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Petitioner: Creative Electronics (Pvt.) Limited VS Respondent: Government of Pakistan through JUDGMENT
Court Name: Islamabad High Court Judge(s): Miangul Hassan Aurangzeb Title:Creative Electronics (Pvt.) Limited vs Government of Pakistan through
JUDGMENT
Reported As: PLD 2020 Islamabad 319, PLJ 2020 Islamabad 151, 2022 [M] CLR 1230 Result: Petition dismissed Judgment
JUDGMENT MIANGUL HASSAN AURANGZEB, J. Through the instant petition, the petitioner, Creative Electronics (Pvt.) Ltd., seeks a declaration to the effect that the procurement process initiated by Respondent No. 3 (Islamabad Electric Supply Company, "I.E.S.C.O.") pursuant to the invitation to bid published on 07.01.2019, is contrary to the provisions of the Public Procurement Rules, 2004 ("the 2004 Rules") made by the Federal Government in exercise of the powers conferred by Section 26 of the Public Procurement Regulatory Authority Ordinance, 2002 ("the 2002 Ordinance"), as well as the Construction and Operation of Engineering Works Bye-laws, 1987 ("P.E.C. Bye-laws") made by the Executive Committee of the Pakistan Engineering Council ("P.E.C.") with the previous sanction of the Federal Government in exercise of the powers conferred by Section 25 of the Pakistan Engineering Council Act, 1975 ("the P.E.C. Act"). 2. The facts essential for the disposal of the instant petition are that on 07.01.2019, I.E.S.C.O. published an advertisement inviting bids for the award of the contract for design, supply, installation and commissioning of an Advanced Metering Infrastructure Project in Rawalpindi Circle, Customer Information System and New Billing. System ("the Contract"). In the said advertisement, it was explicitly stated that payments under the contract were to be made from a loan from the Asian Development Bank ("A.D.B.") which had been received by the Government of Pakistan to meet the cost of the Second Power Distribution Enhancement Investment Program. It was also mentioned that the international competitive bidding for the project will be conducted in accordance with A.D.B.'s Single-Stage: Two-Envelope bidding procedure. In order for a bidder to be
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eligible for participation in the bidding process, it had to have a minimum average annual turnover of US Dollars 80 million calculated as total certified payments received for contracts in progress or completed within the last three years. The bids were required to be submitted on or before 21.02.2019 on which date the technical bids were to be opened. It is an admitted position that the deadline for the submission of the bids and the date for the opening of the technical bids was extended to 07.03.2019. Respondent No. 5 (KT- KAIFA Consortium) was one of the bidders who submitted its bid within the said deadline. It is also an admitted position that Respondent No. 5 was technically qualified. 3. On 23.01.2019, All Pakistan Energy Meter Manufacturers ("A.P.E.M.M.") addressed a letter to I.E.S.C.O., voicing their concerns and reservations regarding the subject tender. In the said letter, it was asserted that foreign bidders should be required to enter into a joint venture agreement with a Pakistani firm and be given 30% of the share in the project as required by Bye-law 7(2) of the P.E.C. Bye-laws prior to its amendment. For the purpose of clarity, the relevant paragraph in the said letter is reproduced herein below: "As per previously in-vogue Clause 7(2) of Pakistan Engineering Council (PEC), Engineering Works By-Laws, before initiating any activity, the foreign firms were bound to get license from PEC, but only for specific projects where technology is not available in Pakistan and such foreign firm was bound to enter into a JV agreement with the Pakistani firm in which the share of the Pakistani firm is to be limited to 30%. But unfortunately this clause has been amended. Kindly, ensure the implementation of original Clause that allows minimum local value addition of 30%." 4. The petitioner was one of the signatories to the said letter. On 08.02.2019, I.E.S.C.O. responded to the said letter and informed A.P.E.M.M. that the subject tender had been carried out in accordance with the A.D.B. Procurement Guidelines, and that under clause 1.3.4 of the Evaluation and Qualification Criteria (which was a part of the bidding documents), a margin of preference will be granted to eligible domestically produced products. 