A probable undisclosed agreement or understanding, formal or informal, which has the tendency of restricting competitiveness during tendering process is essentially a matter of inference and no direct evidence is required

In the matter of O.K Marine vs ONGC and Ors. (WPC 95/2021) decided by the Bombay High Court on 08.06.2021

FACTS: The Petitioner was a sole proprietor of a firm carrying on business of fresh water supply through barges. Respondent No.1 invited Indigenous Open Tender for procurement for supply of water to its offshore facilities. The tender was a two-bid system – a technical bid followed by a commercial bid. The Petitioner was one of the contractors, who submitted a bid. There were three others, who had also submitted bids which included Respondent Nos. 4 and 5, who have been successful bidders, whilst the third bidder was one Royal Traders, which happens to be a sole proprietorship of the Petitioner’s father.

While the Respondent ONGC had cleared the technical bids of all four bidders, including the Petitioner and his father, at the stage of consideration of commercial bids, the bids of both the Petitioner and his father were not opened. It had come to the notice of Respondent ONGC that the proprietors of the two firms were, respectively, the son and father. Considering that the two would have access to vital information pertaining to the bid submitted by the other, including the prices quoted by each other, the employer concluded that both bidders have an undisclosed understanding with each other, which would restrict competitiveness or introduce cartelisation in the bidding process, thereby offending Section 2 of the Integrity Pact.

Section 2 of the Integrity Pact – Commitments of the Bidder/contractor

“2. The Bidder/Contractor will not enter with other Bidders into any undisclosed agreement or understanding, whether formal or informal. This applies in particular to prices, specifications, certifications, subsidiary contracts, submission or non – submission of bids or any other actions to restrict competitiveness or to introduce cartelisation in the bidding process.”

ISSUE: Whether the circumstance of Petitioner firm and one of the Respondents firm being of the son and father would lead to violation of the Section 2 of Integrity Pact

HELD: The Bombay High Court disagreeing with the contentions and reasoning of the Petitioner for its challenge against the acceptance of the bids of Respondent No. 4 and 5 outlined the following reasons which were also exhaustively replied to by the Respondents:

• It was borne out by the record that the Petitioner and his father, though shown as proprietors of different concerns, operate from the same premises. The letterheads of the two bear the same addresses.

• Further, in an earlier contract involving another employer, namely, Bombay Port Trust, the Petitioner had not only acted both for himself and his father, but had also issued cheques from the same account towards the contracts of himself and his father

It was further observed by the Hon’ble High Court that the present case is a purely administrative matter and to fault a decision of the Respondent employer, there must be a case of either perversity in the decision or a colourable exercise on the part of the employer. Though scrutiny of such decision does not even go strictly by Wednesbury principles, even applying those principles, the decision cannot be faulted as the decision of the Respondent employer has been supported by material on record.

The Bench also observed and held that that the Respondent having arrived at the decision that there is a clear likelihood of an undisclosed agreement which has the tendency of restricting competitiveness or introducing cartelisation in the bidding process, has essentially to be a matter of inference based on material available before the decision maker; no direct evidence of any such agreement or understanding is ever likely to be available before such decision maker. As long as the decision is reasonably supported by material on record and there is no case of victimisation or colourable exercise, the decision cannot be faulted as was the present case.

Finally, dismissing the petition of the Petitioner, the Hon’ble Bombay High Court also held that it is not necessary for the employer to conclude a possible case of cartelisation only after opening of commercial bids, if there are reasonable material on record which suggests a case of cartelisation, the same can be rejected at the initial stage of bidding.