes or relaxations were extended to some but denied to others. The fact a document was belatedly entertained from one of the applicants will cause substantial prejudice to another party who wanted, likewise, an extension of time for filing a similar certificate or document but was declined the benefit. It may perhaps be said to cause prejudice also to a party which can show that it had refrained from applying for the tender documents only because it thought it would not be able to produce the document by the time stipulated but would have applied had it known that the rule was likely to be relaxed. But neither of these situations is present here."

"Shri Vaidyanathan says that in this case one of the applicants was excluded at the preliminary stage. But it is not known on what grounds that applications was rejected nor has that party come to court with any such grievance. The question, then, is whether the course adopted by the KPC has caused any real prejudice to the appellant and other parties who had already supplied all the documents in time and sought no explanation at all? It is true that the relaxation of the time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramanna case will be readily applied by courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no justice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits. The appellant had no doubt also urged that the MCC had no experience in this line of work and that the appellant was much better qualified for the contract. The comparative merits of the appellant vis-a-vis MCC are, however, a matter for the KPC (counselled by the TCE) to decide and not for the courts. We were, therefore, rightly not called upon to go into this question."

70. The judgment refers to two consequences. The judgment relating to the first consequence poses a hurdle in the petitioner's way. It entitles the party issuing the tender i.e. ONGC in the present case to punctiliously and rigidly enforce the terms thereof. In fact, the Supreme Court held that if the party did not strictly comply with the requirements even of paragraphs other than para I, it would be open to KPC (ONGC in this case) to decline to consider the party (petitioner in this case) for the contract and that if such a party comes to Court saying that the party issuing the tender should be stopped from doing so, the Court would decline relief. This conclusion in the judgment of the Supreme Court in G.J. Fernandez's case places the first legal hurdle for the petitioner as it holds that the party issuing the tender has the right to rigidly enforce the same and that a party that comes to Court saying that it should not, would be declined relief.

71. The second consequence discussed in paragraph 15 of the judgment in G.J. Fernandez's case does not assist the petitioner so far as the contract in this case is concerned. It does entitle the party issuing the tender to deviate from the terms in certain circumstances. That, however, does not dilute the right of a party issuing the tender to insist upon strict compliance of such terms and to reject a tender in the event of a party not complying with the same. Had ONGC awarded the contract even in this case to the petitioner, it may have been an entirely different matter. It may have been difficult for any party, including LandT to sustain a challenge to the same.

Indeed, LandT could not have complained of any injustice per se, inter-alia as it's challenge would have been met with the observations in paragraph 15 that injustice is less apparent where the attempt of the applicant before the Court is only to gain immunity from competition. That precisely is the endeavour of LandT in this case. This is so for the reason that despite the fact that the petitioner has, at least before this Court, clarified beyond any doubt that it's bid will not have any adverse financial implications on ONGC, LandT opposes the award of a contract to the petitioner on the ground that it has not strictly complied with the terms and conditions of the contract. LandT's opposition to the petitioner's case is indeed purely technical.

72. In Kanhaiya Lal Agrawal v. Union of India and Ors. (2002) 6 SCC 315, the Supreme Court enunciated two principles of vital importance to the case before us. In that case, the letter acknowledging the appellant's bid, after setting out the rate offered by him, also offered a reduction of 5%, 3% and 2% in the event of the tender being finalised in his favour within 45 days, 60 days and 70 days respectively. The Supreme Court held that the concession or rebate was only an additional inducement to accept the offer expeditiously and did not militate against the terms and conditions of the tender documents. While doing so, the Supreme Court enunciated the following principles which are of vital importance to the case before us.

"6. It is settled law that when an essential condition of tender is not complied with, it is open to the person inviting tender to reject the same. Whether a condition is essential or collateral could be ascertained by reference to the consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is only a collateral term. This legal position has been well explained in G.J. Fernandez v. State of Karnataka."