5. Some of the signatories to the said letter dated 23.01.2019 (excluding the petitioner), being dissatisfied with I.E.S.C.O.'s response, filed writ petition No. 808/2019 before this Court which was dismissed vide order dated 21.05.2019. The petitioners in the said writ petition had also asserted that the foreign bidders should have been required to form a joint venture with local manufacturers for the purpose of participating in the subject tender. In the said order dated 21.05.2019, it was inter alia held as follows: " ... Moreover, the case of the petitioner Companies is based on violation of bye-law 7 of the Construction and Operation of Engineering Works Bye-Laws, 1987. The said bye-law was amended and in this regard notification was published in the official gazette on 29.05.2018. The learned Counsel for the petitioner Companies, despite his able assistance, could not show that the amended bye-law is ultra vires the provisions of the Pakistan Engineering Council Act, 1975. Moreover, the project for which advertisements were published on 07.01.2019 is funded by an international lending institution. The learned Counsel for the petitioner Companies was not able to satisfy this Court regarding maintainability of the instant petition by establishing that the latter could be treated as aggrieved in the context of Article 199 of the Constitution." 6. It was not until 14.10.2019 that the petitioner filed the instant writ petition. The petitioner's primary stance is that paragraph 4 of the advertisement dated 07.01.2019, which permits a foreign bidder to submit a bid without associating with itself a local manufacturer, is in violation of Bye-law 7(2) of the P.E.C. Bye-laws as well as the standard form of bidding documents for procurement of works issued by the P.E.C ("standard form of bidding documents"), which were applicable to the subject procurement process by virtue of Rule 23(4) of the 2004 Rules read with Regulation 3 of the Public Procurement Regulations, 2008 ("the 2008 Regulations"), which were made by the Public
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Procurement Regulatory Authority ("P.P.R.A.") in exercise of the powers conferred by Section 27 of the 2002 Ordinance. 7. Learned counsel for the petitioner submitted that the procurement process undertaken by I.E.S.C.O. was for an award of a contract that entailed the supply of engineering equipment and the carrying out of engineering works; that the procurement process conducted by I.E.S.C.O. was in violation of the requirements of the Bye-law 7(2) of the P.E.C. Bye-laws as well as the standard form of bidding documents, which required a foreign bidder to form a joint venture with a Pakistani firm registered with P.E.C. before participating in the bidding; that the said standard form of bidding documents explicitly provide that it is mandatory for all engineering organizations and departments at the Federal and Provincial level and district governments to use these documents for procurement of electrical and mechanical works funded locally or through donor agencies; that the standard form of bidding documents were approved by the Executive Committee of the National Economic Council in its meeting held on 12.11.2007, and notified by the Planning Commission (Government of Pakistan) vide notification dated 12.02.2008; that the National Economic Council has constituted under Article 156 of the Constitution to review the overall economic condition of the country and to formulate plans in respect of financial, commercial, social, and economic policies; and that Rule 24 of the Rules of Business, 1973 provides inter alia that when a case has been decided by the National Economic Council or its Committee, the Minister- in-Charge shall take prompt action to give effect to the decision. 8. Learned counsel for the petitioner further submitted that the procurement process conducted by I.E.S.C.O. is contrary to the requirements of Bye-law 7(2) of the P.E.C. Bye-laws and the standard form of bidding documents inasmuch as in the bidding documents issued by I.E.S.C.O. did not require foreign bidders to enter into a joint venture with a Pakistani firm prior to submitting a bid; that Bye-law 7(2) and the said standard form of bidding documents applied to the subject tender by virtue of Rule 23(4) of the 2004 Rules read with Regulation 3 of the 2008 Regulations; and that I.E.S.C.O., instead of following the procedure prescribed in the standard form of bidding documents, adopted A.D.B. Procurement Guidelines-2015 ("A.D.B. Procurement Guidelines") for the subject tender and violated Rule 23(4) of the 2004 Rules read with Regulation 3 of the 2008 Regulations. 9. Furthermore, it was submitted that although the project for which the procurement process was being carried out by I.E.S.C.O. was funded by the A.D.B., foreign bidders could not be exempted from the requirements of the 2004 Rules without the approval of the Economic Coordination Committee of the Cabinet in terms of Regulation 3 of the Public Procurement Regulations, 2011 ("the 2011 Regulations"); that since the procurement process was in violation of Rule 23(4) of the 2004 Rules as well as Bye-law 7(2) of the P.E.C. Bye-laws, it is liable to be declared as such; and that the instant case was one of misprocurement in terms of Rule 50 of the 2004 Rules which provides that any unauthorized breach of the said Rules shall amount to misprocurement. Learned counsel for the petitioner prayed for the writ petition to be allowed in terms of the relief sought therein. 