Adani Gas Limited vs Petroleum And Natural Gas … on 17 February, 2020
Supreme Court of India
Adani Gas Limited vs Petroleum And Natural Gas … on 17 February, 2020
Author: Hon’Ble Dr. Chandrachud
Bench: Hon’Ble Dr. Chandrachud, Hemant Gupta
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 3992 of 2019
Adani Gas Limited ...Appellant
Versus
Petroleum and Natural Gas Regulatory Board & Ors. ...Respondents
With
Civil Appeal Nos 3234-3235 of 2019
With
Civil Appeal Nos 3247-3248 of 2019
With
Civil Appeal No 3289 of 2019
With
Civil Appeal No 4527 of 2019
With
T.C. (C) No 27 of 2019
With
Signature Not Verified T.C. (C) No 26 of 2019
Digitally signed by
SANJAY KUMAR
Date: 2020.02.17
13:49:24 IST
Reason: And With
Civil Appeal No 106 of 2020
1
JUDGMENT
Dr Dhananjaya Y Chandrachud J
1. In 2018 the Petroleum and Natural Gas Regulatory Board1 conducted the
ninth round of bidding for City or Local Natural Gas Distribution Networks 2. On 14
September 2018, a press release was placed on the Board‘s website notifying
details of the successful bidders in various Geographical Areas3. The contest in
the present batch of appeals has arisen over the grant of authorisation for laying,
building, operating or expanding CGD networks in the following GAs:
(i) GA 51 - Puducherry District;
(ii) GA 61 - Kanchipuram District; and
(iii) GA 62 – Chennai & Tiruvallur Districts.
2. The Appellate Tribunal for Electricity4 was seized of two appeals – Appeal
No 292 of 2018, instituted by Adani Gas Limited and Appeal No 323 of 2018,
instituted by IMC Limited. These appeals were instituted before the APTEL under
Section 30(1) of the Petroleum and Natural Gas Regulatory Board Act 2006 5. By
their separate judgments dated 28 February 2019, the Chairperson and Member
Technical (Petroleum and Natural Gas) rendered divergent findings, following
which the Chairperson directed that the proceedings in the two appeals be placed
before the judicial member. The judicial member recused from hearing the
1
―the Board‖
2
―CGD Networks‖
3
―GAs"
4
―APTEL‖ or ―Tribunal‖
5
―PNGRB Act‖
2
appeals on 7 March 2019. This led to the institution of the present appeals before
this Court. Noting that no other judicial member was available in the APTEL to
conduct the hearing, this Court by its order dated 1 April 2019 admitted the
appeals and issued directions in exercise of its powers under Article 142 of the
Constitution for the transfer of the proceedings before the APTEL to this Court in
order to bring finality to the present dispute. In assessing the merits, the Court
has had the benefit of appraising the differing views which have been expressed
by the Chairperson and by the Member Technical (Petroleum and Natural Gas).
3. The APTEL has been constituted in terms of sub-Section (1) of Section 30
of the PNGRB Act which is extracted below:
―30. Appellate Tribunal. (1) Subject to the provisions of this
Act, the Appellate Tribunal established under section 110 of
the Electricity Act, 2003 (36 of 2003) shall be the Appellate
Tribunal for the purposes of this Act and the said Appellate
Tribunal shall exercise the jurisdiction, powers and authority
conferred on it by or under this Act:
Provided that the Technical Member of the Appellate Tribunal
for the purposes of this Act shall be called the Technical
Member (Petroleum and Natural Gas) and shall have the
qualifications specified in sub-section (2) of section 31.‖
Section 33 stipulates that any person aggrieved by an order or decision of the
Board has recourse to an appeal to the Tribunal. The jurisdiction of the APTEL
while hearing an appeal is spelt out in sub-Section (6) of Section 33 in the
following terms:
―33.(6) The Appellate Tribunal may, for the purpose of
examining the legality or propriety or correctness of any order
or decision of the Board referred to in the appeal filed under
sub-section (1), either on its own motion or otherwise, call for
the records relevant to disposing of such appeal and make
such orders as it thinks fit.‖
3
An appeal lies to this Court against an order of the APTEL, other than an
interlocutory order, under Section 37 on the grounds set out in Section 100 of the
Code of Civil Procedure 1908. With this background, we now turn to the PNGRB
Act under the aegis of which the ninth round of CGD bidding occurred.
