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Petitioner: SINOTEC Co. Limited VS Respondent: Province of Sindh & others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title: SINOTEC Co. Limited vs Province of Sindh & others Case No.: Suit No.491 of 2017 Date of Judgment:2017-09-15 Reported As: 2017 SHC 322 Result: Application Dismissed
Judgment Muhammad Ali Mazhar, J: This suit has been filed to entreat a declaration that the acceptance of financial bid of defendant No.6 for the award of tender for Sindh Barrages Improvement Project (Contracts G2 Barrage Rehabilitation Works, Guddu, Kashmore) is in violation of Sindh Public Procurement Rules 2010. The plaintiff has also impugned the letters dated 08.2.2017 and 19.4.2016 to the extent of pre- qualification of the defendant No.6 and sought the directions against the defendants No.1 to 4 to complete the procurement process in accordance with the Sindh Public Procurement Rules 2010. 2. The evanescent facts are that the plaintif f is a multinational integrated technology and services provider and delivers international EPC/T urnkey projects in the areas of infrastructure develo pment, renewable energy , and environmental protection. The plaintif f participated in the tender process of a World Bank financed Sindh Barrages Improvement Project IDA CREDIT 5684-P AK Contract: SBIP/G2 Building Works at Gudu Barrage, Kashmore and Sukkur Barrage, Sukkur; and Barrage Rehabilitation Works at Guddu Barrage, Kashmore (Tender). The tender was essentially in relation to 'electrical and mechanical works' or 'electromechanical works' which are in relation to the barrage gates and its barrage gate mechanics. On 30.8.2016, the defendant No.3 announced the defendant No.6 as lowest bidder for the tender . The plaintif f on or about October ,2016 came to know that the defendant No.6 has no experience in electromechanical works but only carried out civil works in the past. The plaintif f filed a suit No.2445/2016 which was disposed of on 23.11.2016 with the directions to the Review Committee to decide the grievance of the plaintif f. However on 08.2.2016, the decision of Review Committee was informed to the plaintif f that the Sindh Public Procurement Rules 2010 are not applicable in the instant tender and the complaint was dismissed. 3. The plaintiff has moved an interlocutory application under Order 39 Rule 1 & 2 C.P.C (C.M.A No.3820/2017) to solicit restraining order against the defendant No.1 to 5 not to award tender in question to the defendant No.6. Whereas a further application has been filed under Section 151 C.P.C, (C.M.A No. 2651/2017) for
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suspending the operation of the letter of acceptance dated 22.2.2017 whereby the bid of defendant No.6 was accepted and they were called upon to furnish performance security. With this application, the plaintiff has also attached a copy of letter dated 7.3.2017 through which the defendant No.3 communicated the regret to the plaintiff that on evaluation, the plaintiff's bid was not found successful. 4. The learned counsel for the plaintif f argued that the defendant No.6 was declared pre-qualified in violation of Rule 4 and 13 of Sindh Public Procurement Rules 2010. The pre-qualification and bidding process was non- transparent and the defendant No.1 to 3 acted with bias and mala fide intention. The defendant No.6 has no specific construction experience particularly electro mechanical works so they failed to meet the condition 4.2 (a) and 4.2 (b) of tender document. The defendant No.6 was pre-qualified on the basis of Jinnah Barrage Rehabilitation Project, however their projects did not meet requirements of the 4.2(a) and 4.2(b) of PQD. The Jinnah Barrage Project was a Joint Venture Project by defendant No.6 with another Chinese company namely China National Electric Wire & Cable Corp ('CCC'). The defendant No.6 had completed civil work and its JV partner performed Electro-Mechanical work which fact is clearly reflecting from Joint Venture Agreement of Jinnah Barrage Project. The defendant No.6 has neither applied with any joint venture member nor can sub-contract the electro- mechanical work. Furthermore, Clause 24.3 of ITA clarifies that maximum percentage of permitted subcontracting is 20% of the total value of the contract but in the instant project 60% of the work is electro mechanical. 