Hpl Electric & Power Ltd. v. Energy Efficiency Services Ltd.

$~30 *

IN THE HIGH COURT OF DELHI AT NEW DELHI

+ HPL ELECTRIC & POWER LTD.

.....Petitioner Through:

Mr. Sandeep Sethi, Senior Advocate with Mr. Vinayak Marwah, Advocate.

Mr.

Vivek Kumar Tandon and Ms.Prerna Tandon, Advocates.

versus ENERGY EFFICIENCY SERVICES LTD.

.....Respondent Through:

Mr. Samdarshi Sanjay, Mr. Ashish Kr. Sharma and Mr. Monika Sharma, Advocates.

CORAM:

HON'BLE MR. JUSTICE SANJEEV NARULA

O R D E R

% 09.07.2024 1.

The present petition under Article 226 of the Constitution of India assails the letter dated 14th May, 20221 whereby the Petitioner has been suspended from participating in the tender process for a period of one year from 17th May, 2021 to 16th May, 2022.

BRIEF FACTS OF THE CASE 2.

The facts in brief are as follows:

2.1.

The Petitioner is a manufacturer engaged in producing a wide range of products, including metering solutions, switch gears, and LED lighting. The Respondent is a joint venture comprising of four Public Sector 1 "impugned order"

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

Undertakings under the Ministry of Power, Government of India. 2.2.

On 17th February, 2021, the Respondent issued a Notice Inviting Tender2 for the procurement of 23,50,000 units of smart meters. The scope of the tender encompassed comprehensive design, engineering, manufacture, testing, inspection, packing, supply, transport and insurance of single-phase and three-phase whole current smart meters, as well as LT-CT operated three-phase smart meters with meter boxes on a Pan-India basis. The deadline for bid submissions, as well as the date for the opening of technical bids, was set for 17th May, 2021. The following details the specifics of the submitted bids:

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

2.3.

The Techno Commercial Bid was opened on the 17th May, 2021, and it is acknowledged by all involved parties that the Petitioner emerged as the lowest i.e., L-1 bidder in this competitive process. The terms of the tender specified that the bid validity period would last for 180 days following the date of the Techno Commercial Bid opening. Consequently, the validity duration commenced on the 17th May, 2021, and expired on the 13th November, 2021. This timeline and the outcome of the bid process are undisputed.

2.4.

On 02nd September, 2021, the Respondent sent an email to the Petitioner indicating that the award would cover only 60% of the originally specified quantity in the tender. Responding on 09th September, 2021, the Petitioner requested that the Respondent consider awarding an additional 40% of the tendered quantity, but with an amended delivery time frame. 2.5.

Subsequently, through emails dated 19th November, 2021, and 30th November, 2021, the Respondent requested a three-month extension of the bid period until 17th February, 2022. The Petitioner, not being legally obligated to accept such a request, formally declined through a communication on 02nd December, 2021, stating that the bid had already lapsed.

2.6.

On 21st February, 2022, the Respondent issued a Show Cause Notice 3 to the Petitioner. The said notice alleged that the Petitioner's reply dated 09th September, 2021, which requested consideration of an additional 40% of the tendered quantity with an amended delivery schedule, constituted a modification of their original bid. The Petitioner was called upon to clarify 2 "NIT"

3 "SCN"

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

why they should not be suspended from participating in the tendering process.

2.7.

The Petitioner responded to the SCN on 03rd March, 2022, denying the allegations and asserting that their earlier communication was merely a request for the Respondent to consider additional quantities within the new timeline, not a modification of the bid. Despite their clarification, the Respondent proceeded with the suspension, issuing the impugned order on 14th May, 2022. This order suspended the Petitioner from participating in the tendering process for one year, effective from 17th May, 2021, to 16th May, 2022.

ARGUMENTS ADVANCED BY THE PARTIES 3.

Against the above backdrop, Mr. Sandeep Sethi, Senior Counsel for Petitioner, presents the following contentions: 3.1.

On a prima facie assessment of the facts of the case, operation of impugned order has been stayed by the Division Bench of this Court through order dated 18th May, 2022.

3.2.

The action of Respondent is unreasonable and arbitrary. Respondent could not have insisted upon Petitioner to extend the validity of the bid after 13th November, 2021. Therefore, the action of Respondent is liable to be set aside.

3.3.

The claim by the Respondent that the Petitioner modified the bid is also unfounded. On 09th September, 2021, the Petitioner merely requested the Respondent to consider adjusting 40% of the tendered quantity to reflect an amended delivery timeframe, accounting for prevailing factors. At no point did the Petitioner withdraw their original bid. If the Respondent found the proposal unacceptable, it could simply have rejected it and under no The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

circumstances, should this interaction have led to the suspension of the Petitioner from future tender participation.

4.

Per contra, Mr. Samdarshi Sanjay, counsel for Respondent strongly defends the impugned order by raising following contentions: 4.1.

The actions of the Respondent are in strict accordance with the terms set forth in the tender documents. According to the Request for Proposal,4 the L-1 bidder is obligated to supply the quantity of smart meters in specified ratios depending on the number of parties involved: 60% and 40% for two parties, or 50%, 30%, and 20% for three parties, provided that the L1 price is matched. In scenarios involving a single exclusive bidder, the Respondent is permitted to award a minimum of 60% of the total quantity after affirming rate reasonability. Therefore, any deviation by the successful bidder from these stipulated supply ratios, particularly failing to consent to at least 60% of the awarded quantity, constitutes a modification of the original bid and a breach of the undertakings agreed upon in the Bid Security Declaration. Such actions justify the suspension of the Petitioner under Clause 19 of Part C of the NIT, detailed below: 4.2.

