Dynamic Drilling and Services Private Limited v. Oil and Natural Gas Corporation Limited

13. Mr. Sethi states that the Respondent had not given any reasons for rejection of the bid of the Petitioner at the time of filing of the Writ Petition and the Petitioner has come to know about the rejection only through media reports. He states that the Respondent ought to have sought clarification from the Petitioner before rejecting its bid. He further submits that in absence of any concrete reason for rejection of Petitioner‟s bid, the rejection is completely arbitrary and illegal and, therefore, the same be quashed and the Respondent be directed to consider the bid of the Petitioner herein for the 2022 Tender.

14. Mr. Sethi further submits that the Petitioner‟s Bid is compliant with Clauses 5.1, 5.2, 5.[3] read with Clause 6 of Part B.[1] of the Bid Evaluation Criteria which mandates that the bidders offering their drilling units which require modifications/up-gradation/re-activation should meet the tender specifications. He states that the Petitioners have also submitted a feasibility report duly approved by the classification agency as is required by the aforesaid clauses. Mr. Sethi therefore submits that the Respondent‟s decision to only consider operational rigs and not consider the Petitioner‟s Rig when it is compliant with the aforesaid clauses is arbitrary.

15. Per contra, Mr. Sudhir Nandrajog, learned Senior Counsel appearing for the Respondent, submits that the tender in question is of national importance for the purpose of oil and gas production. He states that the anxiety of the Respondent is that only the rigs which are fully functional and operational should be considered for awarding the LOA under the Impugned Tender.

16. Mr. Nandrajog draws the attention of this Court to the letter dated 06.09.2021 sent by the Petitioner to the Respondent stating that massive damage has been caused to its Rig which got caught in the eye of the Super Cyclone „Tauktae‟. He states that the Petitioner in the letter informed the Respondent that certain equipment at the location where the Rig was situated is completely mutilated and in non-serviceable form.

17. Mr. Nandrajog also draws the attention of this Court to the letter dated 27.10.2021 written by the Petitioner to the Respondent wherein the Petitioner informed the Respondent of the various equipment and materials lost at sea from the Rig as a consequence of it being damaged by the Cyclone “Tauktae”. He submits that the petitioner in the aforesaid letter sought a No-Objection Certificate (NOC) from the Directorate General of Hydrocarbon (DGH), stating that the lost equipment is in completely mutilated and non-serviceable form, which needs to be submitted by the Petitioner to the Customs Department.

18. Mr. Nandrajog also states that the Petitioner had been constantly requesting for renewal of the 2018 Contract to extend the contract period and the time for mobilization of the Rig in terms of the 2018 Contract.

19. Mr. Nandrajog places emphasis on the letter dated 27.05.2022 written by the Petitioner to the Respondent informing the Respondent that the insurance underwriter of the Petitioner has concluded that it is not viable to revive the Petitioner‟s Rig, Valiant Driller, and the Rig has been declared as a “Constructive Total Loss”. In view of the Rig being declared a “Constructive Total Loss”, the Petitioner stated that the Agreement is to be deemed as terminated in accordance with the terms of the 2018 Contract. He states that on 05.08.2022, the Respondent has accepted the request of termination of the Petitioner and had terminated the Contract of the Petitioner with effect from 17.05.2021.

20. It is contended by Mr. Nandrajog that the Respondent cannot afford to consider the Rig which has been totally damaged by the Cyclone and which has been declared as “Constructive Total Loss” by the insurance underwriter and deemed not viable for revival. He further submits that it is not the case of the Petitioner that they have any other alternate Rig which can be offered to the Respondent.

21. Mr. Nandrajog further contends that Clause 6 of the BEC only permits modifications/up-gradation/re-activation for those rigs which are in serviceable and good condition and it cannot apply to the Rigs which have been totally damaged and thus the decision of the Respondent to reject the bid cannot be said to be arbitrary.

22. Heard Mr. Sandeep Sethi, learned Senior Counsel appearing for the Petitioner and Mr. Sudhir Nandrajog, learned Senior Counsel appearing for the Respondent, and perused the material on record.

