Holding

The Supreme Court held that the High Court erred in dismissing the writ petition without hearing all parties and without considering the allegations of malafides and discriminatory treatment, and thus set aside its order and remitted the case for fresh disposal.

Summary

Rochem Separation Systems (I) Pvt. Ltd. (appellant) submitted original and supplementary bids for a defence tender but was rejected because it failed to provide an un‑priced price format. The tendering authority (Respondent No.1) subsequently awarded the contract to Respondent No.4, allowing it to amend its original offer in a manner the appellant claimed was discriminatory and indicative of malafides. The appellant filed a writ petition under Article 226 alleging bias, arbitrary variation of terms, and denial of a chance to revise its price in line with technological advances. The Bombay High Court dismissed the petition at the admission stage without hearing Respondent No.4 or considering the malafides allegation. The Supreme Court held that the High Court erred in its procedure and in ignoring the substantive issues, and therefore set aside its order, remitting the matter for fresh disposal with an opportunity for all parties to be heard.

Issues considered

Whether the tendering authority acted with malafides and bias in awarding the contract to Respondent No.4.
Whether the variation in terms offered to Respondent No.4, but not to the appellant, amounted to discrimination and arbitrariness.
Whether the High Court erred in dismissing the writ petition at the admission stage without hearing all parties, including Respondent No.4.
Whether the appellant was entitled to submit a revised price bid instead of a supplementary bid under the tender conditions.

Legislation cited

Constitution of Indias. Article 226

Subjects

public procurementtender awarddiscriminationbiasmalafidesprocedural fairnesswrit petitionremandcontract awardnational importance

Judgment

ROCHEM SEPARATION SYSTEMS (I) PVT. LTD. A
v.
MAZAGON DOCK LTD. AND ORS.

DECEMBER 8, 2006

[DR. AR. LAKSHMANAN AND TARUN CHATTERJEE, JJ.] B

Contract: Tender Bid-Award of contract-Challenged by other bidder,
on the ground of malafides on the part of decision making Authorities-Writ
Petition dismissed-On appeal, held: High Court dismissed the writ petition C
at admission stage-Beneficiary of contract not heard-All the parties not
given opportunity-Also the court did not consider the plea of malafides-
Thus, order of High Court set aside and matter remitted back.

Appellant is engaged in manufacturing of various technology systems
and components. Respondent No. 1 invited tender for certain work. Appellant D
submitted its original techno-commercial and price bids as per the tender
terms. It also submitted its supplementary price bid. Appellant did not submit
un-priced price format with the supplementary price bid and as such the
respondent called upon the appellant to submit new supplementary price bid
in the format annexed for only increase over the original technical
specifications though the decision was for increase/decrease over the original E
TSP. Appellant sought advantages of advancements in technology leading to a
reduction in price. Appellant submitted the supplementry price bid as per the
new format. Offer of both appellant and respondent no. 4 was declared to be
technically accepted. First respondent issued letter of intent to respondent
no. 4 and placed purchase order on them. It rejected appellant's supplementary F
price bid as the unpriced price format was not submitted and that it was not
confirmed in the bid that it was the increase/decrese over the original
technical specifications. Appellant filed writ petition on the ground that there
were malafides on the part of the decision making authorities and that the
first respondent permitted respondent no.4 to alter its original offer nearly 2
years later in the new format given to the 4th respondent which was different G
from that furnished to the appellant. Division Bench of the High Court
dismissed the writ petition. Hence the present appeal.

Allowing the appeal and remitting the matter to the High Court, the
Court
505 H
506 SUPREME COURT REPORTS [2006) SUPP. 10 S.C.R.