During the additional 30-day period extending beyond the initial 180day bid validity, the Respondent requested an extension through an email dated 19th November, 2021. Consequently, the Petitioner was contractually The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

obligated to comply with this request. By failing to accept and adhere to the terms requiring delivery of at least 60% of the minimum quantity stipulated in the RfP documents, the Petitioner defaulted on the tender conditions and effectively modified the original bid.

4.3.

As stipulated in the RfP documents, the Petitioner was required to submit the Bid Security Declaration using the standard format provided. The Petitioner had committed that any withdrawal or modification of the bid during its validity period would result in a suspension from participating in the tendering process for one year from the bid due date of the referred tender. This undertaking binds the Petitioner to the terms of the RfP, underscoring the gravity of their failure to fulfil the agreed conditions. ANALYSIS AND FINDINGS 5.

The Court has noted the above-mentioned facts and contentions of the parties.

6.

As per the terms and conditions of the tender, the bid validity expired on 13th November, 2021. Despite this, the Respondent sought an extension of this period through a communication dated 19th November, 2021, requesting that the Petitioner extend the validity for an additional three months, i.e., until 17th February, 2022, along with the Bid Security Declaration for this extended duration. The said communication is as follows:

4 "RfP"

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

7.

The Petitioner responded through letter dated 02nd December, 2021 to the following effect:

8.

The Petitioner's response correctly underlines a crucial distinction The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

between extending bid security and the bid validity itself-emphasizing that the latter cannot be extended once expired without a formal and mutual agreement before the expiration date. As of 19th November 2021, the original bid validity had already expired, and the extension request was received subsequently. According to the terms set forth in the NIT, extracted in the proceeding paragraphs, while the Bid Security Declaration remains valid for 30 days following the expiration of the bid validity, it does not imply that the bid itself remains valid during this period. These additional 30 days are intended to secure the Respondent's position post-expiry, not to extend the period of bid validity.

9.

The Respondent's insistence on treating the bid as valid and extending the same unilaterally beyond its stipulated period constitutes a fundamental misunderstanding of the contract terms and the Bid Security Declaration. There is no term of the contract that grants the Respondent the authority to unilaterally extend the bid validity. Indeed, the very act of requesting an extension from the Petitioner implicitly acknowledges that any extension beyond the originally stipulated bid validity period requires mutual consent. As documented in the communication dated 02nd December, 2021, such consent was clearly not granted, with the Petitioner explicitly declining to extend the bid validity. Consequently, this Court finds the Respondent's action to suspend the Petitioner from future tenders based on the alleged non-compliance with the extension request to be both unreasonable and arbitrary. This action not only disregards the explicit terms set forth in the tender documents but also the contractual obligations mutually agreed upon by both parties.

10.

In light of the afore-mentioned circumstances, the Court must now The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

determine whether the Petitioner defaulted by modifying the terms of the bid, as suggested by the Respondent. To this end, it is crucial to consider the email communication dated 02nd September, 2021, which reads as follows: 11.

Petitioner responded to the same through communication dated 09th September, 2021 to the following effect:

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

12.

Petitioner's afore-noted response detailed the substantial increase in lead times for essential electronic components due to global shortages exacerbated by the COVID-19 pandemic.

In the opinion of the Court, Petitioner's communication was not a renegotiation or unsolicited modification of the bid terms. Instead, it was a transparent acknowledgment of the challenges faced and an effort to align delivery capabilities with the current global realities. By suggesting a 40% supply of the tendered quantity within a revised delivery timeframe of 12 months, the Petitioner sought to adjust the terms temporarily to accommodate unforeseen external factors. The Petitioner's proactive measure was intended to maintain transparency and seek a viable solution amidst challenging conditions, rather than to unilaterally alter the contract terms. This response did not constitute a The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

formal modification of the bid as alleged by the Respondent. 13.

It is also important to note that the Respondent, at no point, enforced the bid security in response to this communication, which could have indicated a perceived contractual breach or modification of the bid. Instead, the Respondent, requested to extend the bid validity. Therefore, the Respondent's decision to suspend the Petitioner lacks a justifiable legal basis.

CONCLUSION 14.

In the opinion of the Court, the impugned action by the Respondent, resulting in the suspension of the Petitioner from future contracts is unreasonable and arbitrary. The writ jurisdiction in matters concerning tender and contractual obligations is indeed circumspect. However, the jurisprudence evolving from the Apex Court allows for such an intervention under Article 226 of the Constitution of India, 1950, particularly where administrative actions are marred by illegality, irrationality, and procedural improprieties.

15.

The Supreme Court in Ramana Dayaram Shetty v. The International Airport Authority of India and Others,5 has elaborated on the scope of judicial review in contractual matters involving the state or its instrumentalities, emphasizing that while the state has the freedom to contract, it must never act arbitrarily or capriciously. Additionally, in Tata Cellular v. Union of India,6 it was observed that while the decision-making process in awarding contracts should not be interfered with, the Court can certainly ensure that the decision is made lawfully and within the bounds of 5 (1979) 3 SCC 489.

6 (1994) 6 SCC 651 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

authority conferred on the administrative body. 16.

In this case, the suspension not only affects the Petitioner's current contractual engagements but also imposes a long-term exclusion from future opportunities, causing severe financial prejudice without a sound basis demonstrated by the Respondent. The lack of reasoned justification thus contravenes the principles of fairness and equality enshrined under Article 14 of the Constitution and, therefore, this Court finds it necessary to intervene to prevent miscarriage of justice.

17.

In light of the above, the present petition is allowed and the impugned order dated 14th May, 2022 suspending the Petitioner from participating in tender process of Respondent for a period of one year, is set aside. 18.

Disposed of.

SANJEEV NARULA, J JULY 9, 2024 d.negi The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.