5. The learned counsel further counteract the summation of the Project Implementation Consultant (PIC) with the plea that his submissions are contradictory to the Pre-Qualification Report. The Consultant in his brief note submitted that defendant No.6 met the requirement of 4.2 (a) of the PQD on the basis of Jinnah Barrage Project, while for 4.2 (b) condition, New Khanki Project of defendant No.6 was accepted on the basis that condition of substantial completion in the last five (5) years is not required for 4.2(b). However, from Pre-Qualification Report of Consultant, it is clear that even for 4.2(b) requirement, defendant No.6 was pre-qualified on the basis of Jinnah Barrage Project and not on New Khanki Project. The learned counsel further pointed out that one of the participant M/s. Shah Rukh-CLIC Joint Venture was disqualified for relying on a project not completed in the last five (5) years as per 4.2(a) and (b). Similarly, another participant namely M/s. PCCC was disqualified because M/s. PCCC was claiming experience of its joint venture partner M/s. Sinohydro Corporation. It was further averred that the defendant Nos.1 to 3 have not only acted in a nontransparent and unfair manner by violating the terms and conditions of the PQD and Rule 4 of the Sindh Public Procurement Rules 2010 but they have also acted with malice. The learned counsel added that this court may review the cases where exercise of public power is found to have been violative of law or tainted with mala fide. 6. While focusing on the minutes of Bid opening meeting dated 30.8.2016 the learned counsel contended that the plaintif f had conveyed no objection to bid opening process which does not mean that the plaintif f has waived its rights of challenging the process. The lowest bid of defendant No.6 does not create any right. Even after being declared lowest bid, defendant No.3 is required to see whether it is substantially responsive to the terms, conditions and specifications in the PQD and Bidding. On 23.11.2016 the Suit No.2445/2016 was disposed of without prejudice to the rights of the parties to avail the remedy including plaintif f who may raise the pleas as in the instant suit. The defendant No.3 issued letter of acceptance despite pendency of the grievance as well as the above-mentioned suit which shows the malice and bias in favour of defendant No.6. The World Bank Guidelines does not make the SPPR 2010 inapplicable nor oust the jurisdiction of this court hence reliance on Rule 5 is misconceived. Judicial precedents cited by the plaintiff 's counsel: 1. AIR 2005 Delhi 298 (Patel Engineering Ltd. & another vs. National Highways Authority of India and others). Contract Invitation to offer in commercial transaction. Project executed as Joint Venture (JV) by two firms. Correct perspective is to see actual experience or participating entity and not label of firm. 2. AIR 1991 Punjab and Haryana 38 (M/s. Driplex Water Engineering Limited vs. The Punjab State Electricity Board and another). If at all, it wanted to consider the experience of a collaborator as experience of the tenderer it should have given notice of this fact in the notice inviting tenders in order to enable the other concerns or companies to file tenders on the basis of their collaboration with other concerns. Due to lack
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of requisite experience, not only the huge amount of the public exchequer is at stake. Thus, it being a matter of immense public importance, the High Court inclined to interfere at this stage. The fact that the bid of the tenderer was lowest would not be of much consequence. 3. 2016(3) Bom CR 552, [2016] 135 SCL 122 (Bom) (Hitech Audio Systems Pvt. Ltd. vs. The State of Maharashtra and others). Once tender process did not meet requirements of fairness and reasonableness, then there was no alternative but to interfere. 4. 1999 (4) ALD 5, 1999 (4) ALT 176 (Lanco Constructions Ltd. vs. Govt. of A.P., Irrigation). The administration of the Government must be fair and transparent and there should not be any scope for either suppression or suspicion. The petitioner has no vested right to the award of work, but he has a right to claim that his bid should be considered objectively in a fair and proper atmosphere more especially when his bid was found to be lowe st and recommended by the Superintending Engineer and Chief Engineer . 5. (1979) 3 Supreme Court Cases 489 (Ramana Dayaram Shetty vs. Internatio nal Airport Authority of India and others). Administrative authority is equally bound by the norms, standards and procedures laid down by it for others - Disregard of the norm or standard would invalidate its action unless based on some valid principle which is neither irrational or unreasonable nor discriminatory . Standard of eligibility laid down in the notice for tenders, held, cannot be departed. 6. 2014 SCMR 676 (Asaf Fasihuddin Khan Vardag vs. Government of Pakistan & others). Discharge of constitutional duty by the State functionaries in deviation to the spirit of the Constitution was anathema to the Constitution and was challengeable on diverse grounds including mala fide and colourable exercise of power for ulterior motive. In exercise of power of judicial review it was not possible for the judiciary to confer validity and immunity to the acts or actions which suffered from mala fide. 7. PLD 2014 S.C. 47 (Habibullah Energy Limited vs. WAPDA & others). All public functionari es must exercise public authority , especially while dealing with public property , public funds, and assets; in a fair, just, transparent, and reasonable manner , untainted by mala fide without discrimination and in accordance with law While exercising its jurisdiction, superior courts neither sit in appeal over administrative actions nor interfere on account of inconsequential deviations; however, where Administrative Authority acted in a discriminatory manner, and action failed the test of reasonableness, transparency and/or was otherwise unjust and unfair or suffered from mala fide, the courts not only were vested with the jurisdiction to set aside such actions but any failure in such an eventuality to exercise power of judicial review.... 