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IN THE GAUHATI HIGH COURT

(THE HIGH COURT OF ASSAM; NAGALAND; MIZORAM & ARUNACHAL PRADESH)

WP(C) 738/2015

1. M/S Kakoti Engineering Works

Represented by its partner Sri Rohit Prasad Kakoti,

A.T. Road, Sivasagar,

PIN-785640, Assam.

2. Sri Rohit Prasad Kakoti

S/o- Rpendra Prasad Kakoti

R/o- Phukan Nagar,

P.S.- Sivasagar,

Dist-Sivasagar, Assam.

….PETITIONERS

-versus-

1. The Oil and Natural Gas Corporation Limited

Represented by the Chairman having its registered at

Jeevan Bharati, Tower-II, 124, Indira Chowk,

New Delhi-110001.

2. The Chairman,

The Oil and Natural Gas Corporation Limited

Jeevan Bharati, Tower-II, 124, Indira Chowk,

New Delhi-110001.

3. The Chief Managing Director,

The Oil and Natural Gas Corporation Limited

Jeevan Bharati, Tower-II, 124, Indira Chowk,

New Delhi-110001.

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4. The General Manager (MM)

Material Management Department

Contract Cell, Assam Asset,

ROB-II, First Floor, Nazira, Assam.

5. The Head MM

Material Management Department

Contract Cell, Assam Asset,

ROB-II, First Floor, Nazira, Assam.

6. The Executive Director,

Oil and Natural Gas Corporation Limited,

Assam Asset, Nazira, Sivasagar,

Dist-Sivasagar, PIN-785640, Assam.

7. The General Manager,

District Industries & Commerce Centre,

Sivasagar, Assam.

8. Bid Evaluation Committee/Technical Committee

Material Management Department

C/o- General Manager Head

Material Management Department

ONGC Ltd., Assam Asset, Nazira, Dist-Sivasagar, Assam.

9. Raju Ali

R/o- Gelakey Kal Gaon

PO-Gelakey, P.S. Sivasagar,

Dist-Sivasagar, Assam.

…RESPONDENTS

BEFORE

HON’BLE MR. JUSTICE MANOJIT BHUYAN

For the petitioners - Mr. P.K. Goswami, Senior Advocate

Mr. B.D. Goswami,

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Mr. S. Borthakur, Mr. A. Borgohain,

Advocates For the Respondent Nos.1 to 8 - Mr. G.N. Sahewalla,

Senior Advocate Ms S. Senapati, Advocate

For the Respondent No.9 - Mr. D.K. Mishra, Senior Advocate

Mrs. M. Hazarika Senior Advocate

Ms. S. Khound, Advocate

Date of hearing - 26.5.2015

Date of delivery of judgment -

JUDGMENT AND ORDER (CAV)

Heard Mr. P.K. Goswami, learned Senior counsel assisted by Mr.

B.D. Goswami, Advocate for the petitioner. Also heard Mr. G.N.

Sahewalla, learned Senior counsel assisted by Ms. S. Senapati, Advocate

representing ONGC Ltd. as well as Mr. D.K. Mishra, learned Senior

counsel and Mrs. M. Hazarika, learned Senior counsel assisted by Ms. S.

Khound, Advocate representing the Private Respondent No.9.

2. The petitioner M/s Kakoti Engineering Works is a registered firm

having its own engineering workshop in the district of Sivasagar with

experience in repair and fabrication job of Oil Field/Rig Equipment and is

registered under Entrepreneur Memorandum Part II (hereinafter referred

to as ‘EM Part II’) and is also registered under the Assam Preferential

Stores Purchase Act, 1989.

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3. By e-Tender dated 27.6.2014, issued from the Office of the

Respondent No.4, bids were invited for rate contract in repair/fabrication

work, painting rigs and equipment and bunk houses repairing. The

scheme of the bid was a two bid system, i.e. technical and financial. The

last date of submission of bid as well as for opening of technical bid was

fixed on 28.7.2014. Pursuant thereto, both the petitioner and the private

Respondent No.9, i.e. Raju Ali submitted their bids through e-Tender. Be

it mentioned that the parameters for evaluation of bid was governed

under the Bid Evaluation Criteria as well as under the Scope of Work and

Technical Specification as provided in Annexure-III, III(A) and IV to the

Bid Document. On 28.7.2014, the Respondent ONGC opened the techno-

commercial bids of both the petitioner and the Respondent No.9. It is the

case of the petitioner that on the date of opening of the technical bid,

certain glaring irregularities were found in the technical bid of the

Respondent No.9.

4. According to the petitioner, the Respondent No.9 did not have the

experience in repair and fabrication job related to drilling operations in

terms of Clause 2.1(a)(i) of the Bid Evaluation Criteria read with “Clause

A” of the Scope of Works and Technical Specifications governing the

tender. Also, the Respondent No.9 did not have its own workshop in

Sivasagar district duly registered in its name under the statute of the

Government of Assam in terms of Clause 3.0 of the Bid Evaluation

Criteria.

5. Accordingly, the petitioner represented before the Respondent

No.4 immediately on 30.7.2014, in writing, pointing out the defects in

the technical bid of Respondent No.9, followed by another representation

dated 4.8.2014 with copy forwarded to the General Manager, District

Industries and Commerce Centre (‘DICC’ for short), Sivasagar with

prayer to verify as to whether the Respondent No.9 has its own

registered workshop in Sivasagar district or not.

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6. The reply received from the General Manager, DICC, indicated

that the Respondent No.9 is a registered unit as EM Part II vide

Acknowledgement No.18/16/12/01483 dated 18.6.2014.

7. Violation of the terms and conditions of the tender was also

alleged, in that, ONGC had permitted the Respondent No.9 to submit

documents even after the last date of submission of bid. One such

document is the Factory Licence of Respondent No.9 which, according to

the petitioner, in any case proves that the actual existence of a workshop

was from a date subsequent to the last date of submission of tender.