73. In view of the judgments of the Supreme Court in G.J. Fernandez and Kanhaiya Lal Agarwal, it is necessary to determine first whether the condition which was not complied with was an essential condition or not. One of the tests to determine this question is to ascertain whether the consequence of non-fulfillment thereof results in the rejection of the tender. If it does, it would be an essential part of the tender. If it does not, it would be only a collateral term. We demonstrated earlier that bidders were mandatorily required to mention the service tax component in item I-D of the price schedule at Appendix A-3. We also referred to the clauses in the bidding documents that indicate that the failure to furnish the breakup as per Appendix A-3 would lead to a rejection of the bids. Tested on the basis of the said judgments, the requirement of mentioning the service tax component in item I-D of Appendix A-3 was an essential condition and the failure to do so left it open to the ONGC to reject the same. We reiterate that for the present case, it is sufficient to hold that it was open to ONGC to reject the bid. We do not go so far as to say that ONGC was bound to reject the bid. Indeed, had ONGC accepted the bid, it is doubtful whether a challenge to the same would be successful.

74. The learned Attorney General relied upon the judgment of the Supreme Court in B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Limited (2006) 11 SCC 548 to indicate the principles of judicial review in matters relating to tenders. We refer to the judgment here as it introduces a nuance to the principle relating to the requirement to comply strictly with the essential conditions of the tender. The learned Attorney General relied upon paragraph 66, which reads as under :-

"66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarised as under:

(i) if there are essential conditions, the same must be adhered to;

(ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully; .............

(v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with;" (emphasis supplied)

75(A) There being no power of general relaxation in the Bidding Documents, "ordinarily" the same should not be relaxed in the present case as well. It was, however, for ONGC to decide whether or not in the petitioner's case an exception ought to have been made in view, inter-alia, of what we noted earlier. It had the discretion to do so subject to the decision meeting the tests stipulated in paragraph 15 of the judgment in G.J. Fernandez's case.

(B). Moreover, paragraph 66(v) indicates that the authority issuing the tender is entitled to consider whether the successful bidder had, in fact, "substantially complied with the tender conditions". It further indicates that it is open to the authority to consider whether such substantial compliance was "qua the purport and object for which essential conditions were laid down". Thus, if in a given case, the authority finds that a bidder had substantially, as opposed to strictly, complied with the essential condition and the same was in respect of the purport and object for which the essential conditions were laid down, the decision may not ordinarily be interfered with. This, however, would be a question for the authority issuing the tender to decide. If the authority is satisfied that there is substantial compliance with the purport and object for which the essential conditions are laid down, the Court would not ordinarily interfere with the decision. Thus, for instance, in the case of the previous bids of the petitioner accepted by ONGC, it must be presumed that ONGC was satisfied that the petitioner had substantially complied with the purport and object for which the said essential conditions were laid down for otherwise, ONGC would not have accepted the petitioner's bid. Although there was no objection taken by any party to the same, it cannot be said that ONGC did not apply it's mind as to whether the petitioner's bid was responsive or not even as regards the manner in which it filled in Appendix A-3. Whether it did so rightly or wrongly is another matter. In other words, because an objection was not taken to the same, it cannot be said that ONGC did not apply it's mind to the same. Appendix A-3 was probably the most important part of the bid at the stage of the bid evaluation. That it has taken a different view in the present case, is a different matter altogether.

76. At one stage, we did think it possible for the petitioner to develop a case on the basis of the observations of the Supreme Court in paragraph 66(v) to the effect that the petitioner must be deemed to have complied with the purport and object for which the essential conditions were laid down in view of ONGC's previous decision and that ONGC cannot be permitted to a take a different view on the basis of an acceptable and indeed an accepted deviation. However interesting and attractive this theory may appear, we believe that it would not be open for this Court to pursue it in view of the clear ratio of the Supreme Court that where there is a breach of an essential condition, it is open to the authority issuing the tender to reject the same.

77. The judgment of the Supreme Court in IRCTC vs. Doshion Veolia Water Solutions Private Limited and Ors. (2010) 13 SCC 364 was relied upon by Mr. Dwarkadas as well as the learned Attorney General and Mr. Chagla. At first blush, the judgment, especially paragraphs 39 to 43 thereof, appear to support the petitioner's case. On a careful reading, however, it is distinguishable.

