LARSEN AND TOUBRO LTD. & ANR.versusUNION OF INDIA & ORS.

                    [2011) 5 S.C.R. 1127


           LARSEN AND TOUBRO LTD. & ANR.                          A
                              v.
                  UNION OF INDIA & ORS.
                (SLP (C) No. 27217 of 2010)
                        MAY 05, 2011
                                                                  B
     [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]

      Government Contracts - Bid - Request For Proposal
sent to bidders for supply of Fast Patrol Vessels - Tender
condition that the price was to be firm and fixed for the entire C
duration of the contract and not subject to escalation -
Petitioner No.1, lowest bidder claiming the benefit of Foreign
Exchange Rate Variation (FERV) without specifying the foreign ·
currency - Respondent No. 4, second lowest bidder indicating
a firm rate of exchange as on the date of opening of the o
commercial bid - Subsequently, petitioner No. 1 amending
its bid by withdrawing its initial offer and offering the quoted
price without FERV content - However, the bid of petitioner
No. 1 declared as non-responsive and contract awarded to
respondent No. 4 ~ Writ petition by petitioner No. 1 - E
Dismissed by High Court - Interference with - Held: Not
 called for - Standard of eligibility as laid down in the notice
for tender could not be changed arbitrarily as that would be
 violative of Article 14 of the Constitution - In the absence of
compliance with the terms and conditions relating to a firm F
 and fixed price offer, petitioner No. 1 stood excluded from
consideration, even though it tried to make its bid responsive
by withdrawing the initial offer and substituting it with another
offer - Offer made by respondent No. 4 satisfied the
requirements of firm and fixed offer - Administrative law -
Constitution of India, 1950 - Article 14. .                    " . G

    Respondent No.1 sent a Request For Proposal (RFP) .
to petitioner No.1 and others for supply of 20 Fast Patrol·
Vessels for Indian Coast guard. The tender condition was
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    1128   SUPREME COURT REPORTS             [2011) 5 S.C.R.


A that the price was to be firm and fixed for the entire
  duration of the contract and would not be subject to
  escalation. Petitioner No.1 and others submitted their bid
  containing a technical proposal and a commercial
  proposal in two parts. Their technical bids were
8 successful    and thereafter, the commercial bids were
  opened. In its commercial offer, petitioner No.1 claimed
  the benefit of Foreign Exchange Rate Variation without
  specifying the foreign currency which was the basis of
  the foreign exchange component. The offer of petitioner
C No.1 was found to be the lowest but its bid was held to
  be non-responsive. Respondent No. 4, Public Sector
  Undertaking was the second lowest bidder. The price
  offered by respondent No. 4 contained a foreign
  exchange rate component which was to be considered
  at a particular rate as applicable on a future date at the
D time of opening of the bid. Thereafter, petitioner No. 1
  withdrew its offer and offered the quoted price without
  the Foreign Exchange Rate Variation content. However,
  the Contract Negotiation Committee declared the bid of
  petitioner No. 1 as non-responsive and awarded the
E contract to respondent No.4. The petitioners then filed a
  writ petition seeking direction upon respondent Nos. 1 to
  3 to consider the bid of petitioner No. 1 in response to
  RFP and to invite the petitioner for negotiation and
  thereafter, to accept the same in terms of the RFP. The
F High Court dismissed the same. Therefore, the petitioners
  filed the instant Special Leave Petition.

       Dismissing the Special Leave Petition, the Court
        HELD: 1.1. Where tenders are invited for grant of
G Government Contract, the standard of eligibility laid down·
  in the notice for tenders could not be changed arbitrarily
  as that would be hit by the provisions of Article 14 of the
  Constitution. An executive authority has to be rigorously

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 LARSEN AND TOUBRO LTD. & ANR. v. UNION OF 1129
               INDIA & ORS.

held to the standards by which it professes its actions       A
to be judged and it must scrupulously observe those
standards on pain of invalidation. Every action of the
Executive Government must be informed with reason and
should be free from arbitrariness, the same being the very
essence of the rule of law. [Para 15) [1136-C-E]              B

     1.2. The High Court did not commit any error in
dismissing the writ petition filed by the petitioners since
in the absence of compliance with the terms and
conditions relating to firm and fixed price offer, the
petitioners stood excluded from consideration. The offer C
in this regard made by respondent No.4 satisfies the
requirements of a firm and fixed offer since once the
commercial bids were opened, there was no further
scope of the rates being altered, which was riot so in the
case of the petitioners, which tried to make its bid D
responsive by withdrawing the initial offer and
substituting the same with another. Thus, there is no
reason to interfere with the judgment and order of the
High Court impugned in the SLP. [Paras 14 and 16] [1135-.
H; 1_136-A-F]                                               E

    Ramana Dayaram Shetty vs. International Airport
Authority of /ndia(1979) 3 SCC 489 - relied ori.
                    Case Law Reference:
                                                              F
    (1979) 3 .sec 489          Relied on.         Para 11
    CIVIL APPELLATE JURISDICTION : SLP (Civil) 27217 of
2010.                                              .