A HELD: J.l. The Court has to see as to whether the action of respondent
No. 1 in permitting respondent No. 4 to include a basic requirement of the
original offer subsequently without offering any such opportunity to others
is discriminatory and bias; and that whether the action of respondent no. 1
in permitting respondent No. 4 to submit supplementary price bid by indicating
B additions and deletions while at the same time, calling upon the appellant to
submit supplementary price bid only by indicating increase over original offer
was not discriminatory, arbitrary and bias. (513-H; 514-A)

1.2. Perusal of the judgment of the High Court would only to show that
the High Court has failed to consider the real issues raised by the appellant
C and proceeded merely on the basis of a reply filed by appellant No. 1 that does
not address or touch upon such issues as contended by the appellant.
(514-B-C)

1.3. It is seen from the order passed by the High Court that the writ
petition was dismissed at the admission stage. No counter affidavit was filed
D by the 4th respondent. Respondent no. 4 to whom the approval was granted
and the letter of intent was given was not heard at all. Counsel for respondents
1, 2 and 3 alone were heard. Two points were raised principally to challenge
the award in favour of the 4th respondent by the appellant The first point was
in respect of variation in terms offered to respondent No. 4 which according
E to the appellant was a favourable variation. The second submission was that
the appellant was ready to decrease the price offered earlier. The second
submission was basically to submit that there are ma/afides on the part of
decision making authorities. High Court without considering the malafides
on the part of the decision making authorities dismissed the writ petition
without considering the rival submissions and the documents filed before it.
F High court though stated in its order that there was some variation in the
terms, had not considered the nature of variation at all. [514-C-F)

1.4. The project in question and the work sought to be undertaken by
the tender process is one of national importance. High Court ought to have
G heard respondent No. 4 in whose favour the letter of intent was now given.
High Court has not disposed of the writ petition after affording opportunity to
all the parties and in particular respondent no.4. The matter requires deep
and elaborate consideration in the nature of pleadings filed by the appellan~
respondent No.1 and respondent No. 4. Therefore, the order passed by the
High Court is set aside and the matter is remitted back to the High Court to
H dispose of the writ petition on merits. (514-F-H)
ROCHEM SEPARATION SYSTEMS (I) PVT. LTD. v. MAZAGON DOCK LTD. [LAKSHMANAN, J.) 507

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5665 of2006. A
From the final Judgment and Order dated 21-4-2005 of the High Court
of Judicature at Bombay in Writ petition (L) No. 884of2005.

R.F. Nariman, R.R. Malar, P. Venugopal, E. Venu Kumar, Harshad V.
Hamid snd Dileep Poolakkot (for Mis. K.J. John & Co.} for the Appellant. B
B. Datta, A.S.G., Sachin Datta, Rajini 0. Lal and Himinder Lal for the
Respondent No. I.

Upamanyu Hazarika, Swetank and Ashok Kumar Singh for the
Respondent No. 4. C
The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. Leave granted.

This appeal is directed against the judgment and final order dated D
21.04.2005 passed by the High Court of Judicature at Bombay in Writ Petition
No. 884 of2005.

The appellant is a manufacturer of various membrane technology systems
and components using the Reverse Osmosis Process (ROP) for desalination
of sea water and treatment of industrial effluents for converting them to E
reusable water. The appellant also designs, manufactures and services
desalination plants. The appellant commenced its operations in 1993 for
manufacturing sea water, desalination system using ROP and is also an ISO
900:2000 Company. The appellant is also r~gistered with the Ministry of
Defence, Director General of Quality Assurance and is the only Indian company F
to have supplied plants for submarines of the Indian Navy.

Respondent No. I called for a tender for design, manufacture, testing,
supply, preservation, alignment, installation, setting to work, commissioning
and trials of the complete supply of 4 units of 30 tonnes per day, self-
sustaining reverse osmosis plants per ship for 3 ships of PISA class destroyer G
oflndian Navy to be built by the 1-st respondent vide tend.er dated 20.06.2002,
04.07.2002 and 12.09.2002. The appellant submitted its original techno-
commercial and price bids as per the tender terms. The appellant also submitted
the clarification sought for by the respondent No. I. Commercial disc11ssions
were also held between the parties. The appellant submitted its supplementary
price bid dated 11.05.2004 and the technical bid dated 12.05.2004 as directed H
508 SUPREME COURT REPORTS (2006] SUPP. 10 S.C.R.

