Bharat Heavy Electricals LTD. vs. Oil INDIA LTD. And 2 Ors.

Held

The Court held that the petitioner had participated in the bidding process without challenging the legality of Clause 37.0 of OIL's banning policy, which was applicable to the tender. Therefore, the petitioner could not subsequently assail the award of the contract based on GFR, 2017, and the OM dated November 2, 2021. The Court found no material to show that Rule 151 of GFR, 2017, would automatically prevail over Clause 37.0 without an amendment to the tender document. Consequently, the Court concluded that merely because respondent no. 3 was under a banning order, respondent no. 2 was not disqualified from participating in the tender process, even if it fell under the definition of "allied firm" in the debarment guidelines. Applying the principles from Jagdish Mandal (supra), the Court found that the process adopted or decision made by OIL was not mala fide, intended to favour someone, or so arbitrary and irrational that it could be deemed unreasonable. The Court also noted that public interest was not affected. Therefore, the petitioner had not made out a case for interference with the award of the tender. The Court did not find the cases cited by the petitioner to be helpful.

Facts

Bharat Heavy Electricals Ltd. (BHEL), the petitioner, filed a writ petition challenging the Letter of Acceptance (LOA) dated June 28, 2022, issued by Oil India Ltd. (OIL), respondent no. 1, to Megha Engineering and Infrastructures Ltd. (ME&IL), respondent no. 2. BHEL contended that OIL awarded the tender for procuring drilling rigs to ME&IL in disregard of debarment guidelines. Specifically, BHEL argued that ME&IL's bid relied on the experience and credentials of Drillmec S.P.A. (respondent no. 3), which was debarred by OIL from November 9, 2021, for three years, later reduced to one year until November 8, 2022. BHEL alleged that OIL hastily issued the LOA despite pending proceedings before Independent External Monitors (IEMs) and representations made by BHEL regarding the alleged contravention of debarment guidelines.

Key Issues

1. Whether the award of the tender to respondent no. 2, ME&IL, by respondent no. 1, OIL, was illegal, arbitrary, or discriminatory, particularly in light of the debarment of respondent no. 3, Drillmec S.P.A., and the reliance by respondent no. 2 on respondent no. 3's credentials, contrary to debarment guidelines and the tender document? Petitioner's arguments: The petitioner argued that respondent no. 3 was debarred by OIL, and this debarment was publicly available. They contended that respondent no. 2, as an "allied firm" of respondent no. 3, should not have been eligible to bid, especially since respondent no. 2 relied on respondent no. 3's experience and credentials. The petitioner cited the "Guidelines on debarment of firms from bidding dated 02.11.2021" and the General Financial Rules (GFR), 2017. They also argued that the reduction in the debarment period for respondent no. 3 was done to facilitate respondent no. 2's bid. The petitioner asserted that OIL acted arbitrarily by issuing the LOA despite pending IEM proceedings and their representations. Revenue/State's arguments: The respondents argued that the petitioner participated in the tender process without challenging Clause 37.0 of OIL's banning policy, which governed the tender. They contended that under OIL's applicable banning policy, the debarment of respondent no. 3 did not automatically disqualify respondent no. 2. The respondents also argued that the petitioner failed to demonstrate mala fide intent or irrationality in the decision-making process, as required for interference under Article 226, citing the principles from Jagdish Mandal (supra).