10. On the other hand, learned counsel for Respondent No. 5 (KT- KAIFA Consortium) submitted that the petitioner had no locus standi to file the instant petition since after obtaining the bidding documents on 01.01.2019, it neither participated in the bidding process nor was it qualified/eligible to do so; that since the petitioner has an authorized capital of only Rs. 100 million, it was not able to satisfy the eligibility criteria contained in clause 2.3.2 of the bidding documents, which required a bidder to have a minimum average annual turnover of US Dollars 80 million calculated as total certified payments received for contracts in progress or completed within the last three years; that the petitioner had taken contradictory positions by raising objections to the tender documents (including the objection regarding non-fulfillment of the requirements of Bye-law 7(2) of the P.E.C. Bye-laws) vide letter dated 23.01.2019 on the one hand, and on the other giving its consent to be a sub-contractor of other bidders; that the petitioner is estopped from challenging the bidding
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process after agreeing to being the sub- contractor of some of the bidders; that since the petitioner was interested in the tender, it cannot claim to be acting in the public interest by filing the instant petition; that even though the advertisement inviting bids was published on 07.01.2019, the petitioner waited until 14.10.2019 to file the instant writ petition; that during this period, the bidding process progressed and the technical evaluation of the bidders had been completed; that the instant writ petition is liable to be dismissed due to severe laches; and that the instant writ petition has not just been filed belatedly but is also tainted with mala fides. 11. Learned counsel for Respondent No. 5 further submitted that the project, which is the subject matter of this litigation, is being funded from a loan provided by A.D.B. to Pakistan; that terms of the loan agreement provide that procurement shall be governed by A.D.B. Procurement Guidelines, which specifically prohibit mandatory joint venture conditions; that I.E.S.C.O. had conducted the tender bidding process strictly in accordance with the A.D.B. Procurement Guidelines; that there was no provision in the 2004 Rules which made it mandatory for a foreign bidder to submit a bid as a joint venture with a local company; that the P.E.C. Bye-laws cannot be given preference over the 2004 Rules which were made several years after the P.E.C. Bye-laws; that the 2004 Rules apply to all kinds of procurement whereas the P.E.C. Bye-laws apply only to procurement of professional engineering works; that since Rule 51 of the 2004 Rules gives an overriding effect to the said Rules over anything, to the contrary contained in any other rules concerning public procurements, Rule 5 of the 2004 Rules shall have an overriding effect on Bye-law 7(2) of the P.E.C. Bye-laws; that by virtue of Rule 5 of the 2004 Rules, the A.D.B. Procurement Guidelines would also have an overriding effect over the P.E.C. Bye-laws; that on 07.02.2019, a proviso was added to Regulation 3 of the 2011 Regulations by virtue of which the approval of the E.C.C. to proceed in terms of Rule 5 of the 2004 Rules is not required in case of the commitment of the Federal Government arising out of arrangements with international financial institutions or State(s), where finances are provided by them; that since the project for which the bidding process in question was initiated by I.E.S.C.O. was being funded out of a loan given by the A.D.B. to Pakistan, there was no requirement for the approval of the E.C.C. for invoking Rule 5 of the 2004 Rules; that in essence, the requirement of Bye- law 7(2) of the P.E.C. Bye-laws has been fulfilled since A.D.B. has given 15% domestic preference in the subject tender; that even otherwise the P.E.C. Bye-laws do not apply to the subject tender since the engineering works (i.e. installation and commissioning) of the, material supplied by the successful bidder is to be carried out by I.E.S.C.O.; that the position taken by P.E.C., in its written comments, was that by virtue of Rule 5 of the 2004 Rules, the A.D.B. Procurement Guidelines will take precedence over the P.E.C. Bye-laws; and that there was no legal infirmity in the bidding process carried out by I.E.S.C.O. Learned counsel for Respondent No. 5 prayed for the writ petition to be dismissed. 