TaxTMI 
TaxTMI 
TaxTMI 
2005 (7) TMI 743
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....ecified number of special class civil contractors by inviting offers for pre-qualification to tender for the projects. In the second stage it was proposed to again invite tenders inviting offers from empanelled concerns/firms/companies to take up water resources projects on EPC turn key basis. These financial bids are to be evaluated mainly at the stage of a high powered committee and then by the Government. The dispute in this Writ Petition is in relation to rejection of the financial bid/tender of the petitioner which was initially empanelled after pre-qualifying it. The petitioner prays for a Mandamus directing the respondents to issue Letters of Acceptance (LoAs) for packages 90,91 and 98 under category-2 pursuant to tender notice dt.8-1-2005. BACKGROUND FACTS AND PLEADINGS: 2. The fact of the matter is not much in dispute. M/s. GVPR Engineers Limited (GVPREL) is a company registered under the Companies Act, 1956. M/s. Megha Engineering Enterprises (MEE) is a partnership firm. Both of them entered into a joint venture agreement on 31-8-2004 in the name and style of GVPREL - MEE (JV). M/s. GVPREL is lead partner in JV. This was done pursuant to a tender notice No. 2, dt.1....
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....-4-2005 Ex-Officio Advisor to the Government addressed Memo to Managing Director of GVPREL and Chief Executive Officer of MEE requesting them to appear before the evaluation committee on 4-5-2005 to establish a solidarity as joint venture of petitioner JV. It was also informed that in the opinion of the Government, in view of the letters of MEE dt. 21 -2-2005 and 14-3-2005, withdrawing from joint venture, the petitioner JV is no more a joint venture. The meeting of both JV partners with tender evaluation committee was held on 5-5-2005. At that meeting the petitioner gave a letter dt.5-5-2005 to the Advisor inter alia informing that even if MEE is not willing to cooperate, the other constituent has got required experience, equipment, financial strength and personnel to be accepted as a successful bidder. At that stage, G.S.S. Reddy again having come to know through newspapers that the Government is likely to award the contract to L2 and L3 tenders, filed present Writ Petition. 6. This Court while admitting the Writ Petition on 17-5-2005 by order of even date in W.P.M.P. Nos. 14579 and 14580 of 2005 directed the respondents not to award the works of packages 90,91 and 98 to any....
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....es in the Joint Venture, the public interest at large should not suffer by stopping the works which would affect the large number of farmers and any delay in completing the works would adversely affect the ayacutdars under the project. 8. As noticed above, while passing interim orders, this Court directed the respondents to consider the representation dt.5-5-2005 made by the petitioner after giving opportunity to the petitioner. In pursuance thereof, the high power committee gave opportunity to authorised signatory, considered presentation given by him and came to the conclusion that petitioner JV is not in existence in view of withdrawal of JV partner MEE. The decision was communicated to the petitioner by letter No. 13009/Reforms/2005-5, dt.4-7-2005. This is not denied. RIVAL SUBMISSIONS: 9. Sri E. Manohar, learned Senior Counsel for the petitioner submits that the rejection of tender of petitioner JV, though admittedly is the lowest for the packages 90, 91 and 98, is illegal. It is his submission that even after withdrawal of MEE from JV, by reason of the General Power of Attorney executed in favour of Sri G.S.S. Reddy as authorised signatory, the entity of JV as such do....
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.... respect of packages 90, 91 and 98 on the ground that petitioner JV which offered for pre-qualification to tender became nonexistent at the second stage of consideration and acceptance of bids. 12. It is now well-settled that subject to inherent limitations, the judicial review, in a given case is available in relation to exercise of contractual powers by the Government. If it is shown that the public authority committed gross illegalities or exercises power in abusive and arbitrary manner, a Writ Petition would be maintainable even when the contractual powers of the State are impeached. In scrutinizing the State action in awarding contract, the Court is required to keep in mind competing right between the individual and public. If public interest can be sub-served by impugned State action, it has to be preferred to individual right ignoring even financial aspect of the matter. As held by the Supreme Court in Raunaq International Ltd. v. I.V.R. Constructions AIR 1999 SC 393 financial savings to the State would ultimately sub-serve public interest. Over a period of almost four decades, in India clear principles have been evolved by the Courts in the matter of judicial review of con....
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....blic auction or by inviting tenders. This rule of disposing of property by public auction or by inviting tenders can only be relaxed in a situation intended to achieve goals set out in Part-1 V of the Constitution. (ix) When the property is disposed of by public auction or by public tender the standards and guidelines set out in the invitation to tender or tender document must be scrupulously adhered to and the method private negotiations is not ordinarily permissible unless there is sufficient indication in notice inviting tenders for such negotiations. (x) Tender conditions are in the nature of administrative guidelines or instructions. Thus, the principle in Vitarelli v. Seaton 359 US 535 : 3 L Ed 2d 1012 (1959) that an executive agency must be rigorously held to the standards by which it professes its actions to be judged and if the tender conditions require strict compliance there can be no relaxation of tender conditions. This, however, is not the case if the tender document or tender conditions require only substantial compliance with the tender conditions. This point is further discussed infra. (xi) When the offers/proposals by bidding parties are evaluated by committ....
