TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1472
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.... claimed to be the world's largest and oldest suppliers of rail transport equipments with most complete product lines and leading technologies with their business activities enfolding R&D design, manufacture, repair, sale, lease and technical services for railway rolling stock, EMUs, metro coaches, urban rail transit vehicles, engineering machinery, consulting services etc. along with several subsidiaries under their full control. On 09.03.2015, these two entities namely; M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd. got merged after securing the approval of the concerned state authorities, as a result whereof, all assets of these two integrant corporations, together with liabilities, businesses, qualifications, staff, contracts along with all rights and obligations stood transferred to the appellant-corporation w.e.f. 01.06.2015. Following such assimilation, the appellant-corporation was, as a joint stock limited company incorporated in the Peoples Republic of China with limited liability and owned and controlled by the Chinese Central Government. As a consequence of such merger, the subsidiaries of M/s CSR. Corporation Ltd. and M/s CNR. Corporation Ltd., became the ....
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....t to submit its response thereto. 9. The queries, amongst others, related to the norm of experience as contained in clause 2.4 of Section III of the Tender Documents. It is inessential to detail the queries and the replies offered by the appellant, having regard to the focused contentions raised before us, as would be referred to shortly hereinafter. Suffice it to state, as claimed by the appellant, it did adequately and completely answer the queries and supplemented the same with contemporaneous records. 10. It was thereafter that the appellant came to learn that the respondent on 15.10.2016 had rejected its "Initial Filter-cum-Qualification Requirement Bid" and thus had disqualified it for further participation in the tender process. The appellant thereafter unsuccessfully pleaded with the respondent corporation by filing various representations and requests and the same having failed to evoke any affirmative response, sought refuge of the legal process. Prior thereto, it was served as well with a caveat application filed by the respondent in the High Court mentioning about its disqualification following the rejection of its "Initial Filter-cum-Qualification Requirement Bid" . ....
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....riginal offer and further endeavoured to make up the deficiency in its experience, as prescribed, by falling back on the experience of its so called subsidiary companies. According to MEGA, as the subsidiary companies of the appellant, retained their independent existence as separate legal entities, their experience, in terms of the relevant tender norms, could not be counted to be that of the appellant as it (appellant) did submit its offer as a single entity and neither as a joint venture nor as a consortium with its subsidiary companies. Though in its reply, the MEGA also expressed its reservation with regard to the appellant's stand alone financial credentials, it is unnecessary to refer thereto, as the same did not figure in course of the rival exchanges in the appeal. 14. The GEC, according to the MEGA, after scrutinizing the bid documents together with the clarifications re-laid before it, opined that the appellant was found to be non-responsive to the requirements of clauses 2.3 and 2.4 of Section III relating to "Evaluation and Qualification Criteria" of the "Tender Document". It would be sufficient for the present purpose to extract the relevant excerpt of the findin....
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....rring to clause 4.1 of Section I of the "Tender Document", the appellant, in reiteration, pleaded that the clarification referred to by MEGA excluding the experience of the subsidiary/group companies from being accounted for in absence of a joint venture or consortium was in respect of a query in a totally different context and was wholly inapplicable to its bid. According to the appellant, the query was raised by a subsidiary company before the respondent as to whether it could avail the experience of its parent/group company and in response thereto, it was explained that if a subsidiary company did wish to use the experience of the parent company, the parent company or the group company should form with it a Consortium or a JV, as the case may be. The appellant thus insisted that it having submitted its bid, as a single entity being the holding company of its subsidiaries and had claimed the experience of its fully owned subsidiaries, the clarification relied upon by the GEC and acted upon by MEGA to oust it (appellant) from the process as disqualified, was patently flawed. It further stood by its responses to the queries made, contending that those adequately did answer the same....
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....f Criteria" furnished on behalf of MEGA and endorsed by the High Court is patently erroneous and is wholly incompatible with the letter and spirit of clause 4.1 and disregardful of the materials on record pertaining to the constitution of the appellant and the functional mechanism qua its subsidiary companies and is thus liable to be dismissed as absurd, arbitrary and in defiance of logic. 22. Mr. Sundaram has argued that it being apparent on the face of the records that the query in response to which, the clarification provided by the appellant-corporation was that a subsidiary company/group company may bid together with the parent company as a J.V./Consortium member, for parent/group company experience to be taken into account, had been raised by a subsidiary company with a request to allow the experience of the parent company/group company to be taken into account for meeting the qualification requirement of experience of a subsidiary company. The learned senior counsel has thus maintained that this clarification had no application whatsoever to the appellant-corporation who had offered its bid as the single entity, as permissible under clause 4.1 and in view of its formational....
