Karnataka High Court quashes BHEL tender won by company having a consortium agreement with Chinese company

The Karnataka High Court recently quashed a tender awarded by Bharat Heavy Electricals Limited (BHEL) to a company having a consortium agreement with a Chinese company in violation of an order of the Finance Ministry. [Macawber Beekay Pvt Ltd vs BHEL and Ors.].The Union Finance Ministry had, on July 23, 2020, mandated that bidders from countries sharing land borders with India must register with the competent authority..A bench of Chief Justice PB Varale and Justice MGS Kamal emphasized that BHEL should have ensured full compliance with this office order, which was issued in the interest of national security, particularly from a defence perspective. This aspect, according to the Court, held greater significance than the public interest that BHEL tried to argue.."Respondent No. 2 (BHEL) ought have ensured that there is complete compliance with the Office Order which has been issued in the interest of National security from the defense perspective which assumes greater national significance, than the public interest as sought to be made out by the Respondent," the Court said..The Court was hearing an appeal by Macawber Beekay Pvt. Ltd. (appellant) challenging the tender awarded by BHEL to BTL EPC Ltd. to set up an ash handling plant for a thermal power station in Telangana..The appellant company contended that BHEL's decision to accept the bid of the consortium steered by a Chinese entity, apart from violating the conditions of the tender, also violated the Finance Ministry's order.As per the appellant, BTL EPC Ltd, which was also not qualified under the Pre-Qualification Requirements (PQRs) in the tender, entered into a consortium agreement with a Chinese entity. This warranted its mandatory registration with the competent authority.The appellant company submitted that non-compliance with this mandatory condition made the bid invalid..On the other hand, the respondents contended that the consortium agreement between the entities was not a consortium in its strict sense but was merely an agreement for a collaboration or a tie-up.The respondents informed the Court that BTL EPC Ltd. was a sole bidder and there was no joint bidding by it and the Chinese company, Fujian Longking Co Ltd.They also contended that since a lot of progress had been made after the tender was awarded, reinitiating a fresh tender process would be contrary to public interest as it would cause immense delay and entail financial burden on the public exchequer..The Court examined the PQRs and agreed that BTL EPC Ltd was not qualified and that it had entered into a consortium agreement with the Chinese entity.The Court rejected the contention by BTL EPC Ltd. that its engagement with the Chinese company was merely a "tie-up" or an "association" for providing "design and engineering" assistance to the project, and thus, registration of the Chinese company with the competent authority was unnecessary.Further, the bench referred to the tender document, which clearly stated that the "design and engineering" activity should have been carried out by the bidders themselves without involving any external design agencies.The contents of this agreement made it evident that BTL EPC Ltd. lacked technical qualifications in certain aspects and, therefore, was collaborating with the Chinese company, the Court found..The Court also rejected the contention of BHEL and BTL EPC Ltd. that any interference would delay the project and cause a burden on the state exchequer.“As mandatory requirement of registration with the competent authority not having been complied, a mere claim of public interest getting adversely affected cannot be pitted against the national interest," the Court said.The bench ruled that BHEL could not have awarded the contract to BTL EPC Ltd. solely based on their lower bid amount as compared to the appellant's bid. As a result, the Court directed BHEL to reconsider the appellant's bid. However, to allow BHEL sufficient time to approach the apex court, the Court stayed the implementation of the verdict for four weeks..Senior Advocate Dama Sheshadri Naidu along with advocates Sandeep Grover, Aditya Nayyar, Tarang Agarwal, Abhishek Arora and Parushuram AL appeared for Macawber Beekay Pvt. Ltd.Senior Advocate Srinivasan Raghavan along with advocates P Chinnappa and Abhinay V appeared for BHEL. Senior Advocate M Dhyan Chinnappa along with advocates Thakur Rishabh Raj, Subhakar Chakraborty and Saptarishi Bhattacharjee appeared for BTL EPC Ltd.Senior Advocate DLN Rao and advocate L Srinivas represented the Telangana State Power General Company Ltd. Advocates Aniketh BS and George Joseph appeared for Tata Consulting Engineers Limited while Central Government Counsel S Shiva Kumar appeared for the Union of India. .[Read Judgment]