12. Learned counsel for Respondent No. 3 (I.E.S.C.O.) submitted that as far back as 08.02.2019, the petitioner was informed by I.E.S.C.O. that the tender bidding process would be carried out in accordance with the A.D.B. Procurement Guidelines; that the petitioner was also informed that in order to support domestic industry, 15% domestic preference was to be given in the financial evaluation for the locally manufactured goods and services; that four meter manufacturers (excluding the petitioner) had filed writ petition No. 808/2019 before this Court challenging the subject tender on similar grounds as has been taken by the petitioner in the instant petition; that the said writ petition was dismissed vide order dated 21.05.2019; that the petitioner kept quiet until 14.10.2019 when the instant petition was filed purely as an afterthought; that the instant writ petition is liable to be dismissed due to laches and its inequitable conduct; that the petitioner has been nominated by Respondent No. 5 as its sub-contractor; that clauses 7.1 to 7.3 of the Instructions to Bidders provide that any sub-contractor so nominated by a bidder is disqualified from being a bidder itself or a partner in a joint venture; that since the petitioner has been nominated as a sub-
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contractor by Respondent No. 5, it is disqualified from participating in the bidding process; and that the petitioner has been well aware of the requirements of the tender bidding documents since January 2019 but waited till the eleventh hour to sabotage the bidding process by filing the instant petition. Learned counsel for Respondent No. 3 prayed for the writ petition to be dismissed. 13. I have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance. The facts leading to the filing of the instant petition have been set out in sufficient detail in paragraphs 2 to 6 above, and need not be recapitulated. 14. The vital question that needs to be answered is whether the bidding process initiated by I.E.S.C.O. is liable to be annulled due to non- adoption of the standard form of bidding documents issued by P.E.C., and the absence of the requirement in the bidding documents for the foreign bidders to bid as joint ventures with local firms registered with P.E.C. 15. Rule 23(4) of the 2004 Rules provides that procuring agencies shall use standard bidding documents as and when notified by Regulations made by P.P.R.A. Regulation 3 of the 2008 Regulations provides that a procuring agency, when engaged in procurement of works, shall use the standard form of bidding documents prescribed by the P.E.C. The standard form of bidding documents for procurement of works were issued by the P.E.C. on 11.06.2007. The said documents incorporate FIDIC General Conditions of Contract for Electrical and Mechanical Works. The draft "Invitation for Bids", which is part and parcel of the standard form of bidding documents, provides inter alia that a foreign bidder is entitled to bid only in a joint venture with a Pakistani constructor in accordance with the provisions of the P.E.C. Bye-laws. Bye-law 7(2) of the P.E.C. Bye-laws provides inter alia that a foreign firm shall not be eligible to participate in bidding individually, and that a foreign firm shall enter into a joint venture with 'a Pakistani firm registered with P.E.C. in the equivalent/compatible category and submit the same to the employer before participating in the bidding. 16. Rule 5 of the 2004 Rules provides inter alia that whenever the 2004 Rules are in conflict with an obligation or commitment of the Federal Government arising out of an international treaty or an agreement with a State or States or any international financial institution, the provisions of the international treaty or agreement shall prevail to the extent of such conflict. The procedure for invoking the provisions of Rule 5 of the 2004 Rules is provided in Regulation 3 of the 2011 Regulations which provides that whenever a sponsoring Ministry/Division is of the view that prospective procurements are required to be made by invoking Rule 5 of the 2004 Rules, it shall bring a case to the Economic Coordination Committee of the Cabinet ("E.C.C.") after undertaking due consultations with the stakeholder Ministry/Division/Department etc. as prescribed in the Rules of Business, 1973. Furthermore, the said Regulation provides that the E.C.C. shall consider such cases and decide whether to authorize the sponsoring Ministry/Division to proceed or not to proceed in terms of Rule 5 of the 2004 Rules. 17. Now, on 07.02.2019, a proviso was added to Regulation 3 of the 2011 Regulations by virtue of which the approval of the E.C.C. to proceed in terms of Rule 5 of the 2004 Rules is not required in case of the commitment of the Federal Government arising out of arrangements with international financial institutions or State(s), where finances are provided by them. Since the proviso to Regulation 3 of the 2011 Regulations was added through an amendment in 2019, it cannot be treated as surplusage or overlooked. 18. The function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. The general rule in construing an enactment containing a proviso is to construe them together without making either of them redundant or otiose. Even if the enacting part is clear, effort is to be made to give some meaning to the proviso and to justify its necessity. A proviso has to be strictly construed.
