Consortium of Siemens Ltd. India, Siemens SA Spain and Siemens AG Germany v. Dedicated Freight Corridor Corporation of India Ltd. & Anr.

13. Learned senior counsel submits that the present case would be fully covered by the decision rendered by a Division Bench of this court in the afore-cited case; and is also a fit case where this court must lift the corporate veil and satisfy itself that carving-out two companies would have no implication or impact on the constitution of the members of consortium.

14. Reliance is also placed on a judgment of the Supreme Court in Consortium of Titagarh firema Alder S.P.A. vs. Nagpur Metro Rail Corporation Limited & Anr. reported as (2017) 7 SCC 486 to buttress the petitioners’ submissions that commerical wisdom should be applied while interpreting clause No. 25.4. Paras 35 and 38 of this judgment, which are relied upon, read as under:-

15. Ms. Pinky Anand, learned Additional Solicitor General who appears for respondent No.1 on the other hand submits that the law with regard to dealing with matters arising out of tenders is wellsettled. The scope of interference is narrow. The court in judicial review is not concerned with the decision but only with the decisionmaking process. The learned ASG contends that nothing has been placed on record to show that the decision taken by the respondents is either mala fide, unreasonable, arbitrary or unjustifiable. She submits that the tender conditions are to be applied strictly and no part of the tender conditions can be termed as superfluous. Neither can the courts substitute their own view nor can they interpret the tender conditions contrary to their plain meaning. She has placed strong reliance on clause No.25.[4] which, she states, is clear and unambiguous, viz. that only the qualifications of the applicants/bidders, which in this case are Consortium of Siemens Ltd. India, Siemens SA Spain and Siemens AG Germany, are to be considered; and not those of their subsidiaries. She submits that at the time of the bid, the mobility business, which is the real heart of the tender and the contract, was being carried-out by the bidders. Two divisions/businesses of Siemens A.G. have since been hived-off and two new companies viz. Siemens Mobility SLU, Spain and Siemens Mobility GmbH, Germany have been formed. The mobility business being the most central of the qualifications, the respondents have rightly rejected the technical bid for good reason; and this would require no interference in the proceedings under Article 226 of the Constitution of India. She also places reliance upon clause No. 30.1, which she states, in fact supports the case of the respondents and not the petitioners. She submits that this clause cautions the bidders that any change in structure or formation by an applicant/bidder after being pre-qualified would be subject to written approval of the employer, namely the respondents, prior to the deadline for submission of bid. She further submits that on 18.01.2016 a pre-bid meeting had taken place, where a somewhat similar issue had arisen when a request was made that while computing the technical and financial capacity of an applicant, the technical and financial capacity of their associates should also be considered. This request was however not accepted. This meeting, held on 18.01.2016; and the relevant part of the minutes of the meeting dated 18.01.2016 is extracted below:- “ S.No. Referecne to PQ Document Clarification Sought by the Applicant DFCC’s Response Xxx Xxx Xxx Xxx

2. Section 1: Instruction to Applicants Sub Clause 25. Request you that while computing Request not accepted. Evaluation of applicants Sub clause 25.[4] Only the qualifications of the Applicant shall be considered. In particular, the Qualifications of a parent or other affiliated company that is not party to the Applicant under a JV in accordance with ITA 4.[2] (or participating as a sub-contractor as per ITA

25.2) shall not be considered the technical and financial capacity of the applicant, the Technical and financial capacity of their associate should also be eligible. Definition of associate with respect to the applicant: is one who directly/indirectly controls, or are controlled by, or are under common control Provision(s) of PQ Document shall prevail. ”

16. We have heard learned counsel for the parties and have given our thoughtful consideration to the matter. It is no longer res integra that the court while dealing with issues regarding tenders is to examine only the decision making process and not the decision.

17. The law on the scope of judicial review in tender matters is well-settled. A brief reference to some judicial precedents may not be out of place. In the case of Tata Cellular v. Union of India reported as (1994) 6 SCC 651, the Supreme Court held as under: "70....the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down." xxx xxx xxx {{"94. The principles deducible from the above are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."

18. Further in the case of Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and Another reported as (2016) 16 SCC 818, the Supreme Court held as under: "11. Recently, in Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) [Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622: (2016) 4 SCC (Civ) 106: (2016) 8 Scale 99] it was held by this Court, relying on a host of decisions that the decisionmaking 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."

19. xxx xxx xxx

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."

19. Following the principles of Tata Cellular (supra) and Afcons Infrastructure Limited (supra) the Supreme Court in Municipal Corporation, Ujjain and Another v. BVG India Limited and Others reported as (2018) 5 SCC 462, has further held as under:

20.

20. Also, in Silppi Constructions Contractors v. Union of India and Another reported as 2019 SCC OnLine SC 1133, the Supreme Court has held as under:

21.

courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer.

22.

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."