7. The learned counsel for the defendant No.3 argued that in fact seventeen firms participated in the tender proceedings but only six were pre-qualified. The defendant No.6 was declared successful after complying with all requisite formalities in the transparent manner . The name of qualified firm was announced four months back but no firm raised any objection. The invitation of bid was issued on 16.5.2016 and bids were opened on 25.08.2016. The defendant No.6 bid of Rs.9.5 Billion was found lowest whereas the plaintif f's submitted the bid for Rs.12.5 Billion while China harbor Engineer Guanxi Hydroelectric Construction Bureau submitted their bid for Rs. 18.9 Billion. The defendant No.6 also submitted their experience in the related fields. In compliance of the orders passed in Suit No.2445/2016, a meeting of review committee was convened by the Sindh Public Procurement Regulatory Authority on 08.2.2017 and they decided that the instant procurement does not come within the ambit of SPPRA and with this observation they rejected the complaint. 8. He added that the project is assisted and financed by the World Bank which has been commenced according to the World Banks Guidelines, procurement under IBRD loans and IDA credits January , 2011 updated in July, 2014. The project also hired Food and Agriculture Organization (FAO) as project management consultant for the procurement process and transparency international acted as observer in all bid openings. The work order includes the replacement of the barrage gates, rehabilitation and replacement of the mechanical electrical equipment for operating the barrage gates, provision of equipment and workshop for the future operation and maintenance of the barrage, minor repairs to the barrage and head work structures and construction within the river of a new left hand
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pocket divide wall. The plaintif f failed to allege any mala fide. The World Bank on 18.04.2017 through email informed the Project Director that they have reviewed the procurement process and concurred the final evaluation conducted by the Project Director, so there is no pending issue from the Bank side. They also replied to the Project Director that the application moved by the Sinotec Engineering (plaintiff) has no force. The learned counsel maintained that after completion of pre-qualification process, the tender was awarded to the defendant No.6. He referred to judgment of apex court reported in PLD 2017 S.C. 83 and expressed that in this case as well, the procedure was completed according to the World Bank Guidelines therefore the plaintiff has no right to challenge the proceedings conducted fairly and transparently. 9. The learned counsel for the defendant No.6 argued that the plaintif f is motivated by its own self- interest and not in public interest. The result of prequalification in particular the prequalification of Descon was intimated to Sinotec on 19.4.2016 and the bidders (including Sinotec) were asked if they had any objections at the pre-bid meeting on 13.6.2016 but no objection was raised by Sinotec. Bidders were then again asked the objections at the Bid Opening Meeting on 30.8.2016, but no objection was raised by the plaintif f. They filed complaint to the Review Committee of SPPRA on 1.11.2016 after seven months of pre-qualification. The defendant No.6 submitted its bid for Rs.9.58 billion whereas the plaintif f bid was for Rs.12.49 billion. If the plaintif f succeeds, it has a net gain of over Rs.3 billion, which additional amount will be borne by the people of Pakistan. The decision to prequalify a party is that of the IDA and was reviewed by various outside consultants. The present proceedings are not maintainable for the reason that a decision to prequalify a party is a commercial or policy decision, which is beyond the scope of judicial review and requires specialized knowledge and further on the ground that the International Development Association/World Bank has not been made party. The defendant No.6 (Descon) met the criteria set out in the pre-qualification documents and it has considerable requisite experience. He further argued that the scrutiny of SBIP related documents i.e Project Agreement, the Financing Agreement and the applicable World Bank Guidelines clearly establish that the entire process including pre-qualification was within the control of and all decisions in respect thereto were made by the IDA so the Review Committee rightly decided that it has no jurisdiction to decide the complaint filed by the plaintiff. The defendant No.6 was considered fully compliant with this requirement because of its experience of undertaking the Jinnah Barrage and Uch II Projects. The defendant No.6 has also filed a number of additional documents setting out its past experience of large and complex infrastructure projects with elements specific to the present project i.e. electromechanical elements such as gates and regulators. The email dated 15.2.2017 filed by the learned A.G.Sindh on 4.5.2017 shows that the World Bank even after filing of the complaint by the plaintiff and the present and previous suits gave its no objection for awarding the contract to defendant No.6. Judicial precedents cited by the counsel for defendant No.6: 1. 