Petitioner had raised objection before the Respondent No.4 vide letter

dated 6.2.2015. According to the petitioner, the various objections raised

in respect of the deficiencies appearing in the techno-commercial bid of

Respondent No.9 remained unheeded to. Through an e-mail received on

6.2.2015, the petitioner came to learn that the price bid would be

opened on 9.2.2015 at 3 PM and that ONGC authority had also decided

to open the price bid of the Respondent No.9 along with that of the

petitioner. Constrained thus, the instant writ petition came to be filed

and by order of this Court dated 9.2.2015, the Respondent ONGC was

restrained from opening the price bid until the next date fixed.

8. The challenge made to the action of the Respondent ONGC in

accepting the Technical Bid of Respondent No.9 and to open the price

bid of the said Respondent No.9 along with that of the petitioner is laid

primarily on two grounds;

i) The Respondent No.9 does not fulfill the requirement of

Clause 2.1(a)(i) of the Bid Evaluation Criteria as well as

Clause (A) of the Scope of Works, in that, he does not

have the experience in repair and fabrication job related

to drilling operations for the minimum period of three

years as stipulated;

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ii) Respondent No.9 does not fulfill the requirement under

Clause 3.0 of the Bid Evaluation Criteria, in that, he has no

workshop of his own in Sivasagar district duly registered

in his name under the Act of the Government of Assam.

According to the petitioner, on both the counts above, the

techno-commercial bid of Respondent No.9 suffered rejection, which,

however, has been overruled by the Respondent ONGC. Be that as it

may, an adjudication to (ii) above is first taken up for consideration in

view of the fact that a decision thereof would indicate as to whether or

not the point at (i) above would require further attention of the Court.

For better appreciation, Clause 3.0 is extracted hereunder:

“3.0- Workshop facilities:-

The bidder/Indian joint venture company/technical

collaborator should have his own workshop in

Sivasagar district duly registered in the name of the

bidder/consortium member/Indian joint venture

company or partner/technical collaborator, under Act

of Govt. of Assam.

The workshop should be equipped with the equipment

& facilities as mentioned in special conditions of

contract.

* The bidder should submit details of workshop

facilities available.

* The workshop should be on bidders name only

and documentary evidence of ownership of the

workshop should be submitted.

* Proof of workshop along with above

equipments should be certified by District

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Industries office. The certificate is to be

submitted.

* ONGC may also inspect the workshop for

assessment if required.

* All original certificates are to be shown to ONGC

for scrutiny, if required.”

9. In so far as Clause 3.0 of the Bid Evaluation Criteria is concerned,

Mr. P.K. Goswami, learned Senior counsel submits that the existence of

own workshop in Sivasagar district, duly registered in the name of the

bidder etc. and under the Act of the Govt. of Assam and equipped with

the equipment and facilities as mentioned in the Special Conditions of the

Contract is a vital technical condition, in absence of which, a bid would

stand rejected in terms of Clause-B relating to Rejection Criteria under

the Bid Evaluation Criteria.

10. Referring to the letter dated 21.1.2015, received from ONGC, Mr.

Goswami, learned Senior counsel submits that the requirement of a

Factory Licence and the supporting documents submitted along with the

tender of a date not later than the closing date of submission of bids, is

an indispensable condition.

11. Whether or not the Respondent No.9 had discharged/fulfilled the

requirement of a Factory Licence which is of a date prior to the closing

date of submission of bid and whether or not a Factory Licence is at all

necessary for the purpose of Clause 3.0 of the Bid Evaluation Criteria, the

following points have been urged by the learned Senior counsel, Mr.

Goswami.

12. Referring to the affidavit-in-opposition filed by ONGC and to the

documents at Annexure-A thereof, Mr. Goswami, learned Senior counsel

submits that on the basis of the Memorandum filed for a manufacturing

enterprise at Gelakey Kal Gaon, Nazira in the district of Sivasagar, the

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Respondent No.9 was granted the Certificate of Issuance (EM Part II) on

18.6.2014 by DICC, Sivasagar. As per the Note appended to the said

Certificate, it was made clear that the Certificate would not bestow any

legal right and the enterprise concerned is required to seek requisite

clearance/Licence/permit required under the statutory obligations

stipulated under the laws of Central / State Govt. / UT

Administration/Court’s order. Further, referring to the Sl. No.3 under

“N.B” thereof, learned Senior counsel submits that the acknowledgement

of Part II is only for the purpose of enabling the unit to apply for various

incentives under the State/Central Govt.

13. In so far as the Application Form for EM Part-II of Respondent

No.9 is concerned, Mr. Goswami, learned Senior counsel contends that

while making the application, Respondent No.9 had inappropriately

declared that it is registered under Section 2(m)(i), 2(m)(ii) of the

Factories Act, 1948, having plant and machineries installed in May, 2010

with a proposed installed capacity of 800 tonnes per annum and having

anticipated power load of 5 KW with a work force of 28 workers.

14. From the list of plant and machineries enclosed to the application

for EM Part II with the date of commissioning shown as 15.5.2010 read

with the Certificate dated 20.5.2015 issued by APDCL, Gorgaon, learned

Senior counsel submits that with a sanctioned load of 5 KWs it is

improbable that the type of heavy machineries, as indicated in the list,

can at all be operated with a power load of 5 KWs. In fact, and as would

be apparent from the certificate of APDCL, electricity with 5 KW load was

sanctioned only for running welding machine in the premises of

Respondent No.9.

15. Reference to the list of plant and machineries and the sanctioned

load of 5 KW has been made by the petitioner for the purpose of urging

that the Respondent No.9 was not equipped with the equipments and

facilities as mentioned in the Special Conditions of Contract, which is,

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Annexure-III (A) of the Bid Document and a requirement under Clause

3.0, as above. According to Mr. Goswami, learned Senior counsel, the list

of plant and machineries submitted by Respondent No.9 was only for the

purpose of showing fulfillment of Clause 7 of the Special Conditions of

Contract on paper.

