JMC Projects (India) Ltd. v. National Highways Authority of India

1. The present petition under Article 226 of the Constitution of India assails the communication dated 18.11.2021, issued by the respondent no.1/National Highway Authority of India (hereinafter referred to as ‘NHAI’). Vide the impugned communication the petitioner no.3, namely JMC-AGE Joint Venture, which is a joint venture (JV) of petitioner no.1, and M/s AGE INSAAT VE TICARET ANONIM SIRKETI (hereinafter 2022:DHC:426 referred to as ‘AGE INSAAT’), a company incorporated in Turkey, has been informed that security clearance required for award of the contract in its favour by the respondent no.1 has been denied by the Competent Authority i.e., respondent no.2.

2. The petitioner no.1 is a company incorporated in India under the Companies Act, having its registered office at Ahmedabad, Gujarat. The petitioner no.1 is the lead member holding 76% share in the petitioner no.3 JV, while AGE INSAAT is holding the remaining 26% share therein. The petitioner no.2 is a shareholder of the petitioner no.1 company.

3. The respondent no.1/NHAI, an authority under the Ministry of Road Transport and Highways (hereinafter referred to as ‘MORTH’), established vide the National Highways Authority of India Act, 1988, is responsible for the construction, development and maintenance of various highways across India. The respondent no.2/Ministry of Home Affairs (hereinafter referred to as ‘MHA’), is the authority entrusted with the task of granting security clearance to bidders, or in the case of a joint venture, to such members, wherein the controlling interest of 50% or more is held by persons residing outside India. It is respondent no.2 which has taken the decision to not grant security clearance to the petitioners, based on which the impugned communication dated 18.11.2021 has been issued.

4. On 13.05.2021, the respondent no.1 issued a Request for Proposal (hereinafter referred to as ‘RFP’) for construction of 'four laning of part of Ramban to Banihal Section of NH-1A (now NH-44), from CH.154+2.0 to CH158+675 (North Bound) and from CH.155+940 to CH.160+282 (South Bound) including construction of Twin Tube Tunnel (Package-I) in the Union Territory of Jammu && Kashmir by EPC Mode' (hereinafter referred to as ‘the project’). The work under the project was to be conducted in the EPC mode i.e. ‘Engineering Procurement and Construction’ mode. As per routine, the bidding process was divided in two parts i.e. determining the technical responsiveness, followed by the assessment of the financial bids. In terms of the conditions of the RFP, the bidding was, subject to certain conditions, also open to persons from countries other than India; one of the primary conditions for the same being approval of the Competent Authority from national security and public interest perspective, as per the applicable instructions of the Government of India, in terms of clause 2.1.12(a) of the RFP. It is this clause which is the bone of contention between the parties.

5. On 28.05.2021, the petitioner no.1 entered into a Joint Bidding Agreement with AGE INSAAT, whereafter a bid was submitted by the JMC-AGE JV on 20.07.2021. The JV was declared as technically qualified, and the petitioner no.3 was informed that the financial bids of all the six responsive bidders would be opened at the headquarters of the respondent no.1 on 27.08.2021. Upon the financial bids being opened, the petitioner no.3 emerged as the L-1 bidder as its bid at INR 1031 crores was found to be 20.31% lower than the respondent no.1’s estimated project cost of INR 1293.78 crores. The details of the six bidders whose financial bids were opened may be noted hereinbelow:

┌──────────────────────────────────────────────────────────────────────────────────────────┐
│  Serial      Name of Bidder                        Financial Bid   Bidder no.            │
│  no.                                                                                     │
├──────────────────────────────────────────────────────────────────────────────────────────┤
│      1.      JMC Projects (India) Ltd.-AGE INR.1031                L-1                   │
│              INSAAT VE TICARET ANONIM Crores                                             │
│              SIRKETI (JV                                                                 │
│ W.P.(C) 13160/2021                                            Page 3 of 30               │
│                                                                           2022:DHC:426   │
│      2.      Tata Projects Limited - Private Joint INR.1049            L-2               │
│              Stock     Company      "Construction Crores                                 │
│              Association Interbudmontazh" (JV)                                           │
│      3.      HG Infra Engineering Limited- Patel INR.1078.1            L-3               │
│              Engineering Limited (JV)            Crores                                  │
│      4.      Apco Infratech Private Limited            INR.1168        L-4               │
│                                                        Crores                            │
│      5.      Larsen & Toubro Limited                   INR.1184.5      L-5               │
│                                                        Crores                            │
│      6.      Gawar Construction Limited - Bharat INR.1190              L-6               │
│              Construction (lndia) Private Limited Crores                                 │
│              New India Structures Private Limited                                        │
│              (JV)                                                                        │
│ 6.        It is the petitioner’s case that, after having been declared as the L-1        │
└──────────────────────────────────────────────────────────────────────────────────────────┘

