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Petitioner: Gemalto Middle East FZ-LLC VS Respondent: Federation of Pakistan through Secretary, Finance Division and others
Court Name: Islamabad High Court Judge(s): Miangul Hassan Aurangzeb Title:Gemalto Middle East FZ-LLC vs Federation of Pakistan through Secretary,
Finance Division and others Case No.: W.P.No.3094/2018 Date of Judgment:2019-09-27 Reported As: 2019 IHC 154 Result: petition allowed Judgment MIANGUL HASSAN AURANGZEB, J:- Through the instant writ petition, the petitioner , Gemalto Middle East FZ- LLC, seeks a declaration to the effect that the process for the procurement for e-data pages has been conducted by respondent No.3/National Security Printing Company (Pvt.) Ltd. ("N.S.P .C.L.") in violation of the Public Procurement Rules, 2004 ("the 2004 Rules") and in a non-transparent manner . The petitioner also seeks a direction to N.S.P .C.L. to scrap the current procurement process and to invite fresh tenders. CHRONOLOGY OF FACTS:- 2. The facts essential for the disposal of the instant petition are that through an advertisement dated 22.10.2017 published in the daily Dawn, N.S.P.C.L. invited applications from local and foreign manufacturers of smart cards for prequalification for the supply of ID-1 cards and ID-3 cards. ID-1 cards are generally used for the national identity cards, driving licenses etc. whereas ID-3 cards are used for passports. The eligible applicants could obtain further information from the prequalification documents which could be purchased from N.S.P.C.L. The applicants were required to submit their proposals on the prescribed prequalification documents / forms in a sealed envelope by 28.11.2017. 3. Clause 11 of the "Specification and Terms and Conditions for Prequalification" issued by N.S.P .C.L. provided that "[t]he bidder should have at least shipped more than 5.0 million ID3 and 2.0 million ID1 over the last three years which were used as international travelling and identification documents respectively ." On 03.11.2017, a corrigendum was published in the daily Dawn whereby clause 11 was amended to read thus: "[t]he bidder should have at least shipped more than 2.0 million ID1 and 2.0 million ID3 over the last three years which were used as National (Identification / Driving License? Arm License / Vehicle Registration) document and International travelling document respectively ."
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4. The petitioner, along with five other bidders, submitted their prequalification documents by 28.11.2017. The technical evaluation committee constituted by N.S.P.C.L., after going through the technical specifications provided by each of the bidders, "verified" the specifications provided by the six bidders namely (i) M/s Gemalto Middle East FZ- LLC/petitioner, (ii) M/s Mhlbauer GmbH & Co. KG ("M/s Mhlbauer")/respondent No.6, (iii) M/s IDEMIA Identity and Security ("M/s IDEMIA")/respondent No.7, (iv) M/s IN CONTINU ET Services ("M/s IN CONTINU")/respondent No.8, (v) M/s Future Card Industries and (vi) M/s Card Logix. This is apparent from the technical evaluation committee's report dated 26.01.2018. It is an admitted position that N.S.P.C.L., vide letters dated 30.01.2018, informed all the "verified" bidders, including the petitioner, that their proposals had been "technically evaluated and found technically compliant." Furthermore, they were all informed that they had been prequalified for a period of one year. 5. Clause 16 of the terms and conditions of the prequalification documents issued by N.S.P.C.L. provided that the prequalified bidders will have to provide fifty polycarbonate ID-1 and ID-3 sample cards (with or without a chip) to check their compatibility with N.S.P.C.L.'s machines and equipment. Clause 19 of the said documents provided that no sample is required to participate in the prequalification process. Accordingly, vide letter dated 22.02.2018, N.S.P .C.L. requested the prequalified bidders to provide samples of ID-3 cards with the specifications given in the said letter . These samples were required to be provided by 09.03.2018. It is not disputed that the petitioner had provided the required samples to N.S.P .C.L. within the specified time period. 6. The samples of ID-3 cards provided by the prequalified bidders were used in machine trials. As a result of the machine trials, four applicants were prequalified whereas the prequalification documents of M/s Future Card Industries and M/s Card Logix were rejected. Thereafter , a revised technical evaluation report was issued on 22.03.2018 according to which four bidders, including the petitioner , M/s Mhlbauer , M/s IDEMIA and M/s IN CONTINU, were prequalified for the supply of ID-3 cards only. The machine trials of ID-1 cards could not be performed due to the unavailability of the required machines. Since the machines for testing ID-1 cards were not available, N.S.P .C.L. decided to postpone the procurement of ID-1 cards. The procurement process initiated through the said advertisement continued only for ID-3 cards. 