TaxTMI 
TaxTMI 
2017 (5) TMI 1472
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....tion Ltd. and M/s. CNR Corporation Ltd., both 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 Lt....
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.... on 09.06.2016, the respondent raised 16 queries and required the appellant 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 follow....
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....ations as sought for, submitted additional details, thereby virtually revising its original 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 wou....
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....action is strictly in accordance with the tender norms and being objective and transparent, is unassailable. 18. Referring 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 pate....
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....has been insistently urged on behalf of the appellant that the exposition of clause 2.4 of the "Evaluation and Qualification of 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 ap....
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....in New Horizons Ltd. (supra) was of no avail to the appellant in the facts of the case, the learned senior counsel sought to draw 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.....
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....te experience as prescribed, it ought to have been disqualified on that count alone. 28. Following an exhaustive analysis of the facts, the relevant tender conditions as well 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 1^st 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 c....
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....sion must not only be tested by the application of Wednesbury principle of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. The two-Judge Bench took note of 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 ma....
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....jects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints." ... ... ... ... ... ... ... ... ... 29. In Reliance Telecom Ltd. and 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 onc....
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....rience claimed by the parent of the subsidiaries can be taken into consideration. Learned senior counsel for the 1 ^st respondent has drawn our attention to the "lifting of corporate veil" principle or doctrine of "piercing the veil" and in that context, reliance has been 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 1^st 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 c....
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....s one entity. Therefore, the scope of judicial review should be limited in adjudging the decision taken by R 1 in the best interest of the project, and thereby, the public. 40. That arguendo, no prejudice,whatsoever, has been caused to the project or to other bidders including the Petitioner by the above understanding 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 ....
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....d for in accordance with ITB.7.4." 32. Clauses 2.4.1 and 2.4.2 (a) & (b) of the "Evaluationand Qualification of Criteria", Section III are also extracted as hereunder: "General Experience (Clause 2.4.1) Experience in the role of prime contractor (single entity or JV member), Subcontractor or management contractor for at least last ten (10) years starting 1^st January, 2006. 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 1^st 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 1^st J....
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.... parents company, even 100% subsidiary doesn't have 10 years experience and doesn't meet other eligibility conditions mentioned in Clause No.2 of Section-III of Evaluation and Qualification Criteria. The subsidiary company/group company may bid together with the parent company as a JV/consortium member, for Parents/group company experience to be taken in to account. 34. A plain reading of clause 4.1 reveals that a biddercan be a single entity or a combination of such 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. Thi....
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....tandably, it is inclusive of a private as well as a government owned entity. The unit envisaged as a single entity is thus independent of any combination or formation in the form of a J.V. or a Consortium and thus is visualised to be one integral and composite whole. In such a logical premise, a government owned company with its 100% wholly owned subsidiaries has to be comprehended as a single entity, eligible to bid in terms of clause 4.1 of the tender conditions and is to be 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 toget....