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....sustenance principally from the following decision of this Court: (1) Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & Anr. - 2016 (8) SCALE 765 (2) Tamil Nadu Generation and Distribution Corporation Ltd. Vs. CSEPDI - Trishe Consortium - 2016 (10) SCALE 69 (3) Montecarlo Ltd. Vs. NTPC Ltd. - 2016 (10) SCALE 50 (4) Core Projects and Technologies Ltd. Vs. The State of Bihar - 2011 (59) BLJR 183 (5) Rohde and Schwarz Gmbh and Co. Kg. Vs. Airport Authority of India and Anr. -(2014) 207 DLT 1 24. The contentious pleadings and the assertions based thereon have been duly evaluated. The issue that confronts the present adjudicative pursuit, did fall for the scrutiny of this Court, albeit in the context of another project, in which the appellant (respondent No. 2 therein) had been awarded the contract, a decision that stood upheld in C.A. Nos. 1353-1354 of 2017 - Consortium of Titagarh Firema Adler SPA -Titagarh Wagons Ltd. vs. Nagpur Metro Rail Corporation Limited (decided on 9.5.2017). Clause 4.1 dealing with eligibility criteria of the prospective tenders, as involved in that decision, deserves extraction to facilitate an immediate comparison of the text the....
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.... as the law adumbrated by the pronouncements of this Court, this plea against the eligibility of the appellant-corporation was negated. 29. It would be advantageous, in view of the striking analogy of the overall perspectives, to recount the relevant observations recorded therein and having a decisive bearing on the issue under scrutiny. "24. The core issue, as we perceive, pertains to acceptance of the technical bid of the respondent No. 2 by the 1st respondent and we are required to address the same solely on the touchstone of eligibility criteria regard being had to the essential conditions. The decision on other technical aspects, as we are advised at present, is best left to the experts. We do not intend to enter into the said domain though a feeble attempt has been made on the said count. ... ... ... ... ... ... ... ... ... 26. What is urged before this Court is that the respondent No. 2 could not have been regarded as a single entity and, in any case, it could not have claimed the experience of its subsidiaries because no consortium or joint venture with its subsidiaries was formed. With regard to relationship of holding and subsidiary companies, we have been commende....
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....f the fact that in Jagdish Mandal (supra) it has been held that, 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 decisions in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and another (2005) 6 SCC 138, B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. and othersand Michigan Rubber (India) Ltd. (supra) have been referred to. The Court quoted a passage from Afcons Infrastructure Ltd. (supra) wherein the principle that interpretation placed to appreciate the tender requirements and to interpret the documents by owner or employer unless mala fide or perverse in understanding or appreciation is reflected, t he constitutional Courts should not interfere. It has also been observed in the said case that it is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given. After referring to the said....
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....another v. Union of India and another, the Court referred to the authority in Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. and others wherein it has been observed that though the principle of judicial review cannot be denied so far as exercise of contractual powers of Government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the court that in the matter of award of a contract power has been exercised for any collateral purpose. Thereafter, the Court in Reliance Telecom Ltd. (supra) proceeded to state thus: "75. ... In the instant case, we are unable to perceive any arbitrariness or favouritism or exercise of power for any collateral purpose in the NIA. In the absence of the same, to exercise the power of judicial review is not warranted. In the case at hand, we think, it is a prudent decision once there is increase of revenue and expansion of the range of service." And again: "76. It needs to be stressed that in the matters relating to complex auction procedure having enormous financial ramification, interference by the Court....
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....en placed on Littlewoods Mail Order Stores, Ltd. v. McGregor (2006) 11 SCC 548, DHN Food Distributors Ltd. and others v. London Borough of Tower Hamlets (1976) 3 All ER 462 and Harold Holdsworth & Co. (Wakefield) Ld. v. Caddies (1955) 1 WLR 352. Learned senior counsel has also placed reliance upon the principles stated in Renusagar Power Co. (supra) that have been reiterated in New Horizons Ltd. (supra). In the written submission filed on behalf of the 1st respondent, the relevant paragraphs from Renusagar Power Co. (supra) have been copiously quoted. It is also urged that in the current global economic regime the multinational corporations conduct their business through their subsidiaries and, therefore, there cannot be a hyper-technical approach that eligibility of the principal cannot be taken cognizance of when it speaks of the experience of the subsidiaries. It is also contended by Mr. Subramaniam that in the context of fraud or evasion of legal obligations, the doctrine of "piercing the veil" or "lifting of the corporate veil" can be applied but the said principle cannot be taken recourse to in a matter of the present nature. 33. With regard to the satisfaction of the 1 st ....