7. Vide letter dated 27.03.2018, N.S.P .C.L. called upon the prequalified bidders to submit their financial quotations/bids in sealed envelopes for 500,000 ID-3 cards. These bids were required to be valid for a period of 60 days and submitted by 10.04.2018. It is not disputed that the prequalified bidders had submitted their financial bids for 500,000 ID-3 cards on 10.04.2018 and were opened on the same day . 8. M/s IN CONTINU and M/s Mhlbauer had both quoted the unit price (Free on Board) of Euros 4.6 which, along with freight and other charges, came to Euros 2,320,000/- (equivalent to Rs.3,29,648,800/-) for 500,000 ID-3 cards whereas the petitioner quoted the highest unit price of Euros 4.894 which, along with freight and other charges, came to Euros 2,500,000/- (equivalent to Rs.3,55,225,000/-). M/s IDEMIA had also quoted a unit price of Euros 4.6 which, along with substantially higher freight and other charges, came to Euros 2,493,464/- (equivalent to Rs.3,54,296,300/-). 9. Vide letter dated 17.04.2018, the petitioner expressed its intention to challenge the procurement process before the Grievance Redressal Committee (" the G.R.C.") under Rule 48(1) of the 2004 Rules, and asked N.S.P .C.L. for the names of the G.R.C.' s members. The petitioner also asked for a copy of the evaluation report to be issued by N.S.P .C.L. under Rule 35 of the 2004 Rules. 10. A financial evaluation report setting out the above figures was issued by N.S.P .C.L. on 11.05.2018. Subsequently , another undated financial evaluation report was issued by N.S.P .C.L. in which the name of M/s IN CONTINU was missing. Learned counsel for N.S.P .C.L. explained this by submitting that since M/s IN CONTINU' s response to certain technical clarifications sought by N.S.P .C.L. had not been found to be satisfactory , it had been disqualified on 26.06.2018 from further participation in the tendering process. M/s IN CONTINU did not challenge its disqualification. Be that as it may, as a result of M/s IN CONTINU' s disqualific ation, M/s Mhlbauer 's financial quotation emerged to be the lowest. 11. On 21.05.2018, a complaint under Rule 48 of the 2004 Rules was submitted on the petitioner 's behalf to the G.R.C. and the Chairman of N.S.P .C.L. In the said complaint, it was alleged that the norms of transparent tender bidding process as well as Rules 15, 27, 36, 37 and 42(b) of the 2004 Rules had been violated. The said complaint
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was responded to by N.S.P .C.L.' s Purcha se Incharge vide letter dated 24.05.2018, wherein the position taken was that no provision of the 2004 Rules had been violated and that the petitioner had participated in the bidding process by submitting its quotation without any reservation. 12. Vide letter dated 21.06.2018, N.S.P.C.L. requested the prequalified bidders to extend the validity of their quotations and the bid bonds up to 05.08.2018. Although M/s IDEMIA and M/s Mhlbauer extended the validity of their quotations and bid bonds up to 05.08.2018, the petitioner, vide letter dated 29.06.2018, informed N.S.P.C.L. that since the validity of its financial bid had expired on 09.06.2018, and since the bidders had not been asked to extend the validity of their bids prior to the expiry of the original bid validity period, the bids submitted by all the bidders had become invalid on 09.06.2018 and N.S.P .C.L. was obliged to terminate the procurement process. 13. N.S.P .C.L., vide letter dated 04.07.20 18, informed the petitioner inter alia that under Rule 26(3) of the 2004 Rules, the procuring agency could, under exceptional circumstances and for reasons to be recorded in writing, ask all those who submitted their bids to extend the bid validity period. The petitioner was asked once again to extend the validity of its bid and bid bond by 05.07.2018. 14. On 03.07.2018, N.S.P.C.L. asked the Public Procurement Regulatory Authority ("P.P.R.A.") to clarify whether in terms of Rule 26(3) of the 2004 Rules, N.S.P.C.L. could ask for an extension of bid validity during the process of financial evaluation. N.S.P.C.L., in its letter dated 03.07.2018, had taken the position that the financial evaluation process could not be completed in the original bid validity period of sixty days due to "complexity of the project and legal notices issued by one of the participants". Vide letter dated 05.07.2018, P.P.R.A. informed N.S.P.C.L. that under Rule 36(b)(viii) of the 2004 Rules, the technical and financial proposals are required to be opened within the stipulated bid validity period, and that under Rule 26(3) of the said Rules, bid validity cannot be extended further and that the delay in the technical and financial evaluation was on the part of the procuring agency. It was opined that "the procuring agency after thorough deliberation may take a decision in the instant case to extend the bid validity period with consent of the participated bidders." It was also opined that the bidder who does not agree to extend the bid validity period shall be allowed to withdraw its bid without the forfeiture of bid bond or security in terms of Rule 26(4)(c) of the 2004 Rules. 