Quippo Oil and Gas Infrastructure Limited Vs. Oil and Natural Gas Corporation Limited and Ors. - (High Court of Delhi) (12 Mar 2018)

Court's role is not to oversee the whole but only to ensure that there is no unfairness or arbitrariness

MANU/DE/0998/2018

Commercial

The Petitioner is a wholly owned subsidiary of SREI Infrastructure Finance Limited, which owns 99.90% of the shares. The first respondent/Oil and Natural Gas Corporation Limited (ONGC Ltd.) floated the subject charter hire of four numbers of Drilling Rigs for Mehsanam and Rajamundhry Assets. The Petitioner is aggrieved by the interpretation of the financial criteria of the tender, whereby the bidding company is required to possess 15% net worth of annualized bid value. The total bid value is Rs. 500 crore; 15% of that works out to Rs. 75 crores. ONGC published a tender calling for bids, on 30th December, 2016 for charter-hire of four Drilling Rigs for Mehsanam and Rajamundhry Assets. The original tender did not contain the working capital criteria under the bid evaluation criteria. By its letter, dated 23th March, 2017 ONGC informed the Petitioner with regard to the amendments made in the tender.

The Court, however, is not to view the interpretation of the tender documents as if it were the body charged with the primary duty of doing so. As repeatedly emphasized by the Supreme Court in its numerous decisions - including those cited by ONGC, judicial review is concerned with whether the impugned action is illegal, procedurally unfair, lacking in bona fides or patently and manifestly unreasonable in its effect. The last expression is to be resorted to only and only if the result is of such a threshold that the decision is one that no reasonable man placed in a like situation could have arrived at such a conclusion.

In instant case, ONGC argues that the interpretation given by it is plausible and reasonable and that given the Petitioner's extensive liabilities, considering its bid to have been qualifying, can result in the real possibility of non-performance of the contract itself. Facially, the petitioner's argument with respect to inadequate working capital being addressed through a line of credit made available by SREI Infrastructure banker seems plausible. At the same time, present Court is of the opinion that, though plausible, that interpretation is not the only reasonable one. The ONGC's argument that, the shortfall or inadequacy in working capital requirements addressed through a short term credit, in the manner done, in the circumstances of the case, is not adequate at all is reasonable on several grounds. The line of credit made available in terms of to what extent and in what terms the banker would make good the inadequacy and whether the terms are such that there would be sufficient cash flow for specifically funding the contract (if awarded) during the performance period and whether, importantly, such liability will be, in any way, kept apart from the other liabilities so that in the event of creditors moving in and seizing the assets, the contract can nevertheless perform, are matters that are left unsaid and unclear. It is, in these circumstances, that the inadequate working capital requirements assume importance as a relevant factor.

As remarked in Afcons; JSW Infrastructure, the public agency i.e. the ONGC was the author of the tender specifications. It is the commercial entity, though an arm of the Central Government, which primarily interprets the document and its terms and decides whether to award the contract. The considerations, which weighed with the ONGC, therefore, are entirely commercial. The Court's role is not to oversee the whole but only to ensure that there is no unfairness or arbitrariness. Having regard to these factors that the ONGC adopted, an interpretation of the terms under which it ultimately awarded the contract, an interpretation of the terms which will control the decision to award the contract finally that are unfavourable to the petitioner, cannot in the facts of the case be said to constitute an arbitrary decision warranting interference under Article 226 of the Constitution. There is no merit in the writ petition which is accordingly dismissed.

Relevant : Afcons Infrastructure Ltd. vs. Nagpur Metro Rail Corporation Ltd. and Ors. MANU/SC/1003/2016

Tags : BID REJECTION VALIDITY