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....nderstanding of the tender conditions by R 1. It is humbly submitted that R 2 fulfilled all the technical requirements. The bid-document itself provided for bidding as a consortium, and did not require in such a case fulfilment of any material condition, which if not fulfilled would prejudice any parties or the project. Moreover, the scheme of the bid-document is such that it itself provides for a Parent Company Guarantee. According to this Parent Company Guarantee Form, a parent company would have to perform the works under the agreement in case the subsidiary failed. Therefore, the objections raised by the Petitioner are hyper-technical and have been raised only to stall the project once it was found to be unsuccessful." 34. As is noticeable, there is material on record that the respondent No. 2, a Government company, is the owner of the subsidiaries companies and subsidiaries companies have experience. The 1st respondent, as it appears, has applied its commercial wisdom in the understanding and interpretation which has been given the concurrence by the concerned Committee and the financing bank. We are disposed to think that the concept of "Government owned entity" cannot be c....
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..... Specific Experience Clause 2.4.2( a) A minimum number of two (2) similar contracts that have been satisfactorily and substantially completed as a prime contractor (single entity or JV member) between 1st January, 2006 and the Bid submission deadline. Specific Experience (2.4.2(b) Experience under contracts in the role of prime contractor (single entity or JV member) for Vehicle Design, Interface (with other designated Contractors such as signaling, Track Traction, etc.), Assembly & Supply, Testing and Commissioning of minimum of total 150 metro (i.e. MRT, LRT, Sub-urban Railways or high speed railways) cars made of either Stainless Steel or Aluminum with similar features including three phase traction propulsion system ATP/ATO systems, etc. between 1st January, 2006 and the Bid submission deadline. AND Out of 150 or more cars supplied and commissioned as above have minimum of total 75 metro (i.e. MRT, LRT, Sub-urban Railways or high speed railways) cars supplied and in satisfactory revenue operation continuously for at least five years: EITHER in at least 1 (one) country outside the country of origin OR in India." 33. It is a matter of record that between 16.03.201....
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....h entities in the form of a J.V. or a Consortium under an existing agreement or with the intent to enter into such an agreement supported by a letter of intent. Thus a single entity has been construed to be a valid bidder for all intents and purposes. 35. Having regard to the magnitude of the project as well as the experience and expertise essential for the quality execution thereof, there seems to be no justification to infer, at the first place, to exclude a government owned entity with its 100% wholly owned subsidiaries to be ineligible to participate in the process. A single entity, in our comprehension, would assuredly include such a government owned entity along with its 100% wholly owned subsidiaries. This is more so on the touchstone of otherwise imperative facilitation of a broad based participation of entities with competing worth and capabilities, in the overall interest of the timely and quality execution of a public project. 36. As recorded in Consortium of Titagarh Firema Adler SPA (supra), the appellant-corporation is a government owned entity with 100% wholly owned subsidiaries as a composite unit, so much so that the experience of any one of its constituent 100% ....
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....regarded as single, coherent and homogeneous existence and not a disjointed formation. 38. The queries and the clarifications, relatable to the discord, as presented, also in our discernment, do not substantiate the plea of MEGA in any manner whatsoever. The foundation of its rejection of the appellant's bid is the clarification to the query mainly at serial No. 50. It is patent therefrom that it was in response to a query made by a subsidiary company to allow for its benefit, the experience of the parent company/group companies to meet the qualification requirement with regard thereto. It was in that context that the clarification furnished was that the subsidiary company/group companies may bid together with the parent company as J.V./Consortium member, for parent/group company's experience to be taken into account. This clarification was extended and applied vis-a-vis the appellant qua clauses Nos. 2.4.1, 2.4.2(a), 2.4.2(b) and 2.4.2.(c) to disqualify it on the ground that on stand alone basis, it was deficient in the experience prescribed and that it could not have availed of the experience of its subsidiaries companies. As rightly contended on behalf of the appellant,....