16. Learned Senior counsel also refers to the documents at

Annexure-C and Annexure-D enclosed to the affidavit-in-opposition of

ONGC to show that the Respondent No.9 had applied for a Factory

Licence before the Office of the Chief Inspector of Factories, Assam on

12.6.2014, which was granted only on 29.12.2014. As such, the

contention is that the Respondent No.9 did not possess a Factory Licence

on any date prior to the closing date of submission of bid. In this

connection, attention has also been drawn to Annexure-13 of the

affidavit-in-reply filed by the petitioner, which is a letter issued by the

Chief Inspector of Factories, Assam and addressed to the Respondent

No.9. By the said letter, Respondent no.9 was restrained from carrying

out manufacturing process until the Certificate of Stability is obtained

from the competent person and accepted by the Chief Inspector of

Factories, Assam.

17. All the factors above, according to Mr. Goswami, learned Senior

counsel, lead to the inevitable conclusion that until 29.12.2014, the

Respondent No.9 did not possess a Factory Licence. Notwithstanding the

fact that the Respondent No.9 was granted Factory Licence on

29.12.2014 by the letter issued by the Chief Inspector of Factories,

Assam, the Respondent No.9 was restrained from carrying out

manufacturing process until fulfillment of the conditions stipulated in the

said letter. The said letter was only limited to the extent of permitting the

Respondent No.9 to go ahead with the construction of the proposed

factory. Attention has also been drawn to the document at Annexure-2 of

the affidavit-in-opposition filed by the Respondent No.9, which is a

certificate issued by the General Manager, DICC, Sivasagar, to say that

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being a small enterprise registered with DICC, Sivasagar for EM Part II

under the Micro, Small and Medium Enterprise Development Act, 2006

(hereinafter referred to as ‘MSME’ Act, 2006), the Respondent No.9 was

only entitled to the benefits under the MSME Scheme.

18. What is the “Act of Govt. of Assam”, as mentioned in Clause 3.0

of the Bid Evaluation Criteria, under which a workshop needs to be duly

registered. This is the core question involved for adjudication of the point

at (ii) above and also looking at the other requirements of technical

conditions at Clause 3.0.

19. Senior counsel, Mr. Goswami, refers to the meaning of “factory”

as given in Section 2(m)(i) and 2(m)(ii) of the Factories Act, 1948

(hereinafter referred to as ‘Act, 1948’). In terms of the said provisions it

means any premises including the precincts thereof where a

manufacturing process is being carried on, with or without the aid of

power subject to number of workers employed therein and as clearly

specified in Section 2(m)(i) and 2 (m)(ii). Mr. Goswami further submits

that the expression “manufacturing process”, as defined in Section 2(k)(i)

of the Act, 1948, takes within its fold the nature of the work for which

the tender was invited. The power of the State Government to make

Rules, as envisaged under Section 6 of the Act, 1948 is also referred to

by making special reference to Section 6(aa) and 6(d) thereof. For ready

reference, the relevant portions are extracted hereunder:

“6. Approval, licensing and registration of factories.-

(1) The State Government may make rules-

(a) …………………………….

(aa) requiring the previous permission in writing of

the [State Government] or the Chief Inspector to be

obtained for the site on which the factory is to be

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situated and for the construction or extension of any

factory or class or description of factories;

(b) ……………………..

(c) …………………………..

(d) requiring the registration and licensing of factories

or any class or description of factories, and prescribing

the fees payable for such registration and licensing

and for the renewal of licences;

(e) ………………………………...”

20. According to Mr. Goswami, the State of Assam has enacted the

Assam Factories Rules, 1950 (hereinafter referred to as the Rules, 1950).

In terms of Rule 3-A of the Rules, 1950, no site is to be used for the

location of a factory or no building in a factory be construed as a factory

unless previous permission in writing is obtained from the State

Government or the Chief Inspector of Factories. Application for such

permission is to be made in Form I accompanied by the documents

specified therein. Under Rule 3-B of the Rules, 1950, no manufacturing

process is to be carried on in the premises so specified which has been

taken into use as factory or part of a factory until a certificate of stability

is received from the Manager or occupier of the factory and accepted by

the Chief Inspector of Factories. Rule 4 of the Rules, 1950, prescribes for

application for registration and grant or renewal of licence and notice of

occupation and Rule 6 thereof postulates grant of licence by the Chief

Inspector of Factories in Form No.4 prescribed for the purpose.

21. A conjoint and harmonious reading of the Rules, 1950, according

to Mr. Goswami, leaves no room for doubt that a “factory within the

meaning of Section 2(m)(i) and 2(m)(ii) of the Act, 1948 must require a

Licence in terms of Rule 3-A, Rule 4 and Rule 5 of the Rules, 1950.

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22. Taking it forward, Mr. Goswami submits that another vital

technical condition envisaged in Clause 3.0 is that the workshop should

be equipped with the equipment and facilities as mentioned in the

Special Conditions of Contract, which is Annexure-III(A) of the Bid

Document. Clause 7 thereof which lists the equipments reads as:

“7. WORKSHOP FACILITIES

The workshop should be equipped with the following

equipments:

1) Lathe :- 02 No’s

Bed length :- 12 ft

Hollow spindle :- 05 inch

Centre length :- 500 mm

2) Small lathe :- 02 nos.

Bed length :- 6 ft

Hollow spindle :- 75 mm

Centre length :- 300 mm

3) Radial drilling machine, 2-inch capacity :- 02 nos.

4) Welding generator 350 amps :- 05 nos.

5) Welding transformer 450 amps :- 10 nos.

6) Angle grinder :- 05 nos.

7) Gas cutting sets :- 05 nos.