The tenders were invited by the appellant to produce drinking water to Railway passengers. The respondent and another company M/s.Ion Exchange (I) Ltd, submitted their bids. Doshion, inter-alia, contended that as the excise duty amount had not been indicated in rupees in its financial bid, it was contrary to the terms and conditions of the tender. The appellant's Tender Committee made three recommendations. It was on the third recommendation that the contract was awarded to Ion Exchange. The Tender Committee was unanimously of the view that the taxes and duties (excise duty in particular) had no adverse financial implication on payment. The appellants accepting authority accepted the recommendations. The relevant provisions of the Instructions to Bidders and special terms and conditions in that case were as follows :-

"27. Mr Gupta, learned counsel for Doshion, has relied upon Clauses 1.10, 1.11 and 1.12 of the instructions to bidders and Clauses 2.1 and 9.0 of the special terms and conditions of the tender documents to support this finding of the High Court, which are quoted hereinbelow:

"Instructions to bidders

1.10. Rates are to be quoted in the prescribed price schedule format only and it shall be inclusive of all taxes, levies and duties.

1.11. Every page of the tender document shall be signed on the left hand side bottom corner and stamped properly by the authorised person or persons submitting the tender in token of his/their having acquainted himself/themselves with the general conditions of contract, technical specifications, etc. as laid down. Any tender is liable to be treated as defective and is liable to be rejected if any of the documents is not signed. The initials of the tenderer must attest all erasures and alterations made while filling the tender. Overwriting of figures is not permitted.

1.12. Failure to comply with either of these conditions will render the tender void. No advice of any change in rate after opening of the tender will be entertained. Special terms and conditions

2.1. Vendor shall quote for lump sum price along with detailed break-up as per price schedule enclosed with this bid document. The cost of plants and equipments as quoted in the price schedule will constitute contract price/contract value.

* * *

9.0. Deviation to terms and conditions.-The vendor should clearly spell out in his offer his acceptance of the terms and conditions indicated above. In case of deviation, his offer may be rejected"

The Supreme Court thereafter considered whether Ion Exchange committed a breach of the essential terms and conditions of the tender notification or tender contract by not indicating the excise amount in rupees in its offer. The Supreme Court holding that it had not, observed as under :-

"40. Clauses (i) and (ii) of the Note appended to the prescribed price schedule, which relate to duties and taxes, are quoted hereinbelow:

"Note.-(i) The prices quoted are lump sum inclusive of all duties and taxes, etc.

(ii) Vendor should indicate total excise duty amount included in above prices (for plants and equipments)."

"41. The language of Clauses (i) and (ii) of the Note quoted above is clear that the prices quoted are to be lump sum inclusive of all duties and taxes, etc. and the vendor should indicate total excise duty amount included in the prices for plants and equipments. The Note does not indicate the consequences that will follow if the vendor does not indicate the total excise duty amount included in the prices for plants and equipments. The Note does not say that if the vendor does not indicate the total excise duty amount included in the prices for plants and equipments, the offer of the vendor "shall" be rejected. In the absence of any mention of the consequence of rejection of the offer for not indicating the total excise duty amount in rupees included in the price of plants and equipments in the tender documents, the High Court could not have held that Ion Exchange had committed breach of an essential term or condition of the tender notification or the tender format."

"42. For this conclusion, we are again supported by the decision in Kanhaiya Lal Agrawal v. Union of India in which this Court relying on G.J. Fernandez v. State of Karnataka held: (Kanhaiya Lal case, SCC p. 317, para 6)

"6. . Whether a condition is essential or collateral could be ascertained by reference to the consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is only a collateral term."

"Hence, if on the recommendation of the Tender Committee, the accepting authority did not find the deviation from Clause (ii) of the Note by Ion Exchange very material and has accepted the offer of Ion Exchange, the Division Bench of the High Court could not have held that Ion Exchange committed a breach of an essential term by not mentioning the excise duty amount in rupees in its offer."

"43. ....................... We find that on the basis of the recommendations of the Tender Committee, the accepting authority of IRCTC found the offer of Ion Exchange at a net price of Rs.18,47,34,000 to be better than the offer of Doshion at the price of Rs.18,66,00,000 and that tax and duties including excise duty had no adverse financial implications on IRCTC and accordingly accepted the offer of Ion Exchange. By reversing this decision of the accepting authority of IRCTC, the Division Bench of the High Court, in our considered opinion, acted as an appellate court and exceeded its power of judicial review in a matter relating to award of contract contrary to the law laid down by this Court in the leading case of Tata Cellular."