15. On 12.07.2018, N.S.P.C.L. sent the bid evaluation report regarding the procurement of ID-3 cards to P.P.R.A. As per this report, M/s Mhlbauer, with a bid of Euros 2,320,000, was the lowest technically compliant bidder whereas the petitioner, with a bid of Euros 2,500,000, was stated to have also been technically compliant but not the lowest bidder. It was also stated that the petitioner had not extended its bid validity. M/s IDEMIA, with a bid of Euros 2,493,464, was stated to have been technically compliant but not the lowest bidder. This evaluation report was published on P.P.R.A.'s website on 16.07.2018. 16. Vide letter dated 17.07.2018, the petitioner complained to N.S.P.C.L. that despite a complaint having been filed on 21.05.2018, the G.R.C. had not conducted any hearing. It was requested that the G.R.C. should adjudicate upon the petitioner's complaint and issue appropriate directions for the suspension of the procurement process until the final outcome of the complaint. The petitioner asked N.S.P.C.L. to provide the names of the G.R.C.'s members so that the petitioner could directly address its complaint to them. It was also asserted that the evaluation report published on P.P.R.A.'s website on 16.07.2018 was "marred with serious illegalities and irregularities". 17. Vide letter dated 18.07.2018, N.S.P .C.L. informed the petitioner that a G.R.C. had been constituted pursuant to Rule 48(1) of the 2004 Rules. Furthermore, the names of the G.R.C.' s members were also mentioned in the said letter . After the petitioner , vide letter dated 19.07.2018, raised objections to the presence of two members on the G.R.C., N.S.P .C.L., vide letter dated 23.07.2018, reconstituted the G.R.C. by excluding therefrom the two members against whom objections had been raised by the petitioner . 18. The Ambassadors of the Republic of France and the Kingdom of Netherlands had met with the Finance Secretary on 12.07.2018 and had complained about a lack of transparency in the procurement process conducted by N.S.P.C.L. and about the discriminatory treatment meted out to the petitioner. The petitioner's C.E.O. had accused the Managing Director of N.S.P.C.L. of threatening to blacklist the petitioner if it did not stop complaining. Vide letter dated 24.07.2018, the Finance Division (Internal Finance Wing) directed N.S.P.C.L. to submit a comprehensive report on the matter within a period of seven days.
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19. On 31.07.2018, N.S.P.C.L. submitted a strongly worded report to the Finance Division refuting the accusations hurled by the petitioner against N.S.P.C.L., and setting out the chronology of facts leading to the issuance of the bid evaluation report. In the said report, it was also mentioned that the petitioner had been irked by N.S.P.C.L.'s rejection of the petitioner's proposal to enter into a joint venture agreement with it. It was also stated that the petitioner had unnecessarily raised objections to the procurement process regarding the Smart Card Manufacturing System in which the petitioner had not even participated. N.S.P.C.L. believed that the petitioner was trying to pressurize N.S.P.C.L. by involving the Ambassadors after it was known to all that the petitioner's financial bid had been evaluated to be the highest. 20. On 03.08.2018, the G.R.C. decided that N.S.P .C.L. had conducted the prequalification process in a fair and transparent manner by following the requirements of the 2004 Rules. Apparently , the Finance Division had given verbal directions to halt the procurement process. N.S.P .C.L., vide letter dated 10.08.2018, informed the Finance Division that N.S.P .C.L. and the Director General, Immigration and Passports ("D.G .I.&.P .") were suffering financial losses due to the delay in the procurement process. In the said letter , it was specifically mentioned that the procurement process had been halted due to the Finance Division' s verbal instructions. 21. On 09.08.2018, the petitioner filed the instant writ petition. Along with the said writ petition, the petitioner had also filed an application for interim injunction, praying for restraining N.S.P .C.L. from proceeding with the award of the contract. Vide order dated 09.08.2018, this Court ordered that the procurement process may continue but the same shall be subject to the final outcome of this petition. 22. On 28.09.2018, N.S.P.C.L. issued a purchase order to M/s Mhlbauer for 500,000 electronic data pages for electronic passports. 