2012 SCMR 455 (Dr.Akhtar Hassan Khan & others v. Federation of Pakistan & others). Article 184(3). Constitutional petition. Judicial review of award of contract by government. Scope and limitations. Duty of the court is to confine itself to the question of legality and its concern should be, whether a decision- making authority , exceeded its powers; committed an error of law; committed a breach of the rules of natural justice; reached a decision which no reasonable tribunal would have reached, or abused its powers. Question whether a particular policy of a particular decision taken in the fulfillment of that policy is fair, is not for the court to determine and it is only concerned with the manner in which those decisions have been taken. Court must exercise its discretionary powers of judicial review with circumspection and only in furtherance of public interest and not merely for making out of a legal point and it should always keep the larger public interest in mind to decide whether to interfere or not. Only when the public interest overwhelms any other consideration, the court should interfere. 2. PLD 2017 S.C. 83 (Messrs Power Construction Corporation of China Ltd. v. Pakistan Water and Power Development Authority & others). The court held as under:- "26. Developing countries like Pakistan may need to invest in a large infrastructure projects to ensure its economic and social develo pment. Such projects are usually very expensive and may require huge funds which may have to be raised through loans. Such loans may be obtained from International
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Financial Institutions, which are a reality in today's world and are catered for in the law i.e. International Monetary Fund and Bank Act, 1950. If the loans are obtained from International Financial Institutions like the IDA, the same come coupled with conditionalities, which includes the mode and method of the award of contracts for the Projects and the process of pre-qualifications of bidders. Such conditionalities are also catered for in the law, as is evident from Rule 5 of the PPRA Rules, 2004, reproduced herein above. Thus, obviously, the World Bank Guidelines, including paragraph 2(a) of the Appendix-I thereof and its enforceability and effectiveness are contemplated in law. 27. In the instant case, the decision of the IDA to pre-qualification of the Petitioner Company and make a "reasonable request" for deletion of its name from the list of pre-qualified bidders is not the subject- matter of the instant lis, in as much as, the said decision and request by the IDA was not challenged in the Constitutional jurisdiction nor was the IDA impleaded as a party to the proceedings. In the absence of any finding, in this behalf, it is legally impossible to adjudicate upon the reasonableness or otherwise of the "request" by the IDA or to determine whether the Respondent/WAPDA was obliged to accede to such request. The decision of the Respondent/WAPDA not to agitate the matter further with the IDA at the behest of the Petitioner Company is not too difficult to discern. It appears that a pragmatic commercial decision was taken not to jeopardize the funding from the IDA and thereby putting the entire project at risk. Such decision falls within the realm of the Public Policy and the Courts in the exercise of their powers of judicial Review, ordinarily, do not interfere therewith and exercise judicial restraint, as has been held by this Court not only in the case, reported as Dossani Travels Pvt. Ltd and others v. Messrs. Travels Shop (Pvt.) Ltd. and others (PLD 2014 SC 1) but also in the judgment, reported as Cutting of Trees for Canal Widening Projects, Lahore: In the matter of Suo Motu Case No.25 of 2009 (2011 SCMR 1743). While we may not totally agree with the interpretation of the paragraph 2(a) of the Appendix-I of the Guidelines, as has been done by the learned High Court by way of the impugned judgments but such an exercise is not necessary by this Court, as in our opinion, the Constitutional Petition filed by the Petitioner Company was not maintainable, as it sought to encroach into the domain of the Policy Matters in respect whereof the judicial restraint is to be exercised". 