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Guidelines for the interpretation of a proviso to an enactment are given in the following judgments:- (i) In the case of Mst. Nawab Bibi vs. Ch. Allah Ditta (1998 SCMR 2381), it was held as follows:- "It is settled law that proper function of a proviso is to [except] and deal with a case which would otherwise fall within the general language of the main section, and its effect is confined to the rule or section to which a proviso has been added. The proper way to regard the proviso is as a limitation upon the effect of principal section or rule. A proviso, which is in fact and in substance a proviso, can only operate to deal with a case which, but for it, would have fallen within the ambit of the section to which the proviso is a proviso. To put it in another way the section deals with a particular field while proviso excepts or takes or carries out from the field a particular portion and therefore, it is perfectly true that before a proviso can have any application the section itself must apply." (ii) In the case of Sheikh Abdul Hakeem vs. Shamsuddin (PLD 2008 Quetta 14), the Hon'ble Balochistan High Court has held as follows:- "The proper way to regard a proviso is as a limitation upon the effect of the principal enactment, where the section deals with particular field and the proviso excepts or takes out or carries out from the field a particular portion. A proviso is not independent of section, its object is to carve out from the main section a class or category, to which the main section does (sic) apply." (iii) In the case of Lubna Afzal vs. Union Bank Limited (2003 CLD 868), the Division Bench of the Hon'ble Lahore High Court held as follows:- "It is settled principle of law that a proviso to a section has an overriding effect and control over the whole section. Meaning thereby the function of a proviso is to exclude and take out certain cases from the rule to which it is a proviso. In other words to that extent the proviso modifies the main provision of the enactment." (iv) In the cases of Abid Hussain vs. Additional District Judge, Alipur, District Muzaffargargh (2006 SCMR 100), Messrs Hamdard Dawakhana vs. Commissioner Income-Tax, Karachi (PLD 1980 SC 84), and Messrs Tariq Brothers vs. Collector of Customs (2005 PTD 186), it was held inter alia that a proviso is in the nature of an exception to the general rules and ought to be strictly construed. (v) In the case of Madras and Southern Mahratta Ry. Co. Ltd. vs. Bezwada Municipality (AIR 1944 Privy Council 71), Lord Macmillan held inter alia that the proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. (vi) In the case of Shah Bhojraj Kuverji Oil Mills and Ginning Factory vs. Subhash Chandra Yograj Siniha (AIR 1961 S.C. 1596), Hidayatullah, J. held inter alia that as a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment, and ordinarily, a proviso is not interpreted as stating a general rule. (vii) In the case of Mullins vs. Treasurer of Survey (1880) 5 QBD 170, Lush J. held inter alia that when one finds a proviso to a Section, the natural presumption is that, but for the proviso, the enacting part of the Section would have included the subject matter of the proviso. (viii) In the case of Local Government Board vs. South Stoneham Union (1909) AC 57 (HL), Lord Macnaghten held that a proviso may be a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. 19. It is not disputed that A.D.B. is an international financial institution. In the advertisement dated 07.01.2019, it was clearly mentioned that the Government of Pakistan had received a loan from the A.D.B. towards the cost of the Second Power Distribution Enhancement Investment Programe Tranch 1, and that a part of this loan will be used for payments under the contract for which the bidding process had been initiated. Clause 2.03(b) of the project agreement dated 19.11.2016
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executed between A.D.B. and I.E.S.C.O. provides that I.E.S.C.O. shall procure all items of expenditure to be financed out of the proceeds of the loan given to Pakistan by A.D.B. under the loan agreement dated 19.11.2016. Schedule 4 of the said loan agreement provides that the procurement shall be governed in accordance with A.D.B. Procurement Guidelines, which specifically prohibit mandatory joint venture conditions. Additionally, clause 2 (Section 1) of the Instructions to Bidders provides inter alia that the borrower intends to apply a portion of the funds to eligible payments under the contract(s) for which the bidding document had been issued. It was also provided that payments by A.D.B. will be made only at the request of the borrower and upon approval by A.D.B. in accordance with the terms and conditions of the financing agreement between the borrower and A.D.B. These provisions in the said advertisement, agreements and in the…
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