Case Note & Summary
Background: The dispute arose from a tender floated by Maharashtra Airport Development Company Limited (MADC) for the operation and comprehensive maintenance of water supply and sewerage system in the MIHAN area, which included both Special Economic Zone (SEZ) and non-SEZ regions. Jamshedpur Utilities and Services Company Limited (JUSCO), along with others, submitted bids. Facts: On 16-10-2009, MADC invited tenders. A pre-bid meeting was held on 4-11-2009, where clarifications were given that service tax exemption is available in SEZ areas. JUSCO submitted its bid on 14-12-2009, quoting the lowest financial bid of Rs.50,76,42,123. However, JUSCO added a disclaimer that all quoted prices were exclusive of service tax. Other bidders included Veolia (Rs.54,55,93,905) and Berlinwasser (Rs.91,90,64,509). MADC, after internal review, loaded notional service tax at 10.3% on JUSCO's bid, revising it to Rs.55.99 crores, which was higher than Veolia's bid. Consequently, MADC treated Veolia as L-1 and rejected JUSCO's bid as non-conformant. JUSCO protested, citing the pre-bid clarification and government notifications exempting service tax for SEZ operations, and argued that the evaluation without service tax loading should have rendered it L-1. MADC maintained that the tender required a firm, all-inclusive price, and since the scope included non-SEZ areas, service tax loading was necessary to ascertain the ultimate cost. Legal Issues: The petition raised the issues of arbitrariness in tender evaluation under Article 14 of the Constitution, the binding nature of pre-bid clarifications, and the interpretation of tender conditions regarding tax inclusive pricing. Arguments: Petitioners argued that the service tax loading was contrary to the pre-bid clarifications and statutory exemptions, rendering the evaluation arbitrary. They further contended that their technical evaluation was superior. Respondents argued that the bid was non-compliant as it excluded service tax, contrary to the express requirement for an all-inclusive price, and that the scope of work included non-SEZ areas where service tax applied, justifying the loading to arrive at the true comparable cost. Decision: The judgment excerpt does not contain the final decision of the Court. The matter was heard and the Court's order is not provided in the text. Court's Analysis: Not mentioned in the available text.
Issue of Consideration
Whether the decision of Maharashtra Airport Development Company Limited (MADC) to add notional service tax to the petitioner's bid price, thereby rejecting its tender and awarding the contract to respondent No.5, was arbitrary, illegal, and violative of the constitutional rights under Articles 14, 19(1)(g), and 39(b) of the Constitution of India.
Case Details
2010 LawText (BOM) (04) 107
Writ Petition No.466 of 2010
J.N. Patel, A.P. Bhangale
N.H. Seervai, Vaibhav Joglekar, Das Gupta, D.A. Nalawade, Atul Rajyadhyaksha, Akhil Dubey, A.A. Khan, Bhushan Bankar, Rahul Sharma, S.U. Kamdar, Vagish Mishra
Jamshedpur Utilities and Services Company Limited, Prakash Chandra Shukla
State of Maharashtra, Maharashtra Airport Development Company Limited, Vice Chairman & Managing Director of Maharashtra Airport Development Company Limited, Superintending Engineer of Maharashtra Airport Development Company Limited, Veolia Water (India) Private Limited
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Nature of Litigation
Challenge to rejection of tender and award of contract for operation and maintenance of water supply and sewerage system in MIHAN area under Articles 226, 14, 19(1)(g), and 39(b) of the Constitution of India.
Remedy Sought
Petitioners sought a declaration that the rejection of their tender was arbitrary and unconstitutional, and for quashing of the rejection letters dated 19-01-2010 and 05-02-2010 and the award of contract to respondent No.5, alternatively a writ of mandamus to withdraw and cancel the said letters and award.
Filing Reason
MADC allegedly arbitrarily added notional service tax at 10.3% to the petitioner's lowest financial bid, making it higher than respondent No.5's bid, and rejected the petitioner's bid despite pre-bid clarifications that service tax exemption was available in SEZ areas, and further ignored the petitioner's superior technical evaluation.
Issues
Whether the addition of notional service tax to the petitioner's bid price for evaluation purposes was arbitrary and violative of Article 14 of the Constitution?
Whether the pre-bid clarifications and exemption notifications bound MADC to treat the contract as service tax neutral?
Whether the tender conditions required an all-inclusive firm price, and whether the petitioner's disclaimer rendered its bid non-compliant?
Submissions/Arguments
Petitioners argued that the service tax loading was unjustified as the majority of the work area fell within SEZ where service tax is exempt, as confirmed in the pre-bid meeting and government notifications; therefore, their bid was the lowest and should have been accepted.
Respondents (MADC) contended that the bid instructions mandated a firm, all-inclusive price covering all taxes, duties, and levies; since the petitioner's bid excluded service tax, it was non-conformant and MADC was justified in loading the tax to ascertain the true financial liability, especially since part of the work was outside SEZ.
Judgment Excerpts
The price bid of JUSCO was the lowest but one of the officials of MADC brought to the notice of the Vice-Chairman and the Managing Director of MADC that JUSCO had filed format F-12 under service tax as 10.03% and wrote a disclaimer at the bottom that 'All our quoted prices' are exclusive of the service tax.
JUSCO sought to clarify that the contract was service tax neutral and the loading of service tax was unjustified and, therefore, JUSCO shall be treated as L-1 bidder.
Shri Chandra Shekhar Gupta, Superintending Engineer of MADC opposed the petition by filing his affidavit in reply... The bid instruction had required the bidders to quote firm price inclusive of taxes, duties and levies to enable MADC to ascertain the ultimate financial liabilities that they shall bear.
Procedural History
Petitioners filed Writ Petition No.466 of 2010 under Article 226 of the Constitution of India before the Bombay High Court, challenging the rejection of their tender and award of contract to respondent No.5. The Court issued Rule, and with consent of parties, made the rule returnable forthwith and heard the matter finally on April 27, 2010.
Acts & Sections
- Constitution of India: Article 226, Article 14, Article 19(1)(g), Article 39(b)
- Companies Act, 1956:
