Grouping In Tender Process Based On Intelligible Differentia; Can't Be Faulted Merely Because Bidders Convenience Not Suited: Calcutta HC

The Calcutta High Court has dismissed a plea filed by the bidder, a start-up, against a tender floated by Indian Oil Corporation Limited ('Indian Oil') for transportation and conversion of High-density Ammonium Nitrate ('HDAN') Melt into HDAN Solid alleging that the same was tailor-made for six big operators in the field and specifically to exclude start-ups.

A single bench of Justice Sabyasachi Bhattacharya dismissed the plea upon holding that there was nothing to indicate patent mala fides, arbitrariness or intention by the tender floating authority being Indian Oil to favour any particular operator based on any line of distinction which is not reasonable or intelligible.

Relying on Shri Ram Krishna Dalmia Vs. Shir Justice S.R. Tendolkar and others (1958) passed by the Supreme Court, the High Court observed that Courts would only interfere if there is no reasonable basis for classification deducible from the surrounding circumstances or on the face of it.

Reliance was also placed on Afcons Infrastructure Limited Vs. Nagpur Metro Rail Corporation Limited and another (2016) as cited by Indian Oil, wherein the Supreme Court clearly observed that the threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the Court interferes with the decision-making process.

It was argued by the petitioner that as per the bid document, in case a start-up was interested in supplying the tendered item but did not meet the Pre-Qualification Criteria ('PQC'), the bidder had to write a detailed proposal separately and not against the subject tender which proposal would be examined by Indian Oil, after which a detailed offer may be sought from the start-up with the intent to place a trial or test order provided the start-up meets the quality and technical specifications.

In case the start-up was successful in the trial order, they submitted that it would be considered for PQC exemption for the next tender provided the status of the start-up does not change, it was argued.

Per contra, Indian Oil submitted that the petitioner failed to meet the technical criteria as a start-up when it participated in a similar short tender for six months floated in the year 2022. Thus, it was argued that the writ petitioner could not now claim to be eligible as a start-up, having failed on the previous occasion and having known all along regarding the provision of trial orders applicable to start-ups.

It was argued that the same trial order policy had been in force since 1998 and remained unchallenged, even by the petitioner.

It was submitted that the office memorandum dated 20.09.2016 issued by the Department of Expenditure Procurement Policy Division and not the general Action Plan of 2016 prevails in this case, which made it optional for operators floating tenders like Indian Oil to make relaxations for start-ups.

Subject tender relates to explosive substances and public safety is involved, for which the classification between start-ups and entities having previous experience was justified and reasonable, it was argued.

In dismissing the plea, the single bench looked at the Manual for Procurement of Goods as updated in July 2022 and held that in the notion of the IOCL, the capability of a vendor as opposed to incapability may very well be taken into consideration for calculation of past experience, keeping in view the serious impact of the work contemplated, which is for transportation and manufacture of components of explosives.

On the General Financial Rules, 2017 it held that Rule 173(i) uses the expression “may”, leaving it at the discretion of the Tender Issuing Authority to consider how far the condition of prior turn-over and experience was to be relaxed for start-ups.

It further held that there were six big operators having experience in the field, and merely because the tender conditions were restrictive to those six, it cannot be said that the conditions were tailor-made to suit them, in the absence of other existing operators having similar experience.

Court further held that the work contemplated under the tender was transportation and conversion of High-Density Ammonium Nitrate Melt into High-Density Ammonium Nitrate Solid and transportation to various consignee locations leaving sufficient intelligible reasons for the IOCL to distinguish between operators having past experience and start-ups, who were starting out in the field.

Taking into consideration the magnitude and the criticality as well as the public safety aspect of the matter, such distinction cannot be said to have been vitiated per se.,' the Court held. 

Accordingly, in holding that the impugned provision was sufficiently inclusive and did not discriminate against startups, the Court dismissed the plea and concluded:

…”In fact, Clause 4 of the tender document has envisaged sufficient opportunity to start-ups, contemplating a separate proposal to be given to the IOCL by start-ups in which case such proposal shall be examined by the IOCL and a detailed offer may be sought from the start-up with the intent to place a trial or test order provided the start-ups meets the PQC otherwise. In such case, a successful start-up in the trial order would be considered for PQC exemption for the next tender. The said provision is sufficiently inclusive and gives ample opportunity to start-ups to participate in the very next tender subject to their success in the trial or test order”

Advocates for Indian Oil (Respondent no. 1): Mr. Sabyasachi Chaudhury, Advocate, Ms. Manju Bhuteria, Advocate, Mr. Arjun Mookerjee, Advocate with Mr. Amit Meharia, Ms. Paramita Banerjee, Ms. Subika Paul and Ms. Amrita Das – Meharia & Company (MCO Legals)

Case Title: Black Diamond Resources & Anr. Vs Indian Oil Corporation Limited & Ors.

Citation: 2023 LiveLaw (Cal) 347

Counsel for Petitioner: Mr. Abhrotosh Majumdar, Mr. Chayan Gupta, Mr. Rajesh Upadhyay, Mr. Eshaan Saroop, Mr. Shoham Sanyal

Counsel for Respondent No.1: Mr. Sabyasachi Chaudhury, Ms. Manju Bhutoria, Mr. Arjun Mookherjee, Mr. Amit Meharia, Ms. Paramita Banerjee, Ms. Subika Paul, Ms. Amrita Das

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