The interest of national security from the Defence perspective assumes greater national significance than the public interest, the High Court of Karnataka has said while quashing a tender awarded by the BHEL to a private company, having consortium agreement with a Chinese company, contrary to the Union government’s restriction imposed on bidders from countries sharing land borders with India.
The court declared as invalid the tender awarded in September 2022 by public sector undertaking Bharat Heavy Electricals Ltd. (BHEL) in favour of Kolkatta-based BTL EPC Ltd, which had consortium agreement with Fujian Longking Co. Ltd, a Chinese company, to set up an Ash Handling Plant forming part of installation of a Thermal Power Station in Telangana. Value of the projected awarded to the company was around ₹378 crore.
A Division Bench comprising Chief Justice Prasanna B. Varale and Justice M.G.S. Kamal delivered the verdict while allowing an appeal filed by Macawber Beekay Pvt. Ltd., a Noida based company. The appellant had questioned the single judge’s November 2, 2022, verdict of dismissing its petition against award of tender to BTL EPC Ltd.
The Bench pointed out that the order, issued by the Finance Ministry on July 23, 2020, in national Defence interest, makes registration with competent authority mandatory for the bidders from countries sharing land boarders with India.
The BTL EPC, which alone had not fully technically qualified to participate in the bid and it was due to its ‘consortium agreement’ with the Chinese company made its bid technically qualified, the Bench said while pointing out that the Chinese company was admittedly not registered with the competent authority as per the July 23, 2020 order of the Finance Ministry to participate in the bid.
The Bench refused to accept the contention of BTL EPC Ltd that it alone participated in the bid and agreement with Chinese company, through it was titled as ‘consortium agreement‘ was in fact only a ‘tie-up’ or ‘association’ to provide certain ‘design and engineering’ assistance to the project, and hence registration of Chinese company with the competent authority was not necessary.
Also, the Bench, from the tender document, pointed that the ‘activity of design and engineering should have been carried out by the bidder and not through any external design agency/agencies.’
Referring to documents, including ‘consortium agreement’ of the bid, the Bench, pointed out that BTL EPC Ltd did enter into ‘consortium agreement’ with Chinese company and contents of agreement makes it clear that BTL EPC Ltd. alone is not technically qualified in certain aspects and hence it was collaborating with the Chinese company.
The contents of agreement makes it further clear that both the companies constituted themselves as a ‘consortium’ for ‘bidding and undertaking’ the project work, the Bench said while pointing that ‘consortium agreement’ was not for mere commercial terms between the two companies but was an ‘undertaking to the tendering authority’ to execute the project.
“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 Bench observed while refusing to accept contention of BHEL and BTL EPC Ltd that interference at this stage would delay the project and cause financial burden on state exchequer as 50% of the work has already been completed.
BHEL could not have awarded contract to BTL EPC Ltd merely because its bid was lower than the bid amount of the appellant when mandatory requirements issued in national Defence interest were not fulfilled, the Bench said while directing BHEL to consider the bid of appellant. However, the Bench stayed implantation of the verdict for four weeks to enable BHEL to move the apex court.