21. Considering the matter within the afore-cited contours of settled-law, we find that the real dispute between the parties revolves around clause Nos. 25.[4] and 30.[1] of the tender conditions, which we have extracted in the foregoing paras. The question which arises for our consideration is as to the effect of two new entities having been created by the petitioners after being pre-qualified and after placing their technical bid. The request of the petitioners to the respondents to grant consent to the transfer and assignment of the contractual relationships to their subsidiaries was rejected for the reason that the business that has been hived-off to the two new companies was the real ‘heart and soul’ of the subject matter of the tender relating to the ‘mobility business’. As the names of these subsidiary companies, viz. Siemens Mobility S.L.U, Spain and Siemens Mobility GmbH, Germany suggest, the entire mobility business of Siemens A.G. has been transferred-out of the parent company; and according to the respondents, it is these two new companies which now carry with them all necessary experience, expertise and the human, and technological resources required as per the eligibility criteria of the tender.

22. Upon a conspectus of the submissions made by the parties, we are of the view that evidently the tender in question was in relation to the ‘mobility business’ of the bidder-consortium, of which Siemens A.G. was one of the members. Accordingly, at the stage of prequalification, as well as at the stage of evaluating the technical bid of the petitioners, the respondents evaluated and assessed the experience, expertise, availability of trained manpower and other resources, both human and infrastructural, available with the consortium including those available with Siemens A.G. in relation to the mobility business.

23. However, admittedly the entire mobility business of Siemens A.G. has now been transferred to Siemens Mobility S.L.U. and Siemens Mobility GmbH by way of the global restructuring exercise conducted. Evidently therefore, all the experience, expertise, human, technological and infrastructural resources that were available with Siemens A.G. have now been transferred to the said two entities. The said two entities however are not part of the consortium, nor are the bidders in their own right. To say that the said two entities are wholly owned subsidiaries of Siemens A.G. is not a full answer since each of these companies is a separate and distinct incorporated entity, which are now independently engaged in the mobility business. In this view of the matter, the submission made on behalf of the petitioners that by way of global restructuring exercise ‘nothing has changed’ is unacceptable since a global restructuring exercise would not have been conducted if nothing was to change.

24. Insofar as reliance placed by the petitioners on decisions in Nagpur Rail Corporation Limited & Anr. (supra) and Alstom Transport India Ltd. (supra) is concerned, the said two cases are clearly distinguishable inasmuch as both these cases concern a situation of ‘amalgamation’ and ‘merger’ of businesses into the bidder company, by reason of which the core business for which the tender was floated, alongwith all experience, expertise, human, technological and infrastructural resources, was being transferred into the bidder company and not out of it. It was in these circumstances that the Supreme Court and Division Bench of the High Court in those cases decided that the bidder would not suffer any disqualification. What is more, is that in the present case, a conjoint reading of clause Nos. 25.[4] and 30.[1] of the tender conditions makes it clear that the respondents had, in its discretion, decided that the qualification of a parent or other affiliated company, which is not a bidder or party to a bidderconsortium, shall not be considered when assessing the qualification of the bidder; and further that if, after being pre-qualified, there is any change in the structure of the bidder company, such change ‘shall be subject to written approval of the employer prior to the deadline for submission of the bid’, thereby conveying the unequivocal intention not to permit inter alia restructuring of bidder corporations without the respondents’ written approval; and that too, prior to the bid submission deadline. In fact in clause No. 30.1, the respondents clearly specified that one of the grounds for not according approval for restructuring is that as a consequence of the change, the bidder may no longer substantially meet the qualification criteria for the tender.

25. In view of the above discussion, firstly, we find that the terms and conditions of the tender insofar as they relate to restructuring of a bidder corporation are clear and unambiguous; and secondly, we find that such terms and conditions are reasonable, rational and bear a meaningful connection with the contract for which the tender was issued. Besides, we are also of the view that hiving-off the mobility business by one of the consortium members namely Siemens AG into two separate and distinct, though wholly owned subsidiary companies, had the effect of ousting the experience, expertise, human and infrastructural resources from Siemens A.G. and thereby from the bidder consortium; and this was certainly a valid and justifiable reason for the respondents to reject the technical bid of the petitioners by reason of changed circumstances after their pre-qualification. For completeness we may observe that no mala fides have been alleged on the respondents part; nor are any discernible from the turn of events.

26. In the above view of the matter, we find no infirmity in the decision taken by the respondents in rejecting the technical bid of the petitioners; and accordingly, there is no reason why we should interfere in such decision in exercise of our powers of judicial review under Article 226 of the Constitution.

27. The writ petition alongwith the pending application, if any, are accordingly dismissed; without however, any order as to costs. Dasti under signatures of the Court Master. G.S.SISTANI, J. ANUP JAIRAM BHAMBHANI, J. DECEMBER 06, 2019