8) Hoisting device/crane of cap 20 MT. :- 01 no

9) Plate bending machine to handle up to 15 mm thick MS

plate

:-01 no.

10) Sheet bending machine up to 4 mm

Thickness MS plate :-01 no

The bidders should also have sufficient covered and

uncovered space for executing the jobs at his premises.”

Having regard to the list of equipments which are required as a

vital technical condition and the electricity power that would be required

to run the same, it is urged that the premises, be it called a workshop, is

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a factory for which a Licence is a pre-condition for carrying on

“manufacturing process”. It is further urged that the requirement of a

Factory Licence is implicit and is a necessary condition imposed by the

respondent ONGC, as would be evident from the ONGC letter dated

21.1.2015 (Annexure-12 to writ petition) whereby the petitioner was

asked to provide valid Factory Licence (notary attested) which expired on

31.12.2014. The said letter also indicated that in the case of furnishing

deficient documents, such supporting documents must be of a date not

later than the closing date of submission of bids. In this connection and

by referring to the relevant documents available on record, it is

submitted that the Respondent No.9 was granted Factory Licence only on

29.12.2014 pursuant to the application dated 12.6.2014. Apparently, a

Factory Licence being a sine qua non under Clause 3.0 and a valid

Licence not being with Respondent No.9 on any date prior to the closing

date of submission of bid, as such, the technical bid of Respondent No.9

automatically suffered rejection on account of Clause 3.0.

23. Touching upon another important aspect of the matter with

regard to the applicability of the Micro, Small and Medium Enterprises

Development Act, 2006 (MSME Act, 2006), Mr. Goswami submits that,

contrary to the arguments advanced by the respondents, as would be

noticed later in this judgment, it is only an Act to provide for facilitating

the promotion and development and enhancing the competitiveness of

micro, small and medium enterprises. This is an Act framed as per the

declaration as to expediency of control by the Union under Section 2 of

the Industries (Development and Regulation) Act, 1951. Referring to

Section 8 of the MSME Act, 2006 and in the backdrop of the Statements

of Objects and Reasons thereto, Mr. Goswami submits that if any person

intends to establish a micro or small or a medium enterprise, he is

required to file a Memorandum with such authority as specified by the

State Government under sub-section (4) or the Central Government

under sub-section (3) of Section 8 of the MSME Act, 2006. In terms of

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the amended format for the Entrepreneur Memorandum under the MSME

Act, 2006 after inclusion of the amendments vide Notification No. S.O.

941(E) dated 7.6.2007, the Memorandum is required to be filed with the

District Industries Centre under which jurisdiction the enterprise is

proposed to be located. The form of Memorandum is in two parts. Part I

is in respect of the intention to establish the enterprise in question and

Part II is when the enterprise starts production or starts providing or

rendering services. For Part II, an Acknowledgement has to be issued by

the concerned office, i.e. the District Industries Centre in the form of a

Certificate of Issuance (EM Part-II).

24. Referring to the Certificate of Issuance (EM Part-II) dated

18.6.2014 in favour of Respondent No.9, issued by the General Manager,

DICC, Sivasagar, Mr. Goswami submits that, commensurate to the

objects of the MSME Act, 2006, the said Certificate only enables the unit

to apply for various incentives under the State/Central Government. It

does not bestow any legal right and the entrepreneur is required to seek

requisite clearance/licence/permit required under statutory obligation

stipulated under the laws of Central Government/State Government/UT

Administration/Court Orders. According to the senior counsel, the said

prescriptions can be had from the “Note” and Serial No.(3) of “NB”

mentioned in the said Certificate of Issuance.

25. The sum and substance of Mr. Goswami’s contentions is that the

MSME Act, 2006 has nothing to do with the registration of a workshop

for the purpose of carrying on manufacturing process. It only

contemplates an acknowledgement in the form of a Certificate of

Issuance (EM Part-II) for getting or enabling the unit to apply for

incentives under the State/Central Government. It is the Factory Licence

which is a statutory requirement under the Assam Factories Rules, 1950

that is envisaged as “under Act of Govt. of Assam” in Clause 3.0 of the

Bid Evaluation Criteria.

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26. Lastly, Mr. Goswami submits that the requirement of a Factory’s

Licence was all along within the comprehension of ONGC authority. A

waiver of the statutory requirement would only render the action as

arbitrary and discriminatory in the teeth of the law laid down by the Apex

Court in the case of Ramana Dayaram Shetty vs. International

Airport Authority of India and others, reported in (1979) 3 SCC

489=AIR 1979 SC 1628. Such waiver, if it had been expressly

declared in the Tender, would have had the participation of more

bidders. Reference is also made to the case of Khudiram Das vs. The

State of W.B., reported in AIR 1975 SC 550 to say that the Court has

the power to interfere when an authority has come to a conclusion so

unreasonable that no reasonable authority could ever come to it. A

legitimate inference may be drawn that either the authority did not

honestly form that view or that in forming it could not have applied its

mind to the relevant facts. In such a case the power of the Court to

interfere is not as an appellate authority to override the decision of the

authority, but as a judicial authority which is concerned only to see

whether the statutory authority has contravened the law by acting in

excess of the power the legislature has confided in it. Mr. Goswami

emphasizes that “there is nothing like unfettered discretion immune from

judicial reviewability.”

27. On the grounds above, prayer has been made for setting aside

the decision of the ONGC authority in accepting the technical bid of

Respondent No.9 as well as for a direction to the respondent ONGC not

to go ahead with the opening of price bid of Respondent No.9 along with

the petitioner in connection with the e-Tender dated 27.6.2014.