29. I find that, even though the action of the respondent no.1 in issuing the LOA in favour of respondent no.3 is in the teeth of the RFP, it is not a situation where respondent no.3 has been denied security clearance by respondent no.2 and therefore ought to be treated as ineligible under clause 2.1.12(a) of the RFP. It appears that in its anxiety to award the tender at the earliest, the respondent no.1 has, on the basis of its past experience, wherein security clearance in respect of companies based in Ukraine was being given as a matter of routine, proceeded to bypass this important and crucial step before awarding the tender to respondent no.3. I am, therefore, of the considered view that, it would also be unfair to respondent no.3, who is admittedly the L-2 bidder, and has now matched the bid of the L-1 bidder, were to be ousted without its case of security clearance being considered by respondent no.2. It is not the petitioner’s case that respondent no.3 is in any manner responsible for this failure of respondentno.1 to seek security clearance. There is no reason as to why the respondent no.3 should suffer on account of this failure on the part of respondent no.1 to follow the due procedure as laid down in clause 2.1.12(a) of the RFP.

30. I can also not lose sight of the fact that projects such as these are extremely crucial for a developing nation like ours to ensure better connectivity of remote locations with the rest of the State, which contributes to the economic growth of the country. Huge stakes are involved in such projects and any delay in executing the same may have a cascading effect on the project cost and ultimately lead to an increasingly significant financial burden upon the public exchequer, thus being in total contravention of the rationale of serving the larger public interest, which has been repeatedly held to be paramount by the Courts.

31. The Courts have consistently held that, the larger public interest should aways be kept in mind while deciding whether any intervention is called for or not, in tender matters demonstrated recently in the aforementioned decision. Ultimately, with any action of the authority, the public interest must be safeguarded. In my view, in the present case, the public would be directly interested in the timely fulfilment of the contract so that the highway becomes available to the public expeditiously and effectively, and provides better connectivity within regions of the J&K State. Therefore, in my considered opinion, directing a re-tendering of the project at this belated stage will cause undue delay to the work and ultimately be against larger public interest.

32. In this regard it may be apposite to refer to the observations of the Apex Court in National High Speed Rail Corporation Ltd. (supra), wherein the Court emphasised on the need to exercise restraint while entertaining writ petitions dealing with tender matter, which read as under: “Even while entertaining the writ petition and/or granting the stay which ultimately may delay the execution of the Mega projects, it must be remembered that it may seriously impede the execution of the projects of public importance and disables the State and/or its agencies/instrumentalities from discharging the constitutional and legal obligation towards the citizens. Therefore, the High Courts should be extremely careful and circumspect in exercise of its discretion while entertaining such petitions and/or while granting stay in such matters. Even in a case where the High Court is of the prima facie opinion that the decision is as such perverse and/or arbitrary and/or suffers from mala fides and/or favouritism, while entertaining such writ petition and/or pass any appropriate interim order, High Court may put to the writ petitioner’s notice that in case the petitioner loses and there is a delay in execution of the project due to such proceedings initiated by him/it, he/they may be saddled with the damages caused for delay in execution of such projects, which may be due to such frivolous litigations initiated by him/it."

33. Having given my thoughtful consideration to these aspects, I am of the opinion that while the action of the respondent no.1 in issuing the LoA in favour of respondent no.3 without seeking security clearance is undoubtedly blameworthy or faulty, it would still be in larger public interest, that instead of straightaway directing the cancellation of the LoA issued in favour of the respondent no.3, the same should be made subject to security clearance from the respondent no.2. Therefore, with the public interest perspective in mind, I am inclined to accept the respondent no.1’s plea that the appropriate course of action to follow, would be to direct the respondent no.1/NHAI to seek security clearance qua respondent no.3, from respondent no.2 expeditiously.

34. For the aforesaid reasons, the writ petition alongwith the pending application, is disposed of, by rejecting the petitioner’s challenge to the impugned communication dated 18.11.2021, with a direction to respondent no.1 to forthwith forward the proposal for grant of security clearance to respondent no. 3. A further direction is issued to respondent no. 2 to take a decision on the respondent no.1’s request within three weeks. It is made clear, that in case, the said security clearance to respondent no.3 is declined for any reason whatsoever, the respondent no.1 will be free to proceed further as per the terms of the RFP to award the contract to the next bidder, subject to it meeting the criteria under clause 2.12.1(a) of the RFP, if applicable.

JUDGE FEBRUARY 4, 2022 Kk/sr