78. From a careful reading, it is apparent that the provisions of the contract in that case are entirely different from those in the case before us. The Supreme Court held that the provisions therein did not provide that if the vendor does not indicate the total excise duty or include in the price for plants and equipment, the offer of the vendor shall be rejected. Indeed the Instructions to Bidders and the special terms and conditions in that case which we set out earlier, were to say the least not clear and categorical regarding the consequence of not furnishing a break up. For instance, clause 1.10 of the Instructions to Bidders required the rates to be quoted in the prescribed format only and that the same should be inclusive of all taxes, levies and duties. Clause 1.12 provided that the tender would be rendered void in the event of a bidder failing to comply inter-alia with clause 1.10. However, clause 2.1 of the special terms and conditions required the lump sum price along with the detailed break up as per the price schedule but did not further provide that failure to furnish the break up would render the tender void.

We have set out in detail the provisions of the contract in the case before us. They expressly provide the consequences for failure to furnish the break up as per the price format. (See for instance clause 12.8.1(a) of the Instructions to Bidders and Appendix A-6, Section C-7.1(a), sub-paragraph 3.)

79. Mr.Dwarkadas also relied upon paragraph 37 of the judgment in IRCTC vs. Doshion, which reads as under :-

"37. These observations made by this Court in W.B. SEB v. Patel Engg. Co. Ltd. (2001) 2 scc 451 rather come to the aid of Ion Exchange in this case. Since IRCTC did not clearly stipulate in the instructions to bidders or in the special terms and conditions or in the prescribed price schedule or in any other part of the tender documents that a tenderer will not offer any discount on the prices quoted by him and if any such discount is offered the tender will be rejected, the offer of discount on the price made by Ion Exchange cannot be treated to be in breach of the essential terms or conditions of the tender documents. To hold that the State or its agencies can reject a tender for breach of a term or condition in the tender document, which is not explicit in the tender documents, is to give room to the State or its agencies to arbitrarily reject tenders even where the clear terms or conditions of the tender documents are complied with."

These observations do not assist the petitioner's case. In the present case, we do not find the terms not to be explicit.

80. In Glodyne Technoserve Limited v. State of Madhya Pradesh (2011) 5 SCC 103, the Supreme Court reiterated that the effect of noncompliance with a mandatory condition in a tender notice was fatal.

81. In the circumstances, ONGC's decision to reject the petitioner's contract as non-responsive warrants no interference. It was entitled to insist upon strict compliance with the said terms and conditions. The petitioner's failure to comply strictly with the same, entitled ONGC to reject it's bid.

II. Whether the MOU entered into between the petitioner and its consortium partner - Gulf Piping Company WLL (GPC) was in accordance with clause 3 of the Instructions to Bidders:

82. In clause 3.1 of the Instructions to Bidders, ONGC anticipated that some of the intending bidders may pool their resources and experiences to form consortia / joint-ventures. Clauses 3.2, 3.3 and 3.5 relied upon by Mr. Chagla read as under :-

"3.0 JOINT VENTURE/CONSORTIUM BIDS

3.2 In the event that the successful bidder is a joint venture formed of two or more companies, the Company requires that the parties to the joint venture accept joint and several liabilities for discharging all obligations under the Contract.

3.3 The leader of the Consortium can submit bid on behalf of consortium of bidders. Memorandum of Understanding between the Consortium members duly signed by the Chief Executives of the consortium members must accompany the bid, which should clearly define role/scope of work of each partner/member and should clearly define the leader of consortium. Memorandum of Understanding (MOU) must also state that all the members of consortium shall be jointly and severally responsible for discharging all obligations under the Contract. ....................

3.5 Documents/details pertaining to qualification of bidder as per Proforma of documents attached with the Bidding Documents must be furnished by each partner/member of consortium/joint venture complete in all respects along with the bid offer, clearly bringing out their experience especially in the form of work in their scope. The division of scope of work in between the members of Consortium /Joint Venture in terms of value and jobs should be indicated in the un-priced techno-contractual bid."

83. The petitioner, accordingly, entered into a MOU with GPC and submitted the same to ONGC. Mr. Chagla submitted that the same is not an MOU setting out the terms of the agreement, but is merely an agreement to agree; that no draft consortium agreement as contemplated by clause 2.1 was made or attached to the MOU and its terms were not spelt out anywhere; that the terms of the MOU bare out that there was no consortium in existence at the time of the bid; the MOU does not give a firm commitment as required by clause 3.3 that all the members of the consortium shall be jointly and severally responsible for discharging all the obligations under the contract, if awarded; that the provisions of the MOU are firm only till the consortium agreement is prepared and that the parties could always agree in writing that some of the provisions should be set aside or altered.