28. Mr. G.N. Sahewalla, learned Senior counsel representing the

ONGC Ltd, opens his arguments by saying that for the work in question

the significant purpose is to ensure whether a person would be capable

to execute the work or not. Referring to the affidavit-in-opposition it is

averred that the Respondent No.9 owns a running workshop which

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satisfied the requirement of Clause 3.0. Further, a Committee of three

senior ONGC Executives had visited the workshop of Respondent No.9

and had carried out inspection of the plant and machinery, manpower as

well as verification of documents. According to the Report of the

Committee dated 27.10.2014, the Respondent No.9 was found to be the

owner of the workshop and the machines/worker were found to be in

operation. On the basis of the Report, the ONGC authority held that the

contention of the petitioner was baseless and motivated. According to

Mr. Sahewalla, learned senior counsel, the system for seeking documents

after the opening of tender, without alteration of the original bid

structure, is as per the internal guidelines of ONGC. The same is resorted

to in order to enhance competition amongst the participating bidders.

29. In so far as the question of requirement of Factory Licence is

concerned, Mr. Sahewalla submits that in the present case the ownership

of the workshop was established by carrying out Inspections on

20.10.2014 and 21.10.2014 respectively. The requirement of Factory

Licence not being essential, as such, there was no lacunae on the part of

the Respondent No.9 in not submitting the Factory Licence along with

the bid. According to Mr. Sahewalla, although there was no requirement

for a Licence, nevertheless the Respondent No.9 had submitted the letter

from the Additional Chief Inspector of Factories certifying that

Respondent No.9 had applied for the Factory Licence on 12.6.2014. In

the opinion of ONGC, the Respondent No.9 was found technically

acceptable after a detailed technical scrutiny and inspections so carried

out in terms of Clause 3.0 of the Bid Evaluation Criteria.

30. Mr. Sahewalla, learned Senior counsel, further submits that since

Clause 3.0 only makes reference to a workshop and not a factory, as

such, the applicability of the Factories Act, 1948 and that of the Assam

Factories Rules, 1950 is irrelevant in the context of the case.

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31. Reliance is placed in the case of B.S.N. Joshi & Sons Ltd. v.

Nair Coal Services Ltd. And ors, reported in (2006) 11 SCC 548 to

say that right accrues upon the party issuing the tender to punctiliously

and rigidly enforce it but at the same time can deviate from the

guidelines in a given situation subject to the fact that it does not result in

arbitrariness or discrimination. Further, as a matter of general

proposition an authority issuing the tender has the latitude not to give

effect to every term indicated in the tender in meticulous details, save

and except a technical irregularity which cannot be waived. As the

requirements of a tender come within two categories - those which lay

down the essential conditions of eligibility and others which are merely

ancillary or subsidiary with the main object to be achieved by the

condition, it is urged that the dominant object in the present case is the

decision of ONGC Ltd as to whether the person would be capable to

achieve successful completion of the work or not.

On judicial review of administrative action, reliance is placed in the case

of Jagdish Mandal v. State of Orissa, reported in (2007) 14 SCC

517 as well as in the case of Michigan Rubber (India) Ltd. v. State

of Karnataka, reported in (2012) 8 SCC 216. On the grounds where

interference under Article 226 of the Constitution of India is called for,

reference is made to paragraph 24 in Michigan Rubber (India) Ltd.

(supra), which is extracted hereunder;

“24. Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review , should pose to itself the follow ing 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 w ith relevant law could have reached”? and

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(ii) Whether the public interest is affected?

I f the answers to the above questions are in the negative, then there should be no interference under Article 226.”

32. According to Mr. Sahewalla, learned Senior counsel, in the teeth

of the Apex Court decisions laying down the power of the Court and the

parameters for exercise of powers of judicial review over administrative

actions, it is contended that in the absence of malafide, arbitrariness,

irrationality and any intention to favour the Respondent No.9, no

interference is called for in respect of the decision of the ONGC authority

in allowing the technical bid of Respondent No.9.

33. Lastly, Mr. Sahewalla submits that the price bid not having been

opened, the writ petition is premature, in as much as, the award of the

work will be dependent upon the outcome of the price bids and it is not

a case where the petitioner has been thrown out of the competition.

34. Mr. D.K. Mishra, learned Senior counsel representing the

Respondent No.9, opens his argument by saying that Factory Licence is

not a requirement under Clause 3.0. It is only the assumption of the

petitioner. What is essentially required is the existence of a workshop in

Sivasagar district. From the very pleadings in the writ petition, any

controversy that the Respondent No.9 did not have a workshop in

Sivasagar, stands dispelled. The basic foundation of the petitioner’s case

is that from inputs received from field-level personnel there is no

government registered workshop standing in the name of the

Respondent No.9 in Sivasagar district, save and except, being a

registered unit as Entrepreneur Memorandum Part-II under the

provisions of the MSME Act, 2006. Reference is made to the Certificate of

Issuance dated 18.6.2014 issued in favour of the Respondent No.9 and

also to the List of Plant & Machineries installed in the Factory/Workshop

to say that the same are in due compliance of the requirements under

Clause 3.0. Attention is also drawn to the Certificate dated 18.6.2014

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(Annexure-2 to the Affidavit-in-opposition of Respondent No.9) to show

that the unit is registered with the District Industries & Commerce

Centre, Sivasagar vide EM Part-II of MSME Act, 2006. The fact that

Respondent No.9 has a running workshop satisfying the requirements of

Clause 3.0 has been reinforced and established by the Inspection Report

of the Committee which had visited the workshop site on 20.10.2014 and

21.10.2014.

35. On the question that in the Application Form for EM Part-II the

Respondent No.9 had indicated that it is registered under Sections

2(m)(i), 2(m)(ii) of the Factories Act, 1948, without actually being so,

Mr. Mishra submits that the same was done in contemplation of setting

up of a factory for some other work. As regards the sanctioned power

load of 5 KWs, which the petitioner argues that under no circumstances

it is sufficient to run the machines as given in the List of Plant &

Machineries alleged to have been installed in the workshop of

Respondent No.9, Mr. Mishra counters the same by saying that apart

from the three Welding Generators at serial nos. 4, 5 and 6 of the List,

the remaining machines can be operated with power load of 5 KWs. The

nature of the business of Respondent No.9 necessitates utilization of the

Welding Generators at field-sites mostly. Lathe machines can be

operated by a minimum load of 1.5 KW and so in the case of the other

machines apart from the Welding Generators. In respect of the

manpower indicated in the said Application Form, standing at 28 nos.,

Mr. Mishra submits that they had been working in other places and are

not covered by the Factories Act, 1948.