    From the Judgment & Order dated 8.9.2010 of the High      G
Court of Delhi at New Delhi in W.P. (C) No. 3231 of 2010.

   Indira Jaising, ASG, S, Ganesh, Shyam Diwan, Ashok H.
Desai, Raju Ramachandran, Pratap Venugopal, Surekha
Raman, Dileep Poolakkot, Namrata Sood (for K.J. John & Co.)   H
    1130     SUPREME COURT REPORTS                  [2011] 5 S.C.R.


A   Ritin Rai, Siddhartha Jha, Akrit Gandotra, Niraj Gupta, Anand
    Vaidhan Sharma, Satyakam, Anil Kaityar for the appearing
    parties.

        The Judgment of the Court was delivered by
B      ALTAMAS KABIR, J. 1. This Special Leave Petition has
  been filed by Mis. Larsen and Toubro Ltd. and one Lt. Col. Ajay
  Bhatia (Retired), challenging the judgment and order passed
  by the Division Bench of the Delhi High Court on 8th
  September, 2010, dismissing Writ Petition (Civil) No.3231 of
C 2010, filed by the Petitioners herein. In the Writ Petition, a
  prayer had, inter alia, been made for an appropriate writ, order
  or direction upon the Respondent Nos.1 to 3 to consider the
  bid of the Petitioner No.1 in response to Request For Proposal
  (RFP) No. TM (M)/0025/CG/FPV dated 17th June, 2009 and
D to invite the said Petitioner for negotiation, since the said bid
  was the lowest bid, and, thereafter, to accept the same in terms
  of the said RFP.

       2. On 17th June, 2009, the Respondent No.1 sent a RFP
E to the Petitioner No.1 for supply of 20 Fast Patrol Vessels
  (FPV) foi" the Indian Coast Guard. Similar requests were also
  sent to other persons as well. According to the normal
  procedure, the RFP was to be submitted by the intending
  bidders in two parts. The first part was to consist of the technical
  proposal and the second part was to be the commercial
F proposal or financial bid. In response to the said RFP, the
  Petitioner No.1 submitted its bid on 19th October, 2009,
  containing a technical proposal and a commercial proposal in
  two parts. In its commercial offer, the Petitioner had indicated
  that it intended to avail of the Exchange Rate Variation benefit.
G The Petitioner and four others, including the Respondent No.4,
  proved to be successful in the technical bid and, thereafter, the
  commercial bids were opened on 11th January, 2010, in the
  presence of the Bidders and/or their representatives. Although,
  the offer of the Petitioner No.1 was found to be the lowest (L-
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 LARSEN AND TOUBRO LTD. & ANR. v. UNION OF 1131
      INDIA & ORS. [ALTAMAS KABIR, J.]
1), its bid was held to be non-responsive, because, despite the     A
tender condition that the price was to be firm and fixed for the
entire duration of the contract and would not be subject to
escalation, the Petitioner No.1 had claimed the benefit of
Foreign Exchange Rate Variation. On the other hand,
Respondent No.4, M/s. Cochin Shipyard Ltd., a Public Sector         B
Undertaking, was found to be the second lowest bidder (L-2).

     3. Apart from the fact that the Technical Evaluation
Committee, which had been constituted on 21st October, 2009,
found·that the price quoted by the Petitioner had a variable
foreign content, it was also found that in order to determine the   C
foreign exchange content, the Petitioner had attached a copy
of the rate card of the State Bank of India along with the
commercial bid, which contained various exchange rates of
different foreign currencies. The Petitioner, however, did not
specify as to which foreign currency was the basis of the foreign   D
exchange component in its commercial bid . Since the
Commercial offers had to be firm and fixed and since the
Petitioner had claimed the benefit of the foreign exchange
variation component, the Contract Negotiation Committee,
which was constituted in accordance with the Defence                E
Procurement Procedure-OB (DPP), concluded that the
commercial offer of the Petitioner was non-responsive. The
Petitioner thereupon withdrew its offer and offered the quoted
price without the Foreign Exchange Rate Variation content. The
Contract Negotiation Committee, however, declared the bid of        F
the Petitioner as non-responsive and awarded the contract to
Respondent No.4, which was declared as L-1. Challenging the
said decision of the Respondents, the Petitioners filed Writ
Petition No.3231 of 2010 before the Delhi High Court.