PNGRB Act and regulations
4. The content of the PNGRB Act is summarised by its long title as:
―An Act to provide for the establishment of Petroleum and
Natural Gas Regulatory Board to regulate the refining,
processing, storage, transportation, distribution, marketing
and sale of petroleum, petroleum products and natural gas
excluding production of crude oil and natural gas so as to
protect the interests of consumers and entities engaged in
specified activities relating to petroleum, petroleum products
and natural gas and to ensure uninterrupted and adequate
supply of petroleum, petroleum products and natural gas in all
parts of the country and to promote competitive markets and
for matters connected therewith or incidental thereto.‖
The PNGRB Act came into force, in terms of the provisions contained in Section
1(3) on 1 October 2007, save and except for Section 16. Section 16 which
provides for the authorisation for building or expanding CGD Networks, came into
force on 15 July 2010. Section 16, insofar as is material contains the following
stipulations:
―16. Authorisation.—No entity shall—
(a) lay, build, operate or expand any pipeline as a common
carrier or contract carrier,
(b) lay, build, operate or expand any city or local natural gas
distribution network, without obtaining authorisation under this
Act: … ‖
Under Section 19 of the PNGRB Act, the Board may grant an authorisation for a
city or local natural gas distribution network either on the basis of an application
4
or suo moto. Before it does so in a specified GA, the Board is under a mandate to
give wide publicity of its intent to do so. Upon inviting applications from interested
parties, the Board may select an entity ―in an objective and transparent manner
as specified by regulations for such activities‖.
5. On 19 March 2008, the Petroleum and Natural Gas Regulatory Board
(Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas
Distribution Networks) Regulations 20086 were notified. The CGD Authorisation
Regulations were amended on 21 June 2013, 7 April 2014 and 6 April 2018. The
CGD Authorisation Regulations, as amended in 2018, substituted new criteria for
bidding which applied to the ninth round of bidding with which the present batch
of appeals is concerned.
6. Regulation 6 of the CGD Authorisation Regulations provides for the
invitation by the Board for laying, building, operating or expanding of a CGD
network in a specific city or GA. The procedure stipulated in Regulation 5 is to
apply, except for those aspects relating to expressions of interest. Under
Regulation 5(6), the Board can scrutinise only those bids which are received in
response to an advertisement and from entities which fulfil certain minimum
eligibility criteria. Regulation 5(6)(b) spells out the criteria, which are designed to
ensure that the entity bidding is technically capable of laying and building a CGD
network in the relevant city or GA. Regulation 5(6)(c) enunciates criteria which
ensure that the entity is technically capable of operating and maintaining a CGD
6
―CGD Authorisation Regulations‖
5
network. Besides the technical criteria, the Regulations also spell out certain
financial criteria which potential bidders must satisfy. Regulation 5(6)(e) provides:
―(6) The Board shall scrutinise the bids received in
response to the advertisement in respect of only those
entities which fulfil the following minimum eligibility criteria,
namely:-
…
(e) the entity has adequate financial strength to execute
the proposed project, operate and maintain the same in the
authorised area and shall meet the following financial criterion
to qualify for bidding for a single CGD network namely:-
Population in the Minimum net worth of the bidder entity
geographical area as per
2011 Census of India
(1) (2)
5 million or more Rs. 1,500 million for a population of 5 million,
plus additional Rs. 300 million for each 1
million of population or part thereof, in excess
of 5 million (refer Note-3)
2 million or more but less than Rs.1,000 million
5 million
1 million or more but less than Rs. 750 million
2 million
0.5 million or more but less Rs. 500 million
than 1 million
0.25 million or more but less Rs. 250 million
than 0.50 million
0.1 million or more but less Rs. 100 million
than 0.25 million
Less than 0.1 million Rs. 50 million
‖
The minimum net-worth of the bidding entity is thus linked to the population of the
GA the entity is bidding for, as set out in 2011 Census data.
7. Regulation 7 of the CGD Authorisation Regulations provides the criteria for
determining how the Board should evaluate rival bids for the same GA.
Regulation 7 is quoted below, in its entirety:
―7. Bidding criteria.
6
1(a) The Board, while considering the proposal for authorisation, shall
tabulate and compare all financial bids meeting the minimum eligibility
criteria, as per the bidding criteria specified below, namely:-
Sl. Bidding Criteria Weightage Explanation
No %
1 Lowness of transportation 10 Bidder is required to quote
rate for CGD – in rupees transportation rate for CGD
per million British Thermal only for the first contract
Unit (Rs./MMBTU) year which shall not be less
than Rs.30/MMBTU. Rates
for the subsequent contract
years shall be derived
considering the quoted rate
and escalation as per Note.
2 Lowness of transportation 10 Bidder is required to quote
rate for CNG – in rupees transportation rate for CNG
per kilo gram (Rs./kg) only for the first contract
year which shall not be less
than Rs.2/kg. Rates for the
subsequent contract years
shall be derived considering
the quoted rate and
escalation as per Note.
