TaxTMI 
TaxTMI 
2011 (10) TMI 775
X X X X Extracts X X X X
X X X X Extracts X X X X
....estic bidder. According to ONGC, the Petitioner has failed to establish its claim to a price preference. The Bid Evaluation Criteria required inter alia, the submission of a certificate in original of the statutory auditor of the bidder indicating through various details that no more than fifty percent of the work measured in terms of value has been subcontracted to foreign bideders. Moreover, the certificate had to be submitted with the unpriced bid. According to ONGC and the Third Respondent (to whom, a decision has been taken to award the contract), the certificate issued by the statutory auditor of the Petitioner did not fulfill the conditions laid down in the Bid Evaluation Criteria. Moreover, the certificate was not furnished with the unpriced bid. 2. The First Respondent issued a notice on 28 May 2010 inviting tenders for a Sub­Sea Pipeline Project, described as being for "B­193 Field Development". The Bid Evaluation Criteria were contained in Appendix A­6 of the bid document. Bids were required to be submitted under a two Bid System as per Clauses (10) and (11) of Part­I of Volume­I of the bid documents. Clause 25 of the Bid Evaluation Criteria stipul....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... far as is material, provided for price preference to domestic bidders to the extent of ten percent over the lowest acceptable foreign bid. The Price Preference clause is as follows: "C­5) Price Preference/Purchase Preference a. Price Preference Domestic Bidders would be entitled to a price preference of ten percent (10%) over the lowest acceptable (quoted) foreign bid subject to domestic bidders providing all evidence necessary to prove that they meet the following criteria: (i) is registered within India, (ii) have majority ownership by nationals of India and (iii) not subcontract more than 50% of the Works measured in terms of value to foreign contractors. For (iii) above, an original certificate from practicing Statutory Auditor engaged by the company (bidder) for auditing their annual accounts indicating therein various details, which could establish that no more than 50% of the works measured in terms of value has been sub­contracted to foreign contractors must be furnished along with unpriced bid. It must be noted that above information so furnished, if at any stage, found wrong, incorrect or misleading, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be registered within India and have a majority ownership of nationals of India. The third condition required that the bidder should not sub­contract more than 50% of the work measured in terms of value to foreign contractors. The observations of the Tender Committee in that regard were that "the certificate submitted by the statutory auditors M/s.S.R. Batliboi does not clearly bring out about the sub­contracting" and that the certificate made a reference only to the foreign cost component. The Tender Committee was in that context, referring to a certificate that was furnished by the Petitioner of their statutory auditors, S.R. Batliboi & Co. on 16 August 2010. The auditors' certificate was to the following effect: "We have received from the Company a working of the budgeted cost of the proposed Project that bifurcates the cost between its local and foreign components. In terms of the said working of cost, and using exchange rate of Rs. 46.50 for USD, the foreign cost component is less than 50% as verified based on the attached Annexure." The Tender Committee noted that there was a difference in the language of the certificate submitted by the Petitioner fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nism set up by the First Respondent to assist in the evaluation process. The IEM furnished its opinion on 1 December 2010 by which it came to the conclusion that all documents which were required to be furnished along with the unpriced bids were not furnished by the Petitioner. The Petitioner was found not to have submitted a certificate to establish that the value of the work sub­contracted to foreign contractors was not going to be in excess of 50%, together with the unpriced bid. The IEM furnished a supplementary opinion of 2 December 2010 to the effect that requirement for securing a 10% price preference had not been fulfilled by the Petitioner. 6. After submitting representations on 5 and 8 December 2010 to the IEM, the Petitioner challenged in writ proceedings before this Court under Article 226 of the Constitution, the proceedings before the Second Respondent, the IEM, on the ground that it has not been furnished with an adequate opportunity of representing its case. On 7 February 2011, this Court disposed of the Writ Petition in terms of an order passed by consent. The consensual arrangements between the parties contemplated that (i) A copy of the recommendation made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons and decision of the EPC were minuted to the following effect: "15. EPC deliberations/decision: 1. It was brought out that an EPC agenda brief was submitted on 23.11.10 with recommendation to award the work to M/s.PLL subject to matching the price with L1 and providing an explicit conformity certificate of subcontracting to qualify for Price Preference. After submission of agenda brief, one of the bidders M/s.Swiber Offshore Construction Pte.Ltd., Singapore made representation to IEM. Therefore, the case was not taken up by the EPC on 24.11.2010. Vide opinion dated 02.12.2010, IEMs had concluded that on interpretation of clause 10.3 of ITB and read with clause C­5a of the BEC, the requirement for securing 10% price preference has not been fulfilled by the Consortium of Punj Lloyd Limited and PT­Punj Lloyd, Indonesia. A Writ Petition was filed by M/s.Punj Lloyd Limited in the High Court. As per the court verdict, the subject Petition is disposed of by a direction to the effect that the Petitioner would be at liberty to furnish to the First Respondent such further material that may have a bearing on the recommendation of the IEM and on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s sought to be urged that the certificate of the statutory auditor submitted by the Petitioner was not in compliance with the tender conditions. The Division Bench held that the Third Respondent was not entitled to raise this point not having raised it before the IEM in its representation dated 19 February 2011. Similarly, the Division Bench held that the Third Respondent was not entitled to question before the Court the sufficiency of the certificate of the statutory auditor furnished by the Petitioner. For these reasons, the Division Bench came to the conclusion that the reasons furnished by the First Respondent for rejecting the offer of the Petitioner and for denying the Petitioner the benefit of the price preference was arbitrary. The award of the contract to the Third Respondent was accordingly set aside and rule was made absolute. 