84. Recital B and the relevant clauses of the MOU read as under:-

"WHEREAS

A ....

B The Parties desire to enter into this Agreement to set out the primary terms of arrangement among themselves for the purpose of the tendering and undertaking the Project and to regulate their relationship inter-se and agree to enter into such further and other agreements as may be necessary from time to time to set out in further detail the specific scope of responsibilities and/or to regulate the relationship between themselves.

1.0 PREAMBLE

1.1 The Parties agreed to co-operate between themselves on a mutually exclusive basis for the purpose of preparing a tender for the Project to the Company and thereafter for executing the Project subject to the terms and conditions herein.

1.2 If the tender submitted by the Parties (hereinafter called Tender) is accepted by the Company, the Parties shall enter into a contract (hereinafter called the Contract) with the Company for the execution of the Project.

1.3 Upon formal advice that the Company Intends to award the Contract to the Parties, the Parties agree to immediately form a Consortium (hereinafter referred to as the Consortium) for the purpose of entering into the Contract and undertaking the Project by way of a separately executed Consortium Agreement (hereinafter referred to as the "CA").

2.0 PURPOSE OF THE AGREEMENT

2.1 The purpose of this Agreement is to bind the Parties to the preparation and submission of the Tender to the Company and if successful to undertake the Project in accordance with the terms of the CA and the Contract.

2.2 The Parties shall be jointly and severally liable for the preparation and submission of the Tender and if successful, for undertaking the Project.

3.0 ESTABLISHMENT OF CONSORTIUM

3.1 The rights and obligations of the Parties In respect of the work to be undertaken under the CA shall be set out in the CA, which shall include any relevant and appropriate provisions of this Agreement and shall give continuity to them unless it is agreed in wilting between the Parties that some provisions should be set aside or altered. ........

3.3 The participating interest of each Party in the CA shall be as specified in the Scope Split Matrix, Annexure 1.

4.0 PREPARATION OF TENDER AND RESPONSIBILITIES OF THE PARTIES

4.6 The Parties agree to be bound by the conditions contained In clause 3 of Part I of Volume I of "Invitation for Bids" of the bidding documents.

6.0 INDEMNITIES

6.2 Each Party indemnifies and shall keep Indemnified the other Party and its directors, officers employees from and against all claims, demands, writs, summonses, action suits, proceedings judgments, orders, decreed damages, costs, losses and expenses of any nature whatsoever arising out of or in consequence of any failure by the indemnifying Party to duly perform its obligations in accordance with the terms of this Agreement. Each Party indemnities, and shall keep indemnified, the other Party in respect of any liability the other Party may incur under the several liability to the Company as a result of actions of that Party, or arising from matters for which. In accordance with the agreed division of the Project or otherwise, that Party is responsible."

85. Mr. Chagla firstly submitted that the MOU is merely an agreement to agree and is not an MOU as contemplated under clause 3 of the Instructions to Bidders.

86. The MOU, read as a whole, contains all the essential terms and conditions constituting it an agreement between the petitioner and GPC. Our attention was not invited to the absence of any essential term as a result whereof the MOU could be said to be merely an agreement to agree.

87. Mr. Chagla submitted that clause 3.3 of the Instructions to Bidders required a bidder to submit a MOU stating that the members of the consortium shall be jointly and severally responsible for discharging all the obligations under the contract. That is correct. The contention that the MOU does not state so is incorrect.

88. Clauses 2.1 and 2.2 of the MOU read together are in accordance with clause 3.3 of the Instructions to Bidders. Clause 2.1 binds the petitioner and GPC to undertake the project in accordance with the terms of the CA (consortium agreement) and the contract, if awarded. The contract foists a joint and several responsibility upon the consortium members for discharging all the obligations thereunder (clause 3.2 of Instructions to Bidders). By agreeing to undertake the project "in accordance with the terms of the contract", GPC expressly undertook to ONGC to be liable jointly and severally for discharging all the obligations thereunder.