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....ew are equally applicable in the context of Indian administrative law by reason of the decision of the Supreme Court in Tata Cellular v. Union of India. AIR 1996 SC 11. Dealing with the ground of illegality and its scope in Sri Bhavanarishi Co-operative House Building Society v. Joint Collector, 2002 (5) ALD 398 this Court observed as under. An administrative decision is illegal if "(i) it contravenes or exceeds the terms of the power which authorizes the making of a decision; or (ii) it pursues the objective other than that for which a power to make the decision was conferred See De Smith, Wolf and Jowell's "Principles of Judicial Review": 1999 Sweet and Maxwell -p.151. In Tata Cellular, the Supreme Court observed that illegality means the decision maker must understand correctly the law that regulates the decision making power and must give effect to it. It was also observed that a Court of judicial review must confine itself to the question of legality by examining whether a decision making authority exceeded its power, committed an error of law, committed breach of rules of natural justice and reached a decision which no reasonable Tribunal would have reached. 16. When t....
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....erty or labour in conduct of particular line of trade or a general business for joint profits. The Courts do not treat a joint adventure as identical with a partnership though it is so similar in nature, and in the contractual relationship created by such adventurerers that the rights as between them are governed practically by the same rules that govern the partnership. This relationship has been defined to be a special combination of persons undertaking jointly some specific adventure for profit without any actual partnership. It is also described as a commercial or a maritime enterprise undertaking by several persons jointly; a limited partnership not limited in the statutory sense as to the liabilities of partners but as to its scope and duration. Generally speaking the distinction between a joint adventure and a partnership is that former relates to a single transaction 'though it may comprehend a business to be to be continued over several years' while the later relates to a joint business of a particular kind (see 48 American Law Reports at p. 1055 under the caption "what amounts to a joint adventure" at pages 1056-57 and 1060). It is generally agreed that in order t....
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....tuation may arise when a member of a joint venture group drops out prematurely because of the liquidation or insolvency. When a contract is concluded with a joint venture group all members are made jointly and severally liable even if only one is capable of rendering the service in question. The joint and several liabilities of the members of a joint venture group may cover the marginal areas of the contract performance such as late performance, faults, deficiency of goods and services etc. (emphasis supplied) 20. In Chahal Engg. and Construction Co. (P) Ltd. v. State of Gujarat(supra) a Division Bench of Gujarat High Court was dealing with a case of joint venture where at the stage of consideration of pre-qualification to tender, one of the members of eight participants of joint venture consortium, withdrew from the group. The Gujarat High Court considered JV agreement and subsequent postils to it, came to the conclusion that even if one of the joint venture partners withdrew from the joint venture, still joint venture continued to function. The relevant passages from the judgment delivered by Justice B.K. Mehta are as follows. The case, therefore, is not of termination of th....
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....t venture is an association of two or more persons to carry out a single business enterprise for profit (p.117, Vol.23). A joint venture can take the form of a corporation wherein two or more persons or companies may join together. A joint venture corporation has been defined as a corporation which has joined with other individuals or corporations within the corporate framework in some specific undertaking commonly found in oil, chemicals, electronic, atomic fields. (Black's Law Dictionary, 6th Edn.,p.342) Joint venture companies are now being increasingly formed in relation to projects requiring inflow of foreign capital or technical expertise in the fast developing countries in East Asia, viz., Japan, South Korea, Taiwan, China etc. (See Jacques Buhard : Joint Ventures in East Asia -Legal Issues (1991).] there has been similar growth of joint ventures in our country wherein foreign companies join with Indian counterparts and contribute towards capital and technical know-how for the success of the venture. 22. A further reference, may be made to 'Words and Phrases' Permanent edition volume 23 as well as its 2002 Cumulative Annual Pocket Part). In page 230 of Volume 23....
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.... been made subject to each of the associates on the trust and inducement that each would act for their benefit. 24. On reading decision of Supreme Court and two judgments of Gujarat High Court, it may be summarised that an informal partnership between two or more persons to take up a common enterprise on one time basis is a 'joint venture'. The 'joint venture' involves the factors, like (i) contribution by the parties of money, effort, knowledge and other assets to common undertaking; (ii) joint property interests in the subject matter of the venture; (iii) right of mutual control of management of the enterprise; (iv) expectation of profit; (v) right to participate in the profits; and (vi) limitation of the objective to a single undertaking. 25. The second respondent issued tender notice No. 2 dated 13-08-2004 inviting offers for pre-qualification to tender for water resource development projects. As per the general instructions to applicants in tender notice, it is essential that the bidder/firm/ company should have annual turnover of Rs. 50 crores at least for two financial years in a block period of preceding five financial years. That is to say, befo....