23. The undisputed facts of the case are that the Respondent awarded a contract to the Petitioner in 2018 i.e., the 2018 Contract, and the Petitioner offered the Rig, Valiant Driller, to the Respondent for a period of three years commencing from 08.10.2018 in terms of the 2018 Contract. On 17.05.2021, while the Rig was operational, it was caught in the eye of the Super Cyclone “Tauktae” and suffered heavy damage. A perusal of the letter dated 27.10.2021 which was written by the Petitioner herein to the Respondent herein shows the details of the material and equipment of the Rig which have been lost due to Cyclone “Tuaktae” on 17.05.2021. The relevant portion of the said letter reads as under: “Dear Sir, This is further to our letter no DDSPL/ONGC/JACKUP/P46JC17001/22 ONGC to intimate DGH regarding the materials / equipment lost in the sea from rig Valiant Driller due to Cyclone "Tuaktae" on 17th May 2021. The details of material/ equipment lost are as under:  Derrick structure.  Crown Block.  Travelling Block  Drill Line  Draw works with Makeup Cathead, Breakout Cathead, Blowers  Swivel  Elmagco  Top Drive with Pipe Handler  Rotary with Master Bushing & Hydraulic motor  Choke Manifold  DeadLine Anchor  Standpipe Manifold  Driller's Cabin with Instrumentation, Control System (PLC) & Purge System  Air Winches x 3  Man Rider Winches x 1  Ezy Torque with Hydraulic Unit  Mud rotary Hoses along with snubbing lines  1 lot Chiksan Pipes, X/Os, Elbows  Hang off line  MGS Gas Vent Lines  Life Jackets  Spill Kit  Full Body Safety Harness with lanyard  Man Rider Belt  Fall Arrestor  HP Service Hoses  Rig Floor sub structure with Skidding System  Mathey Wireline Unit Unit  Choke and Kill Manifold  Cementing Manifold  1 lot X Sheaves, Chain Blocks & Hand Tools  1lotX Shackles & Slings of Various Size  1lot X PPE Box  1 lotX SCBA Sets  Eye Wash Station  Bug Blower  1 lot X Walkways, Gratings, Handrails, Ladders  AC/DC Electrical Cables  Manual Water Deluge System  Sensors of Combustible Gas Monitoring System  Sensors of Gas/Fire/Smoke Detection  Derrick Escape System”

24. On 27.05.2022, the Petitioner wrote another letter to the Respondent herein highlighting that the insurance company has declared its Rig as “Constructive Total Loss” and that the Contract be deemed to be terminated. The said letter reads as under: “Subject: Request ONGC for mutual Consent to treat the Charter Hire Agreement of Rig Valiant "Valiant Driller" for termination Reference 1. Agreement No. MR/DS/MM(CH)/8RIGS/2017/1346 1C17001/9010026434 dated 26" March 2018 for Charter Hire of Drilling Unit "Valiant Driller"

2. DDSPL Letter No. DDSPL/ONGC/JACKUP/P461C17 001/2022/ 27 dated 12" May 2022 Dear Sir, This is further to our above referred letter dated 12' May 2022. We would like to inform you that Rig Valiant Driller is successfully moved from the N-24 Platform Location to Mumbai Port Y-4 Anchorage location after duly completing the salvage operation of the fallen derrick structure in to the sea due to the impact of Cyclone "Tauktae". The incident of the damage occurred on account of Natural Calamity which was totally beyond our control. Our sincere thanks to ONGC for all the support extended Post "Tauktae" and during the Salvage Operations. As intimated in our letter dated 12" May 2022, the inspection by the concerned authorities including class and insurance have been carried out. Our Insurance Underwriter, New India Assurance Company Ltd has concluded that it is not viable to revive Valiant Driller as a drilling unit for deploying under the current above referred Agreement as cost of revival is extremely higher than the applicable Insurance coverage of the Rig, and therefore insurance have considered the Rig is a Constructive Total Loss. The declaration from Insurance Company (The New India Assurance Co. Ltd) is attached herewith for your reference and considerations. In view of the Clause 20 of the Charter Hire Agreement dated 26" March 2018, the Rig "Valiant Driller" having been declared by the Insurance Company as "Constructive Total Loss", the Agreement shall be deemed terminated in respect of Rig "Valiant Driller" as of the event causing is construed to be Total Loss in terms of Clause 22.[3] of the Agreement. Accordingly, each Party (ONGC & Dynamic) to the aforesaid Agreement shall thereupon be released of all further obligations thereunder in respect of Rig" Valiant Driller". Thanking you and assure you our best services at all time.” (emphasis supplied) Pursuant to the abovementioned letter, the contract was terminated on 05.08.2022 with effect from 17.05.2021.

25. The material on record indicates that Part B of the Bid Evaluation Criteria and more particularly Part B.[1] which deals with the technical rejection criteria of a bid states that a bidder should strictly comply with the conditions specified therein failing which their bids will be rejected. Clauses 5.1, 5.2, 5.[3] read with Clause 6 of Part B.[1] of the Bid Evaluation Criteria mandates that the bidders offering their drilling units which require modifications/up-gradation/re-activation should meet the tender specifications and should submit a feasibility report duly approved by the classification agency to which the drilling unit is presently classed to. In terms of the said Clause, a technical feasibility report was submitted by the Petitioner herein. The report indicates that the following equipment were not installed or were missing from the Rig at the time of inspection: “ ● Derrick and substructure.  Rig floor and associated accessories  Drillers Cabin.  Draw works and accessories,  Top drive system.  Travelling Block  Crown Block  Transverse Skidding system  Choke and Kill manifold system  Standpipe manifold  Tuggers and Man riders  Mud Cleaning equipments including its complete structure”

26. A perusal of the abovementioned missing parts shows that virtually the entire sub-structure of the Rig of the Petitioner is missing. The contention of the learned Counsel for the Respondent is that Clause 6 of the BEC only permits modifications/up-gradation/re-activation for those rigs which are in serviceable and good condition and it cannot apply to the Rigs which have been totally damaged and thus the decision of the Respondent to reject the bid cannot be said to be arbitrary. The Petitioner itself had asked the Respondent herein for termination of the 2018 Tender by writing the letter dated 27.05.2022 which is just two months before the 2022 Tender was floated. Therefore, it cannot be said that the decision of the Respondent to consider only those Rigs which are operational on the date of the tender is arbitrary.