9. The judgment of the Division Bench was carried in appeal before the Supreme Court both on behalf of the First Respondent and the Third Respondent. By a judgment dated 27 July 2011, the Supreme Court held that the Division Bench was not right in coming to the conclusion that the First and Third Respondents were precluded from questioning the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etitioner and would have resulted in an invalidation of the bid. 11. The Learned Attorney General of India appearing on behalf of the First Respondent submitted that (i) Ex­facie the certificate that was submitted by the statutory auditors of the Petitioner was based on a bifurcation of the cost between its local and foreign components and was clearly not in terms of Clause C­5 of the Bid Evaluation Criteria which required a certificate to establish that not more than 50% of the work measured in terms of value has been sub­contracted to foreign contractors; (ii) The Tender Committee, in its initial recommendations, as well as the Engineering Services division had opined that there was a considerable amount of uncertainty as to whether the activities under the contract would be performed by the Petitioner or by other contractors as a result of which the Committee had proceeded to estimate that between 32.10% to 54.87% of the work under contract would be performed by foreign contractors; (iii) The Tender Committee while recommending the award of the contract to the Petitioner had, however, required an explicit conformity certificate of sub­contracting thereby recog....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n behalf of the First Respondent and urged that (i) The issuance of a certificate of the statutory auditors as required in Section C­5 of the Bid Evaluation Criteria is a crucial requirement which forms the basis of a claim of price preference by a domestic bidder; (ii) Clause 11.1 of the Invitation to bid contains provisions in regard to the techno commercial bid and required a disclosure of all sub­contracts; (iii) The provisions of clause 25 of the Bid Evaluation Criteria as well as Clause C­5 leave no manner of doubt that the documents required for claiming a price preference were to be submitted with the unpriced bid. The Petitioner having failed to do so, its bid was not compliant; and (iv) The certificate of the statutory auditor submitted by the Petitioner contained a bifurcation of cost between foreign and local components and was not in compliance with the tender conditions. 13. The rival submissions now fall for determination. 14. The First Respondent had invited bids for the award of a contract for its Sub­sea Pipeline Project on the basis of international competitive bidding. Bids were required to be submitted in two folders. The unpriced techno c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....domestic bidder. In other words, a price preference cannot enure to the benefit of a bidder where over a half of the work measured in terms of value is going to be subcontracted to foreign contractors. In order to establish the fulfillment of this condition, Clause C­5 requires an original certificate from a practicing statutory auditor engaged by the bidder for auditing its annual accounts indicating various details which would establish that not more than 50% of the work measured in terms of value has been sub­contracted to foreign contractors. Clause C­5 contains a specific requirement that such a certificate had to be furnished along with the unpriced bid. The conditions on which a price preference was made available to domestic bidders were essential conditions of the tender. The object and purpose of the conditions was to ensure that a price preference should be availed of by a bidder who can be regarded as a genuine domestic bidder. The manner in which that condition was required to be established was through the submission of a certificate of a statutory auditor. The requirement that the certificate of the statutory auditor should be submitted together with the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all the terms and conditions of the bidding document have been accepted. The Petitioner did not raise any doubt nor did it seek any clarification in the course of the pre­bid meeting. The only possible conclusion, therefore, was that the entitlement claimed by the Petitioner to the benefit of a price preference under Clause C­5 was required to be evaluated strictly on the touch stone of whether they had complied with the provisions of Clause C­5. 16. Plainly, in our view, the Petitioner failed to do so for two reasons. Firstly, the Petitioner did not submit a report of the statutory auditor indicating that not more than 50% of the work measured in terms of value would be sub­contracted to foreign contractors along with the unpriced bid. Counsel appearing on behalf of the Petitioner, however, submitted that the failure to do so would not result in the invalidation of the bid in view of Clause 27 of the Bid Evaluation Criteria. Now, Clause 27 stipulates that offers of a certain kind would be rejected and among them in sub­clause (b) are offers which are not submitted in an e­form through the e­procurement engine, except documents mentioned in Clause 25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en material and services in Indian rupees and against the imported component in US dollars. The Tender Committee noticed in the course of its initial recommendation dated 23 November 2010 that the certificate submitted by the Petitioner did not clearly bring out the extent of sub­contracting and that it mentioned only a foreign cost component. Despite this the Tender Committee proceeded to make its own assessment noting that there was a lot of uncertainty on whether certain activities would be performed by the Petitioner or by others. The Tender Committee, when it recommended the award of the contract to the Petitioner, nonetheless required the Petitioner to match the price of the lowest bidder and to provide "an explicit conformity certificate of sub­contracting as deliberated earlier". This itself is an indication of the fact that the Tender Committee was conscious of the fact that the certificate which was submitted by the Petitioner was not compliant. 18. Clause 11.1 of the Invitation to bid adverted to the contents of the unpriced techno commercial bid. Sub­clause (g) thereof requires a disclosure in relation to sub­contracting as follows: "g) A des....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which is referred to as an illustration, in contrast to the certificate granted in the present case, provided as follows: "This report is issued for the limited use by the Company for submission to Oil and Natural Gas Corporation Limited (ONGC) for execution of laying of Sub­Sea Pipeline and platform modifications for MHN Re­Development plan, phase­II project. The procedures were performed solely to examine the below mentioned information based on the documents and records maintained by the Company and are summarized as follows: 1) Obtained the management's proposed plan to sub contract the work to contractors for execution of laying of Sub­Sea pipeline and platform modifications for MHN ReDevelopment plan phase­II project. 2) Obtained the management's proposed plan to sub contract the work to foreign contractors for execution of laying of Sub­Sea pipeline and platform modifications for MHN Re­Development plan, phase­II project. 3. Verified the arithmetical accuracy of percentage of the work proposed to be sub contracted to foreign contractors in comparison to total value of work to contractors. Based on ....