89. Further, clause 2.2 of the MOU expressly states that the petitioner and GPC shall be jointly and severally liable, inter-alia, "for undertaking the Project". The expression "undertaking the Project" includes within its ambit undertaking the joint and several responsibility for discharging all the obligations under the contract. This is fortified by a conjoint reading of clauses 2.1 and 2.2. of the MOU. By clause 2.2, GPC accepted jointly and severally with the petitioner to undertake the project and by clause 2.1 of the MOU, it did so "in accordance with the terms of the contract" including clause 3.2 of the Instructions to Bidders. The expression "for undertaking the project" in clause 2.2 of the MOU is at least as wide if not wider than the expression "all obligations under the contract."

90. This is also clear from the other provisions of the MOU. Clause 3.3 refers to the annexure which specifies the participating interest of the petitioner and GPC in the consortium agreement. The undertaking contained in clause 2.2 and 2.3 of the MOU is not restricted to the discharge by each of the parties viz. the petitioner and the GPC of their respective obligations under the MOU. Their undertaking is in respect of the project as a whole. If it were otherwise, each member would have furnished an undertaking to perform only those obligations agreed to be performed by it.

91. It is also clear from clause 6.2 of the MOU that the petitioner and GPC understood themselves as having undertaken jointly and severally the responsibility for discharging all the obligations under the contract. It is for this reason that they agreed to indemnify each other against all claims arising out of or in consequence of any failure by the indemnifying party to duly perform its obligations in accordance with the terms of the MOU. Further, by clause 2 of the MOU, each of them indemnified the other in respect of any liability that the other may incur "under the several liability to the company" (i.e. ONGC) as a result of the actions of that party or arising from matters for which, in accordance with the agreed division of the project or otherwise, that party is responsible. Thus, under the MOU the petitioner and the GPC had agreed between themselves to perform various functions for carrying out the contract. They, however, realised that each of them was jointly and severally responsible for the due execution of the contract as a whole and, therefore, furnished indemnities to each other. Had they not considered themselves jointly and severally responsible for discharging all the obligations under the contract there would have been no question of each of them indemnifying the other.

92. The doubt, if any, is set at rest by clause 4.6 of the MOU under which the petitioner and GPC agreed to be bound by the conditions contained in clause 3 of the Instructions to Bidders. Clause 3 set out earlier expressly required the members of the consortium to "accept joint and several liabilities for discharging all obligations under the contract". Nothing could be clearer. The petitioner and GPC not merely impliedly, but expressly undertook to accept joint and several liability for discharging all the obligations under the contract, irrespective of whether under the agreement between themselves inter-se, they were to perform a part of it or not.

93. In our opinion, the contention that the MOU was structured to enable the GPC to avoid the joint and several responsibility for discharging its obligations is entirely unfounded. GPC is clearly jointly and severally responsible for discharging all the rights and obligations under the MOU. Even assuming that there is generally a distinction between a joint and several liability for undertaking a Project and a joint and several liability for discharging all obligations under the contract, it would make no difference in the present case for the reasons we have already indicated earlier.

94. Mr. Chagla stated that LandTs representation in this regard was based on its experience that international companies are reluctant to accept joint and several obligations. We are afraid that LandTs experience is irrelevant while construing the terms of the document. In our view, the MOU, correctly construed, meets the requirements of clause 3 of the Instructions to Bidders.

95. The contention that although clause 2.1 of the MOU refers to a consortium agreement, no such agreement is made or attached to the MOU and that its terms are not spelt out anywhere is also not well founded. There was no such agreement when the bid was submitted. The petitioner and GPC were to execute a consortium agreement in the event of their being awarded the contract. This is clear from clause 1.3 which provides that it is only upon ONGC informing the consortium that it intends to award the contract to the consortium that the petitioner and GPC agreed to form a consortium for the purpose of entering into the contract and undertaking the Project "by way of a separately executed consortium agreement". Thus, the formation of the consortium referred to in clause 1.3 and the agreement referred to therein, to be separately executed, only refers to the execution of a formal document in terms of the MOU.

96. Mr. Chagla contended that under clause 1.3 of the MOU the petitioner and GPC agreed to form a consortium only upon their being awarded the contract which is contrary to clause 3 of the Instructions to Bidders which required the consortium to be formed prior to the bid.

