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Quippo Oil and Gas Infrastructure Ltd. v. Oil and Natural Gas Corporation Limited and Ors. - (High Court of Delhi) (08 May 2017)

Public interest or change in policy may be sufficient to negate concept of legitimate expectation.



Petitioner, a public limited company, engaged in providing oil and gas rigs on rent with related services, claim that a direction should be issued to ONGC to consider its bid for a tender bearing No. P26AC16006 dated 05th December, 2016 and also seeks a direction restraining ONGC from awarding letter of intent to M/s. Globe Ecologistic Private Limited for said tender. Second Respondent herein owns 100% share holding in Petitioner company and is its ultimate holding company for all practical purposes, including financial criteria mentioned in tender. It is urged that, no other corporate entity holds any share in Petitioner-Company other than second respondent.

ONGC had issued a tender for hire of services for 2D seismic data acquisition in un-appraised "on land" areas of Sedimentary Basins of India for sector 3, 4, 6 & 10. Offer contained the following bid evaluation criteria in tender document for prospective bidder viz, (i) technical eligibility criteria and (ii) financial eligibility criteria. Tender demanded following financial criteria to be fulfilled by bidder for financial qualification viz, (a) turnover of bidders: 30% of annualised bid value or more; (b) net worth of bidder: positive (as per latest audited annual accounts).

It is alleged by Petitioner that, ONGC had made a provision in all its tenders stating that, in event any of criteria (a) or (b) above is not met with by bidder, it can submit its bid on basis of qualification of its 100% subsidiary or 100% parent holding company. It is alleged that, Petitioner did not have positive net worth as on 31st March, 2016, but it had always submitted its bid to tenders floated by ONGC by relying upon positive net worth of its parent holding company i.e. Second Respondent and that ONGC on past occasions had always considered Petitioner's bid by relying upon positive net worth of holding company.

It is not in dispute that, Petitioner was allowed to bid on the basis of the positive networth of its parent company in various tenders before, yet, it is also equally true that with respect to this tender ONGC issued a Circular No. 07/2017 seeking dispensation on issue of negative networth of Petitioner. Bid evaluation criteria for this tender reveals that, it is only in those cases where subsidiary company does not meet financial criteria (viz, turnover of bidders - 30% of annualised bid value) by itself and submits its bid based on financial strength of its parent company, that documents showing positive networth of parent company need to be submitted. However, in present case, interestingly, bidder met standards set in sub-clause No. (i) of Clause 6.0 viz the financial criteria, but failed in criteria (b) above. Therefore, ONGC cannot be said to be at fault in disallowing Petitioner's bid for tender. ONGC's Circular No. 07/2017 is clear on subject and seeks to ensure that, work centres should not put up any case for seeking dispensation on issue of negative networth of Petitioner in future. This cannot, in opinion of this Court, be construed as ONGC's relieving bidders of obligation to comply with eligibility conditions in regard to subject tender. As Petitioner had failed to meet above eligibility criteria, ONGC was justified in rejecting the bid of Petitioner.

In Ram Parvesh Singh & Ors v. State of Bihar and Ors. it was held that, legitimate expectation is not a legal right. It is an expectation of a benefit, relief or remedy, that may ordinarily flow from a promise or established practice. Term 'established practice' refers to a regular, consistent predictable and certain conduct, process or activity of decision-making authority. Expectation should be legitimate, that is, reasonable, logical and valid. Any expectation which is based on sporadic or casual or random acts, or which is unreasonable, illogical or invalid cannot be a legitimate expectation. Not being a right, it is not enforceable as such.

Public interest or change in policy may be sufficient to negate concept of legitimate expectation. Thus, if ONGC had decided that, a subsidiary company applying for tender should have a positive networth, it rather safeguarded compliance of project and hence, acted in public interest. Employer's interest is always in completion of its project rather than to secure financial guarantees for such project.

In present case, condition that, a bidder should have positive net worth was not imposed mid course; it always existed. That Petitioner's bids were accepted and evaluated in past, ignoring such a condition, does not in any manner make it inessential for present tender. As to its premise, Court is not equipped to discern the rationale. Perhaps, it is not enough for public agency to be satisfied that, any possible default can be financially addressed through a guarantee issued by principal or holding company and that alone may not be sufficient. It may wish to safeguard against insolvent contractors, whose lack of lines of credit may imperil smooth performance of contract, or worse - such as seizure or attachment of movable assets onsite. Therefore, insistence on such conditions cannot be belittled, nor can legitimate expectation be pressed into service as an actionable ground.

Court also notes that, Petitioner did not question as arbitrary the condition at time it furnished the bid. Having allowed the bid to stand, even furnished tender, now to seek exemption from condition would be asking Court to direct an unfair consequence, i.e., permit an ineligible bidder to nevertheless be evaluated. Court is satisfied that, neither process of evaluation, nor consideration given to Petitioner's tender, suffers from illegality, lack of bona fides or procedural irregularity. Interpretation given to tender by ONGC is also not arbitrary or unreasonable. Writ petition and miscellaneous application dismissed.

Relevant : Ram Parvesh Singh & Ors v. State of Bihar and Ors MANU/SC/4176/2006 : (2006) 8 SCC 381


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