36. Mr. Mishra further submits that if the Certificate of Issuance (EM

Part-II) is held to be not in compliance of Clause 3.0, it would only mean

that no workshop employing ten or more workers, with or without the

aid of power, will ever be able to run/operate in the absence of a Factory

Licence. According to Mr. Mishra, this is too extreme a proposition.

20

Taking it forward, it is contended that the requirement of a Factory

Licence is nowhere stipulated as an essential condition of the tender.

37. Once again the issue boils down to the point - what is the

meaning of “Act of Govt. of Assam”. Whether the registration of the

workshop, as required of under Clause 3.0, would find due compliance

with the registration of the unit as EM Part-II under the MSME Act, 2006

or with registration and licence under the Factories Act, 1948 read with

the Assam Factories Rule, 1950 in the given facts of this case.

38. Mr. Mishra, learned Senior counsel, refers to the Industries

(Development and Regulation) Act, 1951 (IDR Act) to say that by virtue

of Section 2 thereof, a comprehensive central enactment for providing an

appropriate legal framework facilitating the growth and development of

micro, small and medium enterprises was brought about by the statute

called the Micro, Small and Medium Enterprises Development Act, 2006

(MSME Act, 2006). A reading of Section 11 B of the IDR Act as well as

Section 8 of the MSME Act, 2006 would go to show that it is not just a

beneficial enactment, as made out by the petitioner. The filing of

Memorandum under Section 8 of the MSME Act, 2006 is a mandatory

provision, contravention of which would invite penalty under Section 27

thereof. Mr. Mishra further submits that it is rather the Factories Act,

1948, which is a beneficial piece of legislation, as would be apparent

from the Statement of Objects and Reasons thereof.

39. To sum it up, Mr. Mishra contends that the e-Tender does not

specify that participation is only open to units coming under the purview

of the Factories Act, 1948 and the Rules framed thereunder by the State.

Mr. Mishra emphasizes that Clause 3.0 only contemplates registration of

the workshop with the DICC as EM Part-II and not under the Factories

Act, 1948.

21

40. On the principles of judicial restraint in administrative action and

the contours of power of the Court under Article 226 of the Constitution

of India, Mr. Mishra places reliance on the following case laws:

(i) (1991) 3 SCC 273 (Poddar Steel Corporation v. Ganesh

Engineering Works & ors.)

(ii) (2007) 1 SCC 477 (Rajasthan Housing Board & anr. v.

G.S. Investments & anr.)

(ii i) (2007) 14 SCC 517 (Jagdish Mandal v. State of Orissa &

ors.)

(iv) (2013) 10 SCC 95 (Rashmi Metaliks Limited & anr. v.

Kolkata Metropolitan Development Authority & ors.)

(v) (2014) 11 SCC 288 (Siemens Aktiengselischaft and

Siemens Ltd. V. Delhi Metro Rail Corporation Limited)

The general proposition as laid down in the case laws above, as in the

case laws relied upon by Mr. Sahewalla, are in the same vein. Mr. Mishra

contends that the modern trend points to judicial restraint in

administrative action and the Court does not sit as a court of appeal but

merely reviews the manner in which the decision was made. The

Government must have freedom of contract as a ‘fair play in the joints’ is

a necessary concomitant for an administrative body functioning in an

administrative sphere.

41. Lastly, Mr. Mishra argues that having regard to the aspect that

EM Part-II is due compliance of Clause 3.0 and in the absence of any

element of arbitrariness, malafides and bias, as such, no interference is

warranted in respect of the decision of the ONGC authority in holding

that Respondent No.9 had qualified in the technical bid.

22

42. Having noticed the rival pleadings, the first endeavour would be

to deal with the scope of judicial review in government contracts having

regard to the Apex Court decisions placed by the parties.

43. In Ramana Dayaram Shetty (supra), the respondent

authority had bestowed a favour on one of the bidders without insisting

upon a requirement in the tender notice, which was an essential

condition of eligibility. The Apex Court having examined the question as

to whether the respondent authority could have validly condoned the

shortcoming in the tender of the beneficiary, held that the action

amounted to illegal discrimination. Regarding the power or discretion of

the Government in the matter of grant of largesse, the Apex Court held

that such power or discretion must be confined and structured by

rational, relevant and non-discriminatory standard or norm. A departure

thereof would make the action of the Government liable to be struck

down unless it can be shown that the departure was not arbitrary but

was based on some valid principle which in itself was not irrational,

unreasonable and discriminatory.

44. In Khudiram Das (supra), the proposition of law laid down is

that where in a case the authority has reached a conclusion so

unreasonable that no reasonable authority could ever come to it, then

interference by the Court is not as an appellate authority but as a judicial

authority, in as much as, there is nothing like unfettered discretion

immune from judicial reviewability.

45. In B.S.N. Joshi & Sons Ltd. (supra), it was held that the

requirements in a tender notice generally fall into two categories-

essential and ancillary or subsidiary. Whereas the essential conditions of

eligibility are to be rigidly enforced, the latter can be deviated from

without insistence upon a strict literal compliance with the condition in

appropriate cases. The common thread in the cases of Jagdish Mandal

(supra) and Michigan Rubber (supra) is with regard to the caveat in the

23

exercise of power of judicial review. Interference under Article 226

comes into play only if the process adopted or decision made by the

authority is malafide or intended to favour someone or is so arbitrary

and irrational that the Court can hold that “the decision is such that no

responsible authority acting reasonably and in accordance with relevant

law could have reached.”