97. The erroneous construction of clause 1.3 of the MOU arises from reading it in isolation. The agreement must be read as a whole. For instance, under clause 1.1 the petitioner and GPC agreed to co-operate not merely for the purpose of bidding for the contract but also "thereafter for executing the Project subject to the terms and conditions herein (i.e. the MOU)". Further, by clause 2.1, the petitioner and the GPC bound themselves not merely to prepare and submit the tender, but, if successful, to undertake the Project in accordance with the terms and conditions of the consortium agreement and the contract.

98. It was then contended that under clause 3.1 it was open to the parties by consent to set aside or alter some of the provisions of the MOU. Clause 3.1 refers to the rights between the petitioner and GPC inter-se. The petitioner and GPC have not conferred rights upon themselves to set aside or alter their obligations under the contract qua ONGC. They are entitled to adjust their obligations in respect of the contract inter-se. They, indeed, cannot between themselves agree not to be bound by the obligations undertaken by them with ONGC. This was not even suggested at any stage by the consortium members. The formal consortium agreement if required to be entered into, therefore, cannot alter any terms and conditions of the MOU to the prejudice to ONGC in any manner whatsoever.

99. The reliance upon clause 6.1.1 of the General Conditions of Contract does not support the respondents either. Clause 6.1.1 reads as under :

"6.0 GUARANTEES AND LIABILITIES

6.1.1 The Contractor agrees to ensure that all materials, equipment and components used in execution of the works under this Contract, shall be new and unused (not reconditioned) and of recent manufacture which shall in no case be of a date of manufacture older than one year from the date of delivery. (This delivery date shall be effected after Notification of Award) at the yard/site as the case may be and however, structural steel shall in no case be of a date of manufacture older than 2 years from the date of delivery at the yard/site as the case may be. The Contractor shall warrant that every Work executed under this Contract shall be free from all defects and faults in design and engineering, materials workmanship and handling etc., and shall be consistent with established and accepted standards for materials and workmanship of the type ordered and in full conformity with the design, drawings, specification, or sample, if any, and shall if operable, operate as per design, drawings, specifications and samples if any, and other stipulated conditions in accordance with the Contract. This warranty shall survive inspection of, payment for and acceptance of the plant, machinery and equipment and shall be valid for a period of 12 months from the date of issue of Certificate of Completion and Acceptance or 12 months from the date of issue of part Certificate of Completion and Acceptance of the respective part(s) of the works accepted and taken over by the Company as per provisions of Clause 5.10.3. The 12 months for the punch list items will start from the date of completion of Punch List."

100. The petitioner and GPC would be equally bound by the terms of clause 6.1.1 of the agreement. The warranty is under a term of the contract with ONGC. There is no warrant for the presumption that this term would not bind the members of the consortium.

101. It is pertinent to note that identical MOUs were entered into between the petitioner and its consortium members in respect of two similar contracts between the petitioner and ONGC. ONGC rightly found the same to be in accordance with clause 3 of the Instructions to Bidders.

102. The submission that the MOU is not in accordance with clause 3 is, therefore, rejected.

103. With a view not to leave any room even for doubt, we would, if necessary, have required the petitioner and GPC, to first execute a document in such other form as desired by ONGC to ensure that GPC had agreed and agrees to the terms of clause 3 requiring them to undertake and accept joint and several liability for discharging all obligations under the contract. The same would not amount to a post bid improvement or compliance. It would be an act in compliance with the order of the Court passed out of abundant caution. Indeed, if GPC did not agree to do so, the contract, if awarded, would stand rescinded without anything more, without further orders of this Court.

III. Whether LandT's bid was in accordance with the terms and conditions of the tender documents :

104. Mr. Dwarkadas submitted that LandTs bid itself was contrary to the terms and conditions of the bid

Court	Mumbai High Court
Decided On	Mar-21-2013
Case Number	Writ Petition (Lodg) No.3033 of 2012
Judge	S.J. VAZIFDAR & THE HONOURABLE MRS. JUSTICE MRIDULA BHATKAR
Appellant	Leighton Welspun Contractors Pvt. Ltd.
Respondent	Oil and Natural Gas Corporation Limited and Another

Leighton Welspun Contractors Pvt. Ltd. Vs. Oil and Natural Gas Corporation Limited and Another - Court Judgment