     4. As has been recorded in the impugned judgment of the        G
High Court, when the writ petition was taken up for admission
on 14th May, 2010, the fact that the Petitioners had withdrawn
the condition with regard to the provision of Foreign Exchange
Rate Variation was considered and it was also observed that
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    1132    SUPREME COURT REPORTS                 [2011] 5 S.C.R.


A such subsequent withdrawal could not affect the bid of the
  Petiti.oners. However, on the submission made on behalf of the
  Petitioners that the aforesaid condition was also included in the
  RFP submitted by Respondent No.4, notice was issued in the
  matter. Consequently, while taking up the writ petition for final
8 disposal,  the issues framed for deciding the writ petition were
  centered round the said question. In fact, the first issue which
  was framed was whether a Bidder could amend its bid by
  withdrawing a condition of the bid document, whereby the bid
  was considered to be non-responsive. The second issue, which
C is an off-shoot of the first issue, is whether a Bidder would be
  entitled to contend that a non-responsive bid be treated as
  responsive since the offending condition was withdrawn after
  the bid documents had been opened. The third issue raised
  was with regard to the bid submitted by Respondent No.4 and
  whether the same could be treated as responsive, although, the
D price offered by the said Respondent contained a foreign
  exchange rate component which was to be considered at a
  particular rate as applicable on a future date at the time of
  opening of the bid.

E       5. In deciding the said issues, the High Court held that
  since the terms and conditions of the price to be firm and fixed
  was one of the more important ingredients of the tender, the
  submission of a bid which violated the said condition rendered
  the bid non-responsive. The High Court observed that this was
F not a case of clerical mistake in the bid documents, but a
  conscious change in the terms and conditions of the bid as
  submitted by the Petitioners, which could not cure the initial
  disqualification when the bids were submitted. The High Court
  took note of the fact that the bid of Respondent No.4 contained
G the condition that its price would be in Indian rupees with a
  foreign component which would be converted in Indian rupees
  as on the date of opening of the bid. The High Court observed
  that the same did not violate the conditions of the RFP and that
  the said condition ensured that the price would be firm and fixed
H during the period of performance of the contract. Accordingly,
 LARSEN AND TOUBRO LTD. &ANR. v. UNION OF 1133
      !NOIA & OR~. [ALTAMAS KABIR, J.]

the High Court held that the said condition satisfied the condition   A
regarding price being firm and fixed and could not, therefore,
be treated on the same footing as the conditions offered by the
Petitioner.

     6. The High Court also rejected the Petitioner's contention      B
t~at as per the bid documents the Discounted Cash Flow (DCF)
method was required to be used to arrive at the actual and final
cost which would be payable by the Respondent Nos.1 to 3,
for the contract in question. Taking note of the different
conditions relating to the evaluation and acceptance process          C
and the terms of payment, the High Court took the view that
once the contract had been awarded, the submission made on
behalf of the Petitioner that the DCF mechanism had to be
applied had little force. Furthermore, it was also observed that
the adoption of the ECF method could not be said to be
mandatory, as the relevant clause provides that the buyer             D
reserved its right to apply the DCF method if it wished to do
so.

     7. On its aforesaid findings and strongly deprecating the
practice of submitting a Foreign Currency Rate Card with the          E
rates of various currencies, without specifying the currency in
respect of which the foreign exchange rate was to be
considered, the High Court was of the view that the entire
exercise was ma/a fide and while· dismissing the writ petition,
imposed costs both in favour of the Respondent Nos.1 to 3 and         F
the Respondent No.4.

    8. Mr. S. Ganesh, learned Senior Advocate, who
appeared for the Petitioners, submitted that the same ground
on which the Petitioners' bid documents had been rejected, ·
was also applicable to the bid documents submitted by the G
Respondent No.4, inasmuch as, the Foreign Exchange Rate
Variation factor had also been projected by the said
Respondent in the column relating to Foreign Exchange
Conversion Rates contained in the commercial bid. Mr. Ganesh
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    1134    SUPREME COURT REPORTS                  [2011) 5 S.C.R.


A submitted that different yardsticks had been used in the case
  of the Petitioners and the Respondent No.4. While accepting
  the commercial bid documents of the Respondent No.4 as valid,
  the Respondent No.1, Union of India, ought not to have rejected
  the commercial bid documents submitted by the Petitioners on
B the basis of the same objection.

        9. Mr. Ganes~ drew our attention to the response of the
  Respondent No.4 in the column relating to Foreign Exchange
  Conversion Rates included in the commercial bid documents.
C It has been indicated therein on behalf of the Respondent No.4
  that the costing of the vessel had been carried out by converting
  the foreign currencies into Indian currency with conversion rate
  as on the date of costing. The said rates and the contents of
  foreign currency had been disclosed in the commercial offer
  and the exchange rate of those currencies as on the date of
D the opening of the bid would be applicable for the respective
  foreign currencies to determine the price of the vessel. There
  could, therefore, be price variation till the commercial bids were
  opened.