46. The case of Poddar Steel Corporation (supra) is a precursor to

the case of BSN Joshi & Sons Ltd. (supra) in the exposition of the

essential and ancillary conditions in a tender notice. In the same vein are

the other cases relied upon by the Respondent No.9. In Rajasthan

Housing Board (supra), the Apex Court relied and referred to earlier

decisions touching upon the principles which have to be applied in

judicial review of administrative decisions, especially those relating to

acceptance of tender and award of contract. Under quotes, the Apex

Court referred to the propositions that the principles of judicial review

shall apply in order to prevent arbitrariness or favouritism on the part of

government bodies. Further, although the modern trend points to judicial

restraint in administrative action and a fair play in the joints is a

necessary concomitant for an administrative body, however, the decision

must be tested by the application of Wednesbury principles of

reasonableness and must be free from arbitrariness, bias and malafides.

Although the State can choose its own method to arrive at a decision

and grant any relaxation for bonafide reasons, such relaxation is

permissible only if the tender conditions permit.

47. A conspectus of the case laws cited above makes it abundantly

clear that notwithstanding the freedom of contract, fair play in the joints,

power of granting relaxation and to choose its own method available

with the State, the Court in exercise of power of judicial review can

certainly examine whether the “decision-making process” was

reasonable, rational, not arbitrary and not violative of Article 14 of the

Constitution.

24

48. It now takes us to Clause 3.0 of the Bid Evaluation Criteria to first

ascertain as to whether the requirement is an essential condition in the

tender notice that cannot be permitted to be relaxed or is ancillary or

subsidiary where a strict literal compliance cannot be insisted upon. From

the Bid Document pertaining to e-Tender No.R16SC14012, Annexure II

thereof relates to “Bid Evaluation Criteria”. Clause A of the said Criteria

prescribes the vital criteria for acceptance of bids; clause B with regard

to rejection criteria, which takes within its fold the requirement of

eligibility and experience of the bidder as well as the requirement of

workshop facilities etc. For the purpose of this instant case, sub-clause

B.1.1 and B.1.3.0 finds relevance. According to sub-clause B.1.1. the

vital technical conditions under Clause B are to be strictly complied with,

failing which the bid stands to be rejected. In other words, the

prescription is that incomplete and non-conforming bids will suffer

rejection outright. Amongst the vital technical conditions is sub-clause

B.1.3.0 relating to the requirements of workshop facilities. Without much

elucidation and having regard to the plain language in Clause B under

the heading of “Rejection Criteria”, there is no manner of doubt that the

requirements of workshop facilities under clause B.1.3.0 or 3.0 simply

put, is an essential condition of the tender notice that has to be rigidly

enforced without permitting any deviations therefrom.

49. Even at the cost of repetition, the essential condition under

Clause 3.0 prescribes the requirement of a workshop in Sivasagar

district, duly registered in the name of the bidder etc. under the Act of

the Government of Assam. Further, the workshop must be equipped with

the equipments and facilities as mentioned in the Special Conditions of

Contract and proof of the workshop along with the listed equipments

should have certification of the District Industries office.

50. Registration under which statute ? - is the foremost point to be

decided first. To start with the Factories Act, 1948, Section 112 thereof

confers power upon the State Government to make rules providing for

25

any matter which, under any of the provisions of the Act of 1948 is to be

or may prescribed or which may be considered expedient in order to give

effect to the purposes of the Act of 1948. This brings us to the provisions

under Section 6 of the Act of 1948 which empowers the State

Government to make rules, amongst others, requiring the registration

and licensing of factories or any class or description of factories, and

prescribing the fees payable for registration and licensing and for

renewal of licence. Section 6 also provides the requirement of previous

permission in writing of the Chief Inspector to be obtained for the site on

which the factory is located and for the construction or extension of any

factory or class or description of factories.

51. Before proceeding further it would be relevant to first ascertain

the status/category of the establishment of Respondent No.9.

Considering the fact that the establishment employs more than 20

persons, with or without the aid of power and on the own showing by

respondent no. 9 with regard to the particulars given in his Application

for EM Part-II, it falls within the definition of “factory” given in Section

2(m) of the Act, 1948. What then are the requirements and the

conditions precedent for the purpose of carrying out any “manufacturing

process” as defined in Section 2(k) of the Act, 1948, in the said

establishment.

52. In exercise of powers conferred by Section 112 of the said

Factories Act, 1948, the State of Assam has enacted the Assam Factories

Rules, 1950. As noticed earlier, Rule 3-A of the Rules, 1950 requires

permission in writing of the State Government or the Chief Inspector of

Factories before any site is used for the location of a factory or to be

construed as a factory. In so far as carrying out manufacturing process,

Section 3-B or the Rules, 1950 prescribes for a certificate of stability in

respect of the establishment to be sent by the occupier or Manager of

the factory to the Chief Inspector and accepted by him. The said

certificate of stability has to be in the form prescribed under the Rules.

26

Rule 4 thereof requires submission of application for registration as well

as for grant or renewal of licence and notice of occupation to the Chief

Inspector, whereof a licence for a factory shall be granted by the Chief

Inspector in the prescribed format in exercise of powers under Rule 5.

53. In the instant case, the Respondent No.9 made application for a

factory licence before the office of the Chief Inspector on 12.6.2014,

which was granted on 29.12.2014. Without any dispute, Respondent

No.9 did not possess the Factory Licence on or before the last date of

submission and/or on the date and time of opening of the techno-

commercial bids.