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....and MEE executed letter authorizing Mr. G.S.S. Reddy to sign the pre-qualification document on behalf of JV and also undertook to be responsible for the tender document submitted by Mr. G.S.S. Reddy on behalf of JV. No objection was raised in the counter affidavit with regard to this aspect. The learned Advocate General while inviting attention of this Court to the JV agreement and the authorization letter, submits that though there was no separate agreement at the time of submitting tenders for various packages, the respondents proceeded on the basis of these two documents as if the JV was entitled to bid for the works based on the JV agreement. He, however, submits that, as noticed above -when MEE submitted letter on 21-02-2005 withdrawing from JV, the same became nonexistent and therefore the decision of the respondents does not suffer from any illegality. For this purpose, he relied on the general instructions to the applicants in tender notice No. 2, dated 13-08-2004, the JV agreement dated 31 -08-2004 especially the preamble portion and Clauses 12,14 and 15 and Clauses 2.3(v) and (ix) of tender schedule in support of the contention that when MEE withdrew from the JV, it ....
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....esirous of entering into a joint venture and submitting the tenders for "PRE-QUALIFICATION TO TENDER FOR WATER RESOURCES DEVELOPMENT PROJECTS FOR MEDIUM SIZED PACKAGES", vide Tender Notice No. 2; dated 13-08-2004 of Government of A.P., Irrigation and CAD Department, Errumanzil, Hyderabad.... And whereas the parties hereto and desirous to form a Joint Venture and tender for and execute successfully the works connected with the following tender notices of Irrigation and CAD Department, vide Tender Notice No. 2; Dated 13-08-2004. Now, it is agreed to by between the parties as follows: 1. to 11. Omitted. 12. Both the Joint Venture firm shall have to come to an agreement for each and every work either to tender, accept, reject, execute or any understanding for and on behalf of the Joint Venture without agreement, the transactions shall not hold any validity. 13. Omitted. 14. That the parties hereto shall subject to the terms and contractual obligations of the work orders, carryout and function under the Joint Venture to the greatest common advantage and shall be (sic. bear) profits and losses in proportion to their investments and shall be just and faithful to each i....
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....thdrawal of MEE by reason of the GPA/authorization letter, Mr. G.S.S. Reddy continued to represent JV, and that the JV as such was not wound up or dissolved, cannot be accepted for reasons more than one. First, even according to JV agreement at the stage of award of contract by the employer, JV partners have to discharge certain legal obligations. Both the partners have to enter into an agreement, they have to constitute a managing committee and appoint a project manager. They have to contribute funds and continue to have community of interest in undertaking the works, in sharing the profits and being responsible to third parties. Though GVPREL by reason of JV may take upon themselves these obligations as an individual entity, after the withdrawal of MEE from the JV, the other partner of JV cannot be said to have taken upon themselves the legal obligations under JV agreement. Whether MEE can withdraw from JV agreement and whether such withdrawal is binding on the employer is altogether different dispute between two JV partners. But insofar as employer is concerned, at the time of issue of LoA it is very relevant when the same is considered in the background of the tender conditions....
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.... to exist cannot be accepted. It must be remembered that the company incorporated in the nature of joint venture may not lose its juristic personality. Similarly a registered partnership firm under Partnership Act may still have certain obligations, rights and liabilities, even after dissolution, by reason of Sections 45, 46 and 47 of Partnership Act, 1932. The same is not position, in the case of a JV which came into existence by reason of agreement between two or more JV partners. When there are only two partners in the J V, and one of them goes out, it is very difficult to accept such entity as a continuing JV especially when it only draws its sustenance under a mutual agreement between the two partners. 32. The above position can be better appreciated by two illustrations. If there is a bicycle with two wheels and if one wheel is lost, by no stretch of common sense the remaining part can be called a bicycle as it ceased to be a bicycle the moment one wheel is lost. The same may also be the case in the case of four-wheeler with only four wheels. But in the case of motor vehicle with six wheels or more number of wheels in the rear or in the front or in the middle (such vehicles ....
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.... to the submission of bank guarantees by GVPREL, authorization being in favour of Mr. G.S.S. Reddy and GVPREL being a lead partner, cannot be accepted. Even otherwise the moment MEE gave letter withdrawing from JV, it became non-existent. 34. The issue may be looked at from different angle as well. What would have been the position if MEE had withdrawn before empanelment of the petitioner JV? What would have been the status of petitioner JV vis-a-vis the employer if MEE had withdrawn after award of work to petitioner JV by the Government? If MEE had withdrawn even before pre-qualification of petitioner JV to tender, admittedly GVPREL was not eligible by reason of not having required annual turnover and therefore would have suffered disqualification. If MEE had withdrawn from JV after award of contract, two things would have been possible. First, as per instruction 2.3(v) of tender schedule, the Government may have agreed for the change of MOU/JV and allowed the petitioner JV to continue the contract. Second option was that the employer could have refused the change of MOU/JV and compelled the remaining JV partner to complete the work accepting the liability. As the things stand th....