40% of the payment was to be made in advance through an irrevocable Letter of Credit and 60% after delivery. In the said purchase order, it was noted that the same was subject to the decision of this Court and that if the Court decided against N.S.P .C.L., the purchase order would be considered as cancelled. Despite this purchase order , N.S.P .C.L. has not made any payment to M/s Mhlbauer . CONTENTIONS OF THE LEARNED COUNSEL FOR THE PETITONER:- 23. Mr. Mansoor Hassan Khan, A.S.C., learned counsel for the petitioner , after narrating the facts leading to the filing of the instant petition, submitted that the procuring agency/N.S.P .C.L. could not have intermingled the prequalification process with the technical evaluation process; that after complet ing the prequalification process envisaged by Rules 15 and 16 of the 2004 Rules, the procuring agency was supp osed to require the prequalified bidders to submit their technical and financial bids; that the terms and conditions for prequalification of ID-1 and ID- 3 cards issued by N.S.P .C.L. were flawed inasmuch as the prequalified bidders were also to be treated as technically qualified for the consideration of their financial quotations; that N.S.P .C.L. had carried out the technical evaluation in the garb of the prequalification process; that Rule 29 of the 2004 Rules requires the procuring agency to formulate an evaluation criteria listing all the relevant information against which the bid is to be evaluated; that the evaluation criteria is required to be a part of the bidding documents; that Rule 30 of the 2004 Rules requires that all bids shall be evaluated in accorda nce with the evaluation criteria and other terms and conditions set forth in the prescribed bidding documents; that failure to provide for an unambiguous evaluation criteria in the bidding documents amounts to mis procurement; that in the instant case, the evaluation criteria provided in the prequalification documents was vague and ambiguous inasmuch as it simply provided that "technically evaluated responsive proposals/offers as per our specification/requirement and meeting terms and conditions of prequalification documents" ; that N.S.P .C.L. did not give any marks to the bidders in the prequalification process; that the prequalified bidders had not been asked to submit their technical bids; that after the prequalification of the bidders, N.S.P .C.L. asked the bidders to submit their financial bids only; and that N.S.P .C.L. should have required the prequalified bidders to submit technical bids as well. 24. Learned counsel for the petitioner further submitted that according to N.S.P .C.L.'s technical evaluation report dated 26.01.2018, six bidders were prequalified; that subsequently , revised technical evaluation report dated 22.03.2018 was issued according to which two out of the six bidders were disqualif ied; that M/s Mhlbauer and M/s IN CONTINU had submitted collusive bids; that when the financial proposals were opened on 10.04.2018, it was found that M/s Mhlbauer and M/s IN CONTINU' s bids were exactly the same, i.e. Euros 2,320,000/-; that although
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M/s IN CONTINU had earlier been prequalified, however , after the submission of its financial bid, N.S.P .C.L. disqualified it on the pretext that it had failed to make certain clarifications; that as a result of M/s IN CONTINU' s disqualification, M/s Mhlbauer became the lowest evaluated bidder; and that the mere fact that M/s IN CONTINU did not object to its disqualification shows that it had submitted a collusive bid with M/s Mhlbauer . 25. Furthermore, it was submitted that on 21.05.2018, the petitioner had submitted its first complaint to N.S.P.C.L. as well as to the G.R.C.; that the petitioner submitted its second complaint on 17.07.2018; that two months after the petitioner's initial complaint, a G.R.C. was constituted by N.S.P.C.L.; that the G.R.C. gave its decision against the petitioner on 03.08.2018; that the petitioner was not afforded an opportunity of a hearing by the G.R.C.; that the G.R.C.'s said decision is bereft of reasons; that the petitioner's ground that the bidders could not have been asked to extend the bid validity after its expiry on 09.06.2018 was not addressed in the G.R.C.'s decision; that the petitioner was under no obligation to renew its bid bond or to extend the validity of its bid; that N.S.P.C.L.'s requirement for the extension of the bid validity was in violation of Rule 26(3) of the 2004 Rules; that Guidance Note 9 in the Standing Operating Procedure ("S.O.P.") No.21 of the Manual of Procurement Policies issued by P.P.R.A. also requires that a request for the extension of bid validity should be made before the expiry of the bid validity; and that P.P.R.A.' s opinion, in its letter dated 05.07.2018, that a bidder who does not agree to extend the bid validity should be allowed to withdraw its bid, is contrary to the said S.O.P . as well as Rule 26 of the 2004 Rules. 