27. It is stated by the learned Counsel for the Respondent that the Petitioner withdrew his Rig from the 2020 Tender vide letter dated 14.07.2021 and the exchange of letters between the Petitioner and the Respondent in the context of the 2020 Tender cannot be taken into consideration for the 2022 Tender. Further, the technical feasibility report submitted by the Petitioner shows that the Rig of the Petitioner is virtually in no condition to operate as its entire substructure is missing.

28. The scope of interference under Article 226 of the Constitution of India in matters of tender is well settled. The Apex Court in Michigan Rubber (India) Ltd. v. State of Karnataka,(2012) 8 SCC 216, after relying on various judgments has observed as under:-

29. In Uflex Ltd. v. State of T.N.,(2022) 1 SCC 165, the Apex Court has observed as under:-

30. The Apex Court in a number of judgments has crystallized the test to be taken into account by the Courts before interfering in tender matters which reads as under:- “A court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”;

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.” [Refer: Jagdish Mandal v. State of Orissa,(2007) 14 SCC 517; Michigan Rubber (India) Ltd. v. State of Karnataka,(2012) 8 SCC 216; Ranaq International Ltd. v. I.V.R. Construction Ltd. & Ors., (1999) 1 SCC 492 etc.]

31. In view of the above, it is well settled that the scope of interference by the High Court while exercising its jurisdiction under Article 226 of the Constitution of India is extremely narrow. This Court ought not to interfere unless it is established that the process adopted by the decision-making authority is mala fide, intended to favor someone, arbitrary or irrational.In case the decision-making process is just, fair and reasonable, the writ courts must loathe to interfere with the award of contracts by the State/Instrumentalities of the State. The decision taken by the Respondents cannot be said to be vitiated by any of the aforesaid criteria.

32. The Apex Court in Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr., (2016) 16 SCC 818, has observed as under:-

622: (2016) 4 SCC (Civ) 106: (2016) 8 Scale 99] it was held by this Court, relying on a host of decisions that the decision-making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decision-making process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one which no responsible authority acting reasonably and in accordance with law could have reached. In other words, the decision-making process or the decision should be perverse and not merely faulty or incorrect or erroneous. No such extreme case was made out by GYT-TPL JV in the High Court or before us.

12. In Dwarkadas Marfatia and Sons v. Port of Bombay [Dwarkadas Marfatia and Sons v. Port of Bombay, (1989) 3 SCC 293] it was held that the constitutional courts are concerned with the decision-making process. Tata Cellular v. Union of India [Tata Cellular v. Union of India, (1994) 6 SCC 651] went a step further and held that a decision if challenged (the decision having been arrived at through a valid process), the constitutional courts can interfere if the decision is perverse. However, the constitutional courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute its view for that of the administrative authority. This was confirmed in Jagdish Mandal v. State of Orissa [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517] as mentioned in Central Coalfields [Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622: (2016) 4 SCC (Civ) 106: (2016) 8 Scale 99].

13. In other words, a mere disagreement with the decision-making process or the decision of the administrative authority is no reason for a constitutional court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional court interferes with the decision-making process or the decision."

33. This position has also been reiterated by the Apex Court in Municipal Corporation, Ujjain & Anr. v. BVG India Limited &Ors., (2018) 5 SCC 462. The relevant portion of the said judgment reads as under:-

specifications. It is also by now well settled that the authorities/State can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation.

16. The State, its corporations, instrumentalities and agencies have a public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary power under Article 226 with great caution and should exercise them only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should interfere. (See the judgment in Air India Ltd. v. Cochin International Airport Ltd. [Air India Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617])"

34. The aforesaid decisions make it clear that in a challenge to the decision of a Tendering Authority, the Court must consider whether the decision has been made lawfully and not whether the decision is sound. The Court‟s should interfere in such decisions only when the decision made is so perverse, irrational and arbitrary that the Court could say that the decision is one which no responsible authority acting reasonably and in accordance with law could have reached.

35. In Silppi Constructions Contractors vs. Union of India and Anr., (2020) 16 SCC 489, the Apex Court has observed as under:-

should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case." (emphasis supplied)

36. In N.G. Projects Limited v. Vinod Kumar Jain and Ors.,(2022) 6 SCC 127, the Apex Court has held as under:-