3 Highness of number of 20 -
CNG stations (online and
daughter booster stations)
to be installed within 8
contract years from the
date of authorisation
4 Highness of number of 50 -
domestic piped natural gas
connections to be achieved
within 8 contract years from
the date of authorisation
5 Highness of inch-kilometre 10 -
of steel pipeline (including
sub-transmission steel
pipelines) to be laid within
8 contract years from the
date of authorisation
Note – Annual escalation shall be considered from the second contract year
and onwards based on the ―Wholesale Price Index (WPI) Data (2011-12 =100)‖
for ―All Group/ Commodity‖, as normally available on the website of the Office of
the Economic Adviser, Government of India, Ministry of Commerce and
Industry, Department of Industrial Policy and Promotion (DIPP) on the link
―http://eaindustry.nic.in/home.asp.‖
7
Provided that in the case of the geographical areas of (i) Bilaspur, Hamirpur and
Una Districts; (ii) Panchkula (Except area already authorised), Shimla, Solan and
Sirmaur Districts and (iii) Barmer, Jaisalmer and Jodhpur Districts, it is not
mandatory to supply natural gas through steel-pipes. However natural gas has to
reach in all charge areas. The bidding parameters and their respective weightage
will, accordingly, be as under:-
Sl. Bidding Criteria Weightage Explanation
No %
1 Lowness of 10 Bidder is required to quote
transportation rate for transportation rate for CGD
CGD – in rupees per only for the first contract
million British Thermal year which shall not be less
Unit (Rs./MMBTU) than Rs.30/MMBTU. Rates
for the subsequent contract
years shall be derived
considering the quoted rate
and escalation as per Note.
2 Lowness of 10 Bidder is required to quote
transportation rate for transportation rate for CNG
CNG – in rupees per kilo only for the first contract
gram (Rs./kg) year which shall into be less
than Rs.2/kg. Rates for the
subsequent contract years
shall be derived considering
the quoted rate and
escalation as per Note.
3 Highness of number of 25 -
CNG stations (online
and daughter booster
stations) to be installed
within 8 contract years
from the date of
authorisation
4 Highness of number of 55 -
domestic piped natural
gas connections to be
achieved within 8
contract years from the
date of authorisation
Note: Annual escalation shall be considered from the second contract year and
onwards based on the ―Wholesale Price Index (WPI) Data (2011-12=100)‖ for
―All Group / Commodity‖, as normally available on the website of the Office of
the Economic Adviser, Government of India, Ministry of Commerce and
Industry, Department of Industrial Policy and Promotion (DIPP) on the link
―http://eaindustry.nic.in/home.asp.‖
8
1(b) Successful bidder shall be required to achieve the year-wise work
programme within 8 contract years as per details given below, namely:-
PNG Connections CNG stations Inch-km of steel pipeline
(cumulative) (cumulative) (cumulative)
By the % of work By the % of work By the % of work
end of programme end of programme end of programme
contract contract contract
year year year
st st
1 Nil 1 Nil 1st 5
2nd 10 2nd 15 2nd 20
3rd 20 3rd 30 3rd 40
4th 30 4th 45 4th 60
th th th
5 40 5 60 5 70
th th th
6 60 6 75 6 80
7th 80 7th 90 7th 90
th th th
8 100 8 100 8 100
Note:- In case derived numbers are in fraction, the same shall be rounded off
to the nearest whole number and fraction 0.5 shall be rounded off to next
higher whole number.
Provided that in the case of the geographical areas of (i) Bilaspur, Hamirpur
and Una Districts; (ii) Panchkula (Except area already authorised), Shimla,
Solan and Sirmaur Districts and (iii) Barmer, Jaisalmer and Jodhpur Districts,
successful bidder shall be required to achieve the year-wise work programme
within 10 contract years as per details given below, namely:-
PNG Connections (cumulative) CNG stations (cumulative)
By the end of % of work By the end of % of work
contract year programme contract year programme
1st Nil 1st Nil
nd nd
2 10 2 10
rd rd
3 20 3 20
4th 30 4th 30
th th
5 40 5 40
6th 50 6th 50
th th
7 60 7 60
th th
8 70 8 70
9th 80 9th 80
th th
10 100 10 100
Note – In case derived numbers are in fraction, the same shall be rounded off
to the nearest whole number and fraction 0.5 shall be rounded off to next
higher whole number.
(2) ***********
9
(3) Bidder entity with the highest composite score, considering the criteria
under sub-regulation (1) and as illustrated in Schedule C (1), shall be
declared as successful bidder.