E      10. Mr. Ganesh contended that Part IV of the Request for
  Proposal dealt with evaluation and acceptance criteria which
  included evaluation of commercial proposals. Under the
  instructions with regard to evaluation of commercial proposals,
  it has been categorically stated that the shipyard/shipbuilder
F quoting the lowest price (L-1) as determined by the Contracts
  Negotiation Committee would be invited for negotiations and
  that the Discounted Cash Flow method would be used for
  evaluation of the bids.

         11. Mr. Ganesh submitted that while awarding the
G .contracts; the Government has to be completely fair and above
  · all arbitrariness, as was laid down by this Court in Ramana
    Dayaram Shetty vs. International Airport Authority of India
    [(1979) 3 SCC 489). Mr. Ganesh also submitted that, in any
    event, the Petitioners had withdrawn the condition regarding
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  LARSEN AND TOUBRO LTD. & ANR. v. UNION OF 1135
        INDIA & ORS. [ALTAMAS KABIR, J.]

 Foreign Exchange Rate Variation and had substituted the                 A
 same with a Fixed Rate offer. Accordingly, Petitioners' tender
 documents ought not to have been rejected and the High Court
 erred in holding otherwise.

      12. The stand taken on behalf of the Petitioners was
                                                                         B
 strongly opposed on behalf of the Respondent No.4, to whom
 the contract had been awarded. Mr. Ashok H. Desai, learned
 Senior Advocate, pointed out that the condition relating to the
 Foreign Exchange Rate Variation and the proposal of the
 Respondent No.4 in relation thereto indicated a firm rate of            C
 exchange as on the date of the opening of the commercial bids
 and there would be no escalation of such offer during the
 subsistence of the contract, as envisaged in the tender
 documents. It was urged that the rate quoted by the Respondent
 No.4 was firm and fixed as on the date of opening of the
 commercial bids and was not subject to any variation during             D
 the period of the contract. Mr. Desai submitted that the
 averments made on behalf of the Petitioners to the contrary,
 as far as the commercial bid of the Respondent No.4 was
 concerned, were erroneous and misconceived and were in no
 way similar to the offer made by the Petitioners.                       E

        13. Learned Additional Solicitor General, Ms. Indira
  Jaising, took much the same stand as Mr. Desai and contended
  that since the commercial offers had already been opened, the
  changed offer made on behalf of the Petitioners regarding the          F
  Foreign Exchange Rate Variation condition was concerned,
· could not be taken into consideration and had to be rejected
  on that ground. Furthermore, as submitted by Mr. Desai, the
  offer made by the Petitioners and that made by the Respondent
  No.4 on the question of firm and fixed pricing, were different         G
  and could not be said to be on the same footing.

       14. Having heard learned counsel for the respective
 parties, we are satisfied that the High Court did not commit any
 error in dismissing the Writ Petition filed by the Petitioners, since
 in the absence of compliance with the terms and conditions              H
    1136      SUPREME COURT REPORTS                  [2011] 5 S.C.R.


A relating to firm and fixed price offer, the Petitioners stood
  excluded from consideration. The offer in this regard made by
  the Respondent No.4 satisfies the requirements of a firm and
  fixed offer, since once the commercial bids were opened, there
  was no further scope of the rates being altered, which was not
B so in the case of the Petitioners, which tried to make its bid
  responsive by withdrawiog the initial offer and substituting the
  same with another.

       15. As far as the decision in Ramana Dayaram Sheffy's
  case is concerned, the same does not in any way help the
C Petitioners' case and, on the other hand, has very clearly laid
  down that where tenders are invited for grant of Government
  Contract, the standard of eligibility laid down in the notice for
  tenders could not be changed arbitrarily as that would be hit
  by the provisions of Article 14 of the Constitution. It was also
D observed by this Court that an executive authority has to be
  rigorously held to the standards by which it professes its actions
  to be judged and it must scrupulously observe those standards
  on pain of invalidation. It has been repeatedly stated by this
  Court that every action of the Executive Government must be
E informed with reason and should be free from arbitrariness, the
  same being the very essence of the rule of law. The said
  decision, in fact, supports the case of the Respondent No.4.

       16. We, therefore, find no reason to interfere with the
F judgment and order of the High Court impugned in this Special
   Leave Petition and the same is, accordingly, dismissed.

           17. There will be no order as to costs.

    N.J.                         Special Leave Petition dismissed.