26. Learned counsel further submitted that M/s Mhlbauer could not have been technically qualified since it had not satisfied clause 11 of the terms and conditions of the prequalification documents which required a bidder to have shipped more than two million ID-3 cards over the last three years; that on 28.11.2017, M/s Mhlbauer submitted its proposal in response to the prequalification notice; that the invoices submitted by M/s Mhlbauer along with its proposal purportedly showed that it had shipped 2,000,326 ID-3 cards over the last three years; that M/s Mhlbauer resubmitted copies of invoices to N.S.P.C.L. along with the clarifications made in its letter dated 17.05.2018; that a careful examination of these invoices submitted by M/s Mhlbauer along with its prequalification documents show that the total number of ID-3 cards shipped by it over the last three years were 1,859,826; that since there was a shortfall of 140,174 ID-3 cards, M/s Mhlbauer had not satisfied the essential condition for prequalification; that compliance with the requirement of clause 11 was most crucial since N.S.P.C.L. had disqualified M/s IN CONTINU on account of not providing an adequate clarification for satisfying the requirements of inter alia clause 11 of the terms and conditions of the prequalification documents; that through application (C.M.No.2040/2019) filed on 15.05.2019, M/s Mhlbauer gave a breakdown of 3,354,591 ID-3 cards purportedly shipped between November 2014 and November 2017; that the invoices annexed at pages 11 to 26 of the said application were not a part of M/s Mhlbauer's proposal submitted in response to the prequalification notice; that Rule 31 of the 2004 Rules does not permit such subsequently filed documents to be taken into consideration in a tender bidding process; and that since the evaluation reports did not contain the details regarding M/s Mhlbauer 's satisfaction as to clause 11 of the prequalification documents, the petitioner came to know about the deficiency in M/s Mhlbauer 's proposal after the filing of the writ petition. Learned counsel for the petitioner prayed for the writ petition to be allowed in terms of the relief sought therein. CONTENTIONS OF THE LEARNED COUNSEL FOR RESPONDENTS NO.3 AND 4:- 27. On the other hand, Mr. Asim Shafi, Advocate, learned counsel for respondents No.3 and 4/N.S.P.C.L., submitted that the procurement process for ID-3 cards had been conducted by N.S.P.C.L. strictly in accordance with the 2004 Rules; that on 21.06.2018, the prequalified bidders had been asked to extend the bid validity in accordance with Rule 26(3) of the 2004 Rules; that the "exceptional circumstances" which caused N.S.P.C.L. to request the bidders to extend the validity of their bids was (i) the correspondence between N.S.P.C.L. and M/s IN CONTINU leading to the latter's disqualification, and (ii) the Finance Division had directed N.S.P.C.L. to halt the procurement process; that vide letter dated 10.08.2018, N.S.P.C.L. had brought to the notice of the Finance Division that the directions to halt the procurement process had delayed the e-passport project resulting in a financial loss to N.S.P.C.L. as well as D.G.I.&.P.; that P.P.R.A. had, vide letter dated 05.07.2018, clarified that a bidder who does not extend the validity of its bid could be allowed to withdraw its bid; that the requirement in Rule 26(3) of the 2004 Rules to extend the bid validity prior to its expiry is directory and not mandatory; that the essential reason why the petitioner did not extend the
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validity of its bid was because it was known to all that the petitioner's financial bid was the highest; and that since the petitioner's financial bid was not the lowest, it did not have the locus standi to file the instant writ petition. 28. Learned counsel further submitted that the G.R.C. was formed on 18.07.2018; that the petitioner had filed its complaints and objections to the constitution of the G.R.C. on 21.05.2018, 17.07.2018 and 19.07.2018, respectively; that the G.R.C. was reconstituted on 23.07.2018 after the petitioner raised objections against two members of the G.R.C.; that the G.R.C.' s well reasoned decision dated 03.08.2018 against the petitioner does not suffer from any jurisdictional infirmity; that N.S.P .C.L. had not extended undue favour to M/s Mhlbauer; that it was a mere coincidence that M/s Mhlbauer 's financial bid was exactly the same as that of M/s IN CONTINU; that the petitioner had not been discriminated against; that if at all there was any irregularity in the bidding process, the same was of a minor nature and curab le; that due to this litigation, the petitio ner had caused a loss to the exchequer; and that the contract price is denominated in Euros which has strongly appreciated in the recent past against the Pakistan Rupee. Learned counsel for respondents No.3 and 4 prayed for the writ petition to be dismissed. CONTENTIONS OF THE LEARNED COUNSEL FOR RESPONDENT No.6:- 29. Mr. Babar Sattar , A.S.C., learned counsel for respondent No.6 / M/s Mhlbauer , raised a preliminary objection to the maintainability of the instant petition on the ground that the petitioner is a foreign company incorporated in the United Arab Emirates and was barred from instituting the instant petition due to Section 441 of the Companies Act, 2017; that the petitioner has a place of business in Pakistan; that since the petitioner has not complied with its obligations under Sections 435 and 436 of the Companies…
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