10. Mr. Chris Hall, Chief Resident Engineer (Project Implementation Consultant) had also addressed the court and presented concise annotation that prequalification document was based on the Standard World Bank Document obtained from the World Bank Website. Modifications to the standard documents were not permitted except where provision is made for contract-specific criteria. The prequalification document was developed in the year 2015 by the project Implementation Consultants (PIC). The World Bank on 21.09.2015 conveyed their no objection to proceed with the prequalification process. The Prequalification for Guddu Barrage was duly advertised in accordance with WB guidelines on 04.10.2015. Seventeen companies submitted applications and the Prequalification Assessment Report (PQAR) was prepared by the PIC and forwa rded to PMO for review which recommended six applicants out of the seventeen. The WB reviewed the documen t and gave their no objection on 16.04.2016. The applicants were notified the outcome of prequalification assessment on 19.04.2016. Section III of the Prequalification Document contains the methods, criteria, and requirements to evaluate Applicants. 4.1a General Construction Experience seeks to establish that the Applicant' s track record in Construction activities over at least the last 5 years. 4.2.a requires the Applicant to demonstrate that it has worked over the last five years, on contracts of a specified size (one contract exceeding $ 110 million or two contrac ts exceeding $ 55 million). Item 4.2a is intended to demonstrate that the applicant is capable of the management and execution of substantial components of challenging major projects. The defendant No.6 submitted the details of 38 Contracts executed over the last 22 years in Pakistan and internationally. Of these 38 Contracts 10 are equal to or exceed US$ 55 Million and 5 exceed US$ 110 Million. Descon's eligibility and bona fides in relation to Item 4.1a are not contended by the plaintiff. PIC assessed Descon fully compliant with this item. They also submitted details of three contracts to demonstrate compliance with Item 4.2a. such as Rehabilitation of Jinnah Barrage valuing PKR 11,794 million/US$ 130.6 million. The defendant No.6 was the lead partner in the JV with a 70% share. A letter from the
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Engineer (M/s. ACE, Nespak and SMEC) was provided confirming completion of civil and mechanical works. In the New Khanki Barrage (July 2013-ongoing) contract valuing PKR 21,300 million/US$ 222.97 million, Descon is the main contractor. A letter from the Engineer (M/s. SMEC, Atkins, EGC, Barqaab JV) was provided confirming 65% complete and 450 MW UCH-II combined Cycle Power Plant (November 2010 to August 2013) Contract value PKR 11,344 million/US$ 134 million in which also Descon is the main Contractor. A letter from the Engineer (M/s. Lahmeyer) was provided certifying successful testing carried out in April, 2014. PIC assessed Descon's use of Jinnah Barrage as acceptable for the reasons that it was conducted over last 5 years, Descon's share of the value of the Works executed was US$ 91.4 million i.e. greater than 55 million, and the works executed are similar in complexity and size to those of Contract SBIC/G2. However New Khanki Barrage was excluded from this list by PIC as it was not substantially (80%) complete at the time of submission of applications. 11. The learned A.A.G too argued that Sindh Public Procurement Rules 2010 are not applicable in the instant tender process hence the plaintiff cannot rely on it. Being lowest bid of the defendant No.6, their bid was accepted after due consideration by the chain of command in a fair and transparent manner. The plaintiff has not approached this court to point out any illegality or complaining to any favoritism or corruption in the larger public interest as whistleblower but they have approached with malice to mileage personal vendetta and vengeance just for the reason that their bid was rejected being higher than the bid offered by the defendant No.6. For rest, the learned A.A.G adopted the arguments advanced by the learned counsel for the defendant No.3. 12. Heard the arguments. To begin with, I would like to jot down the backdrop and scenery of erstwhile legal battle set in motion by the plaintif f for challenging the tender process. The chronicle indicates that the plaintif f had filed Suit No.2445/2016 in which they strived for declaration that the letters dated 1.11.2016 and 19.4.2016 proclaiming the prequalification of the defendant No.6 was illegal. They sought further declaration that the award of tender to the defendant No.6 is illegal. Directions were also entreated against the defendant No.5 in the said suit to transfer the plaintif f's complaint dated 1.11.2016 to the Review Committee constituted by the Sindh Public Procurement Regulatory Authority . When the suit was fixed before the learned Single Judge on 23.11.2016, the matter was disposed of with the directions to the Review Committee to decide…
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