Provided that in case of tie in the evaluated composite score, the successful
bidder shall be decided based on the highness of numbers of PNG
connections among the tied bidding entities. In case there is tie on number of
PNG connections also, highness of inch-kilometer steel pipeline shall be
considered and thereafter in case of tie in inch-kilometer as well, highness of
numbers of CNG stations shall be considered;‖
Under Regulation 7, the Board while considering proposals for authorisation,
shall tabulate and compare all financial bids which meet the minimum eligibility
criteria in accordance with the bidding criteria set out as enunciated. The table
set out in Regulation 7(1)(a) provides for the tabulation of all eligible financial bids
on the basis of five parameters. The table enunciates the five bidding criteria and
the weightage which is to be ascribed to each of them. The criteria are as follows:
(i) The first criterion is the ‗lowness‘ of the transportation rate for CGD
computed in rupees per million for a British Thermal Unit. The
weightage ascribed to this criterion is 10 per cent. The explanation
stipulates that a bidder is required to quote the transportation rate
for CGD only for the first contract year at a rate not less than Rs 30
per MMBTU;
(ii) The second criterion is the ‗lowness‘ of the transportation rate for
CNG expressed in rupees per kilogram. The weightage ascribed to
this criterion is 10 per cent. The bidder is required to quote the
transportation rate only for the first contract year at a rate of not less
than Rs 2 per kilogram;
10
(iii) The third criterion is the ‗highness‘ of the number of CNG stations to
be installed within eight contract years from the date of
authorisation. The weightage ascribed to this parameter is 20 per
cent;
(iv) The fourth criterion is the ‗highness‘ of the number of domestic
piped natural gas connections to be achieved within eight contract
years from the date of authorisation. The weightage ascribed to this
criterion is 50 per cent; and
(v) The fifth criterion is the ‗highness‘ of the inch-kilometre of steel
pipeline to be laid within eight contract years from the date of
authorisation. The weightage ascribed to this parameter is 10 per
cent.
Regulation 7(1)(b) sets out a year-wise work programme indicating the progress
which must be achieved by the successful bidder every year during the course of
eight contract years from the date of authorisation. Under Regulation 7(3), a
bidding entity with the highest composite score, in terms of the criteria contained
in sub-regulation (1), is to be declared as the successful bidder. This is illustrated
in Schedule C(1) of the CGD Authorisation Regulations. Schedule C(1) contains
the following illustration of the manner in which the weightage for PNG
connections is to be ascribed:
―(E) Number of PNG domestic connections
Let,
P1 = Number of PNG domestic connections by the 1st
entity
11
P2 = Number of the PNG domestic connections by the
2nd entity
P3 = Number of the PNG domestic connections by the
3rd entity
Assume P1 is higher than P2 and P2 is higher than
P3.;
The highest number of PNG domestic connections bid
(HP1) shall be given a score of 100% and the number of
the other PNG domestic connections bids shall be given a
score in relation to HP1 on a pro-rata basis as under :-
HP1 = 100%
HP2 = 100 % x (P2 ÷ P1)
HP3 = 100 % x (P3 ÷ P1)
‖
This illustration shows that the entity which has quoted the highest number of
PNG domestic connections to be achieved is allotted a score of 100 per cent.
The entities below the highest will be assigned a score in relation to the first entity
on a proportionate basis.
8. Under Regulation 9, the grant of an authorisation is to be issued to a
successful entity after it furnishes a performance bond. The quantum of the
performance bond is based on the population of the GA as determined with
reference to the census data of 2011. Regulation 9 states:
―9. Performance bond.
(1) Grant of authorisation shall be issued to the
successful entity after it furnishes the performance bond
in the form of demand draft or pay order or bank
guarantee from any scheduled bank for the amount as per
details given below, namely:-
Serial Population in the Amount of
12
Number Geographical Area, as Performance
pre 2011 Census of India Bond (Rupees)
1 5 million or more 500 million
2 2 million or more but less 330 million
than 5 million
3 1 million or more but less 250 million
than 2 million
4 0.5 million or more but less 150 million
than 1 million
5 0.25 million or more but 80 million
less than 0.50 million
6 0.1 million or more but less 30 million
than 0.25 million
7 Less than 0.1 million 15 million
‖
Under Regulation 10, the successful entity is to be issued a letter of intent7 upon
the finalisation of the bid. Under the CGD Authorisation Regulations, the
authorised entity must also obtain financial closure for the project from a bank or
financial institution within 270 days of authorisation.
9. The period of implementation of the project under the ninth round of CGD
bidding is 2018 to 2026. The period for commercial operation is between 2018
and 2043.
10. From an analysis of the CGD Authorisation Regulations, it becomes
evident that the 2011 census figures have been utilised to peg the net-worth
requirement in Regulation 5(6)(e) and the value of the performance bond to be
submitted to the Board post authorisation in Regulation 9. Significantly,
Regulation 7, which provides a table specifying the five bidding criteria to
7
―LOI‖