A in the meeting dated 03.05.2004. The first respondent again sought technical
clarifications from the appellant subsequent to the submfssion of supplementary
price bid. The first respondent, by letter dated 23.06.2004, set out certain
comments of the 3rd respondent on the revised technical offer submitted by
the appellant and sought further clarifications from the appellant. The appellant
submitted the technical clarifications as required. The first respondent once
B again sought technical clarification on 20.09.2004 and the appellant submitted
the clarification sought. The first respondent by a communication
acknowledged receipt of the appellant's facsimile communication dated
23.06.2004 and sought review and advice. The first respondent once again
wrote to the appellant stating that it was in a position to open the price bids
C but that additional time was required to complete the process of obtaining
internal approvals and, therefore, sought further extension of the validity
period of the price bids till 31.01.2005.

On 29.12.2004, the first respondent issued a letter to the appellant
stating that an un-priced price format had not been submitted with the
D supplementary price bid of 12.05.2004, which was neither an essential condition
nor complained of until then and hence it would not be considered and that
a new supplementary price bid in the format annexed for only increase over
the original technical specifications should be submitted on or before 05.01.2005
though the decision as per the meeting of 03.05.2004 was for submission of
E increase/decrease over the original TSP. The appellant, by letter dated
04.0 l .2005 addressed the first respondent to extend the advantages of
advancements in technology leading to a reduction in price to respondent
No. I. The appellant submitted the supplementary price bid as per the new
format. The first respondent had opened the original offer and the
supplementary price bid in the new format but did not inform the appellant
F about the opening of the price bids. The appellant wrote to the first respondent
enquiring about the status of the opening of the tender price bids but did not
receive any reply. Several reminders were sent. The first respondent stated
that the Management approval was granted on 18.02.2005 and that the Jetter
of intent was given to respondent No.4. The first respondent sent a belated
G reply to the reminder of the appellant dated 09.02.2005 stating that the
supplementary price bid of 12.04.2004 was rejected as the unpriced price
format was not submitted and that it was not confirmed in the bid that it was
the increase/decrease over the original technical specifications and that on
opening of the bids, it was found that the appellant was not LI and hence
it was mandatory to initiate price negotiations with the other bidder. The
H appellant questioned the action of the first respondent as discriminatory.
ROCHEM SEPARATION SYSTEMS (I) PVT. LTD. ''· MAZAGON DOCK LTD. [LAKSHMANAN, J.] 509

Thereafter, appellant filed writ petition under Article 226 of the Constitution A
of India in the High Court and questioned the discriminatory and biased
action of the first respondent in permitting respondent No.4 to alter its
original offer nearly 2 years later in the new format given to the 4th respondent
which was different from that furnished to the appellant. By judgment and
final order dated 21.04.2005, a Division Bench of the High Court rejected the B
writ petition holding that it would not be proper to interfere at that stage.

Being aggrieved by the above-mentioned judgment the appellant has
filed the above appeal in this Court.

The order passed by the High Court reads as follows:-
c
"l. Heard Mr. Dwarkadas in support of this petition, Mr. Mandalik for
Respondent No.1 and Mr. Chavan for Respondent nos.2 & 3. The
grievance made in this petition is in respect of award of contract to
Respondent No.4. Two points are raised principally to challenge this
award. Firstly it is stated that in December, 2004 there was a variation D
in the terms offered to Respondent No.4 which was a favourable
variation. The second submission is that the Petitioner was ready to
decrease the price offered earlier. The second submission is basically
to submit that there are ma/a jides on the part of decision making
authorities.
E
2. Respondent No.I has filed reply and it has placed on record that
the Petitioner participated all throughout in the decision making
process. The terms which were given while inviting the bids were
common to both the parties. It is only during the course of negotiations
that' the parties required clarifications and that is how the letters were
written to both the parties in December, 2004. There is some variation F
in them. That variation is related to the questions and queries raised
by the parties concerned.