54. Whether a Factory Licence was required or not for the purpose of

the work in question, attention may be had to the ONGC letter dated

21.1.2015 (Annexure-12 to the writ petition) whereby the petitioner was

asked to provide Factory Licence (notary attested) which expired on

31.12.2014. By the said letter dated 21.1.2015, although dated post the

opening date of techno-commercial bid, it clearly indicates that

submission of deficient documents/supporting documents must be of a

date not later than the closing date of submission of bids. In paragraph 9

of the affidavit-in-opposition of ONGC, it is indicated that the Respondent

No.9 was asked to submit the Factory Licence, although there was no

such requirement in the tender document. In response thereto, the

Respondent No.9 submitted the Factory Licence dated 29.12.2014.

Statement is also made to the effect that the Respondent No.9 had

submitted the letter of the Additional Chief Inspector of Factories

certifying that Respondent No.9 had applied for the factory licence on

12.6.2014. This was done prior to the opening of tender on 28.7.2014.

Also, amongst the documents submitted by Respondent No.9 along with

bid is the Certificate of Issuance (EM Part-II), which makes mention at

Sl. No.10 of the Application Form enclosed therewith, to the effect that

the unit of Respondent No.9 is registered under the Factories Act, albeit

incorrectly at that point of time.

27

55. From the foregoing discussion it is amply clear that the

requirement of a Factory Licence has been one of the dominant factors

and a necessary condition in respect of the work in question.

56. At Clause 3.0 of the Bid Evaluation Criteria, a fine distinction is

made to show that the requirement of registration under “Act of Govt. of

Assam”, on the one hand, and the requirement of “proof of workshop”,

on the other, are two different factors altogether. Whereas, the former is

a requirement that can be had by means of a licence, the latter can be

had by a certificate issued from the office of the concerned District

Industries. One cannot be a substitute for the other.

57. The Certificate of the District Industries is directly proportional to

the provisions under the MSME Act, 2006. Read with the Statements of

Objects and Reasons thereto, any person intending to establish a micro

or small or medium enterprise has to submit a Memorandum before the

appropriate authority as specified by the State Government which,

according to the Notification No. S.O. 941 (E) dated 7.6.2007, is the

District Industries Centre under which jurisdiction the enterprise is

proposed to be located. The Certificate of Issuance in the form of

Entrepreneur Memorandum Part-II, in proof of the establishment of the

enterprise as well as commencement of production/activity, comes with

an Acknowledgement issued by the District Industries Centre. The filing

of a Memorandum under section 8 of the MSME Act, 2006 is a

mandatory requirement and attracts the penalty under section 27 in case

of contravention. Without any doubt, the unit of respondent no. 9 is

registered with the District Industries & Commerce Centre, Sivasagar

vide EM Part-II under the MSME Act, 2006. It is a running workshop and

proof thereof can be had not only from the Certificate of Issuance (EM

Part-II) dated 18.6.2014 but also from the Inspection Report of the

Committee deputed by the respondent ONGC, which had visited the

workshop site of respondent no. 9 on 20.10.2014 and 21.10.2014.

28

58. To what extent a Certificate of Issuance (EM Part-II) is

beneficial? The answer can be had from the Certificate itself. It enables

the unit to apply for various incentives under the State/Central

Government, as is apparent from serial no. (3) of the “NB” thereto. The

issuance of an Acknowledgement does not confer any right, in as much

as, the entrepreneur is required to seek requisite

clearance/licence/permit as statutorily required under the laws of the

Central Government/State Government/UT Administration/Court Orders.

This part is clarified in the “Note” appearing in the Certificate itself. The

MSME Act, 2006 which came about by virtue of the declaration made

under section 2 of the IDR Act, 1951 is a central enactment providing for

an appropriate legal framework in order to facilitate the growth and

development of micro, small and medium enterprises. The legal

framework involves the grant of Certificate of Issuance (EM Part-II) by

the District Industries Centre in proof of the existence of the

workshop/unit as well as the basis for seeking incentives under the

various schemes of the State/Central Government.

59. The foregoing discussions points to the direction that the

provisions under the MSME Act, 2006, to the extent applicable in the

facts and circumstances of this case, is for ascertaining due compliance

of proof of existence of the workshop. Registration of the unit for the

purpose of carrying on “manufacturing process” would require a Factory

Licence under the Assam Factories Rules, 1950, framed under the

provisions of the Factories Act, 1948.

60. Clause 3.0 of the Bid Evaluation Criteria is an essential condition

of the tender which has to be rigidly enforced. The Factory Licence

under the Assam Factories Rules, 1950 is sine qua non for due

compliance of the requirement of registration under “Act of Govt. of

Assam”. At the same time there is also the requirement of a Certificate

to be issued from the District Industries office, but only to the extent of

29

ascertaining “proof of workshop”. Both the requirements are distinct

from each other, flowing out from two distinct statutes.

61. In view of all the discussions above, the stand of the respondent

ONGC in deciding to open the price bid of respondent no. 9, despite non-

fulfillment of an essential condition of the tender under Clause 3.0,

operates as a decision which no responsible authority acting reasonably

could have reached having regard to the relevant law in force.

Accordingly, the said decision of respondent ONGC to open the price bid

of respondent no. 9 cannot be allowed to stand. It is set aside and

declared null and void. In this connection it is clarified that power is

being exercised as a judicial authority on been satisfied that the

statutory authority i.e. ONGC Ltd. acted in excess of its power in

contravention of the essential condition of the tender as well as its power

which the legislature has confided in it.

62. The techno-commercial bid of respondent no. 9 cannot survive

being in violation of Clause 3.0 of the Bid Evaluation Criteria to the

extent indicated above. The adjudication on this point alone is sufficient

to hold that the decision of the respondent ONGC is bad in law, without

entering into any further debate on the question as to whether the

respondent no. 9 had the experience in repair and fabrication job related

to drilling operations for a minimum period of three years, as envisaged

under Clause 2.1(a)(i) of the Bid Evaluation Criteria or to any other

challenge posed.

63. Resultantly, the writ petition stands allowed and the parties are

made to bear their own costs.

JUDGE

gunajit