Case Note & Summary
The petitioner, a subsidiary company engaged in coal import and supply, challenged a communication by the Karnataka Power Corporation Limited rejecting its bid as non-responsive in a tender for import of 2.50 lakh MT of coal for thermal power stations. The tender was floated on 19-09-2023, and the petitioner submitted its bid along with earnest money deposit. After the bid was rejected without reasons on the online procurement portal, the petitioner sought information under the Right to Information Act, leading to the impugned communication dated 08-12-2023. The communication cited two grounds for rejection: first, that the pre-qualification credentials were not in the bidder’s name as required by Clause 1(d) of the PQR criteria, because the petitioner submitted documents in the name of its parent company, PT Bara Daya Energi Indonesia; second, that the parent company had its contract terminated by Gujarat State Electricity Corporation Limited (GSECL), making the bid non-compliant with Clause 1.2 and Section XIX of the tender document. The petitioner contended that it had fulfilled all conditions, that a subsidiary is entitled to rely on its parent’s experience, and that termination is not blacklisting. The respondent Corporation argued that it could deny the parent company’s experience and that termination of the parent disqualifies the subsidiary, maintaining the rejection was not arbitrary. The Court focussed on whether the reasons were tenable in law. It examined Clause 1(d) of Section VII and found that there was no explicit bar in the tender document against a subsidiary relying on its parent’s experience; therefore, rejecting the bid on that ground was arbitrary and hit by Article 14. On the second ground, the Court noted that Clause 1.2 only provided for rejection of bids from blacklisted tenderers, and Section XIX similarly referred to blacklisting; termination by GSECL was not blacklisting, and the tender document did not equate termination with blacklisting. Consequently, the Court held that the impugned communication was unsustainable, quashed it, and directed the Corporation to consider the petitioner’s bid and complete the tender process within four weeks.
Headnote
A) Tender Law - Pre-qualification Requirements - Reliance on Parent Company's Experience - Clause 1(d), Section VII of Tender Document - The bidder, a subsidiary company, submitted pre-qualification credentials partly in the name of its parent company; the tender clause required the tenderer to have pre-qualification requirement in its own name - The Court held that a subsidiary can ordinarily rely on the experience of its parent company unless the tender document explicitly prohibits such reliance, and no such explicit prohibition existed - Held that rejection of the bid on this ground was arbitrary and violative of Article 14 of the Constitution (Paras 8-10). B) Tender Law - Termination versus Blacklisting - Grounds for Rejection - Clause 1.2 and Section XIX of Tender Document - The parent company’s contract had been terminated by GSECL but not blacklisted; the tender clause provided for rejection of bids from blacklisted tenderers - The Court distinguished termination of a contract from blacklisting, holding that termination does not automatically disqualify a subsidiary unless the tender conditions equate termination with blacklisting - Held that rejection on the basis of the parent company’s termination was unsustainable and the impugned communication was quashed; the respondent Corporation was directed to consider the petitioner's bid and complete the tender process within four weeks (Paras 8-9, 11).
Issue of Consideration
Whether the reasons rendered in the communication dated 08-12-2023 rejecting the petitioner's bid as non-responsive are tenable in law?
Final Decision
Writ petition allowed; impugned communication dated 08-12-2023 quashed; respondent Corporation directed to consider the petitioner’s bid and complete the tender process within four weeks from the date of receipt of a copy of the order.
Law Points
- arbitrariness violates Article 14 of the Constitution
- subsidiary company can rely on parent company's experience unless tender conditions explicitly prohibit
- termination of a contract is distinct from blacklisting
- tender conditions must be interpreted reasonably and in a fair manner
- right to reasons in tender rejection