3. In the circumstances, it would not be proper for us to interfere at
this stage. Petition, therefore, is rejected."
G
We heard Mr. R.F. Nariman, learned senior counsel for the appellant and
B. Datta, learned ASG for R-1 and Mr. Upamanyu Hazarika and Mr. Swetank
counsel for respondent No.4. At the time of arguments, our attention was
invited to the various communications and letters which were exchanged
between the appellant, the first respondent and 4th respondent.
H
510 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A On 11.05.2005, this Court ordered notice to the respondents and also
passed an order that any action taken in regard to the disputed contract shall
be subject to further orders of this Court. Parties were asked to file counter
affidavit, rejoinder affidavit etc. On 03.08.2006, this Court directed respondent
No. I to produce the original records pertaining to the tender in question. The
parties were permitted to peruse the original records in the presence of the
B Registrar (Judi.) and the representative of respondent No.I. Additional
affidavits· were also filed after the inspection of the files.

Mr. R.F. Nariman, learned senior counsel appearing for the appellant
made the following submissions:-
c (a) The High Court has erred in holding that the appellant had
participated in the decision- making process particularly in the
2nd supplementary price bid submitted on January 5, 2005 as
such participation by the appellant was involuntary in the face
of the two letters sent by the appellant dated 04.01.2005 and
D 05.012005.
(b) The High Court has failed to notice that even the letter dated
29.12.2004 discriminates between the appellant and respondent
No.4 as it permits respondent No.4 to include additions/deletions
in the new supplementary price bid including two additional
items in the form whilst the appellant was directed to include only
E
increase over the original offer made by them despite the TNC/
CNC meeting dated 28.04.2004 and 03.05.2004 respectively
permitting the appellant to increase/decrease to the original offer,
~hich per se discriminates against the appellant and which has
caused grave prejudice to the appellant. Several other
F submissions were also made in regard to the letter dated
29.12.2004. Many other factual and legal contentions have also
been raised in the grounds of appeal.
(c) That the High Court has failed to consider that whilst the first
respondent has permitted respondent No.4 to alter its original
G offer of 2002 contrary to tender conditions, it has peremptorily
rejected the offer of the appellant to extend the benefit of lower
price resulting from technological advances, though it would
have accrued to the benefit of respondent No. I despite the same
is in accordance with tender conditions 1.6.3 which according to
Mr. Nariman is patent discrimination and contrary to public
H
ROCHEM SEPARATION SYSTEMS (I) PVT LTD. "· MAZAGON DOCK LTD. [LAKSHMANAN, J) 511

interest. A
Mr. Datta, learned Additional Solicitor General, after inviting our attention
to the various documents and records submitted that commercial discussions
were held with the appellant in which it was recorded:

" .... Based on TNC meeting the firm stated that they agreed to execute B
the order as per MDL & Navy's requirement. After prolonged
deliberations, the finn stated that based on TNC meeting they will
submit their technical clarification and supplementary price bid to the
original offer, only for the increase/decrease scope, over and above
Tender's TSP by 12.5.2004. However, the Committee insisted to submit
their supplementary price bid in a sealed envelope by 12.5.2004 at C
1200 hrs.... "

Identical decision was taken qua the respondent No.4.

On 12.5.2004, Supplementary bids were submitted by the appellant and
respondent No.4 in sealed envelope. These bids were not accompanied by D
Proforma Price Scheme Blanking the prices and indicated items quoted.

On 15.12.2004, offers made by the appellant and respondent No.4 was
declared to be technically acceptable.

The net result was that the appellant as also respondent No.4, were E
required to provide certain additional items/satisfy certain requirements over
and above what was quoted by them in their original offer submitted in
October, 2002. Both in the case of the appellant and respondent No.4, there
was an increase in scope over and above what was quoted by them in
October, 2002 and there was no decrease whatsoever on any account. It was F
in respect of these additional requirements that supplementary bids were
called from the appellant and respondent No.4. It was not permissible for
either the appellant or the respondent No.4 to revise their original bid submitted
in October, 2002 but instead only supplement the same by quoting for the
additional requirements.
G
On 29.12.2004 letters were sent to both the appellant and respondent
No.4 requesting them to submit their supplementary bid only by indicating
the change over the original offer. A supplementary rate sheet was enclosed
along with the said letter setting out the additional items/requirements in
respect of which the parties were required to quote. The parties were also
H
512 SUPREME COURT REPORTS [2006] SUPP. 10.S.C.R.

A told that the earlier supplementary bid submitted on 12.05.2004 will not be
considered. This letter was necessitated since the parties had not submitted
any Proforma Price Schedule Banking the prices and indicating items quoted/
not quoted, as required under Tender Condition IN-202.

On 04.01.2005, the appellant replied to the letter dated 29.12.2004 and
B sought permission to revise the original price bid submitted in October, 2002
instead of just quoting for the additional items. The said request was
declined by the respondent No. I as the same would virtually amount to
starting the tender process de novo.

On 05.01.2005, the appellant submitted its supplementary price bid in
C the prescribed format. Price bids were opened on 17.01.2005 and respondent
No.4 found to be L 1. PNC was conducted with respondent No.4 on 03.02.2005.
On 18.02.2005, LOI issued to respondent No.4. On 22.02.2005 purchase order
placed on respondent No.4.

D Thus, he submitted from the pleadings filed before this Court, the
following facts stand admitted by the appellant:-

(i) That the amount quoted by the appellant vide its Bid dated
04.10.2002 was much higher than that was quoted by respondent
No.4 while the amount quoted by the appellant was around
E Rs.11.92 crores, the amount quoted by respondent No.4 was
around Rs.8.57 crores.
(ii) Even assuming that the original bid of respondent No.4 did not
include any quotation for the Second Stage RO Plant, even if the
supplementary offer submitted by respondent No.4 (which
admittedly included the Second Stage RO Plant) is added to its
F
original offer, even then the total amount quoted by respondent
No.4 is lower than the original price quoted by the appellant.

The entire case of the appellant rests on the premise that it should be
allowed to retract from its original offer dated 04.10.2002 and be allowed to
G submit a "revised" price bid instead of a "supplementary" price bid confined
to "additional items/requirements" not covered by the original offer dated
04.l 0.2002.

At no stage was it ever contemplated that the parties be allowed to
withdraw/retract from their original offer and submit a fresh/revised offer. The
H understanding was always clear that the parties would only give their
ROCHEM SEPARATION SYSTEMS (I) PVT. LTD. v. MAZAGON DOCK LTD. [LAKSHMANAN, J.) 5} J

supplementary bid in respect of the additional items/requirements not covered A
by their original offer. However, as it transpired before the High Court, and
now again before this Court that in the guise of submitting its "supplementary
bid" in May, 2004, the appellant sought to completely revise its original bid,
which is not permissible. Vide letter dated 29.12.2004, the respondent No. I
rightly asked both the appellant and the respondent No.4 to submit their B
supplementary price bids in the proper format. The said request of the
respondent No. I was complied with by the appellant on 5. l.2005. The writ
petition was belatedly filed on 28.03.2005 clearly as an afterthought. There
is no infirmity in the decision making process warranting any interference
from this Court.

Mr. Datta has also drawn our attention to the affidavit in reply of
c
respondent No. I.

Respondent No.4 also filed a detailed affidavit in reply to the grounds
of appeal. According to learned counsel for respondent No.4 that he has
complied with the formalities, terms and conditions and in view thereof, the D
contract is concluded between respondent No.4, and l and hence the question
of setting aside and or quashing the tender process or any other reliefs as
prayed for in the present appeal does not arise. Respondent No.4 has also
denied the averments and allegations raised by the appellant in the present
appeal against the 4th respondent with regard to the tender in question.
Learned counsel took us through the said counter affidavit. A rejoinder E
affidavit was filed by the appellant to the affidavit in reply filed on behalf of
respondent No.4. Our attention was also drawn to the minutes regarding
inspec .. on and the affidavit in rejoinder on behalf of the appellant to the
affidavit filed on behalf of respondent No.I. Voluminous documents have
been filed before us in this appeal. It was specifically contended that the p
action of respondent No. I. in rejecting the bids of the appellant was arbitrary,
collusive and contrary to the principles laid down by this Court in the
acceptance of tenders/bids by the government/its agencies. It was also
strenuously contended ·by Mr. Nariman that the tender conditions would not
permit respondent No. I to consider the bid of respondent No.4 which was
admittedly not complete at the time of its first submission and that respondent G
No.1 could not permit respondent No.4 from re-submitting its bid with additions
to the original offer on the ground that the requirements were not understood
at the time of submitting the original offer.

The Court has, therefore, to see as to whether the action of respondent H
514 . SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A No.1 in permitting respondent No.4 to include a basic requirement of the
original offer subsequently without offering any such opportunity to others
is discriminatory and bias.

The Court also has to see as to whether the action of respondent No.1
in permitting respondent No.4 to submit supplementary price bid by indicating
B additions and deletions while at the same time, calling upon the appellant to
submit supplementary price bid only by indicating increase over original offer
was ndt discriminatory, arbitrary and bias.

A careful perusal of the judgment of the High Court impugned in this
appeal would only go to show that the High Court has failed to consider the
C real issues raised by the appellant and proceeded merely on the basis of a
reply filed by appellant No.1 that does not address or touch upon such issues
as contended by Mr. Nariman.

lt is seen from the order passed by the High Court that the writ petition
D was dismissed at the admission stage. No counter affidavit was filed by the
4th respondent and 4th respondent to whom the approval was granted on .
18.02.2005 and the letter of intent was given to them on the same day was
not heard at all. Learned counsel for respondents 1, 2 and 3 alone were heard.
Two points were raised principally to challenge the award in favour of the 4th
respondent by the appellant. The first point was in respect of variation in
E terms offered to respondent No.4 which according to the appellant was a
favourable variation. The second submission was that the appellant was
ready to decrease the price offered earlier. The second submission was
basically to submit that there are malajides on the part of decision making
authorities. The High Court without considering the ma/a jides on the part
F of the decision making authorities dismissed the writ petition without
considering the rival submi~sions and the documents filed before it. The
High Court though stated in its order that there was some variation in the
terms had not considered the nature of variation at all.

The project in question and the work sought to be undertaken by the
G tender process is one of national importance. Learned ASG submitted that
the tender process is purely of commercial nature and no interference by this
Court is called for. The High Court, in our opinion, ought to have heard
respondent No.4 in whose favour the letter of intent is now given. The High
Court has not disposed of the writ petition after affording opportu~ity to all
the parties and in particular the fourth respondent. In our opinion, the matter
H
ROCHEMSEPARATION SYSTEMS(l)PVT. LID."· MAZAGONDOCKLTD. [LAKSHMANAN, J.] 515

requires deep and elaborate consideration in the nature of pleadings filed by A
the appellant, respondent No.1 and respondent No.4. We, therefore, set aside
the order passed by the High Court and remit the matter to the High Court
with a request to dispose of the writ petition on merits after affording
opportunity to all the parties. Since the project is of national importance, the
High Court is requested to dispose of the same on priority basis and at any B
rate not later than 28th February, 2007. Both the appellants and the other
respondents are at liberty to raise the grounds/contentions that have been
raised in this Court before the High Court by way of additional pleadings.
They are also at liberty to file the civil appeai grounds, counter by all the
parties and the rejoinder and other documents and records before the High
Court for a fair and proper consideration of the same by the High Court. C
In the result, the appeal filed by the appellant is allowed and the order
of the High Court stands set aside and matter is remitted back for fresh
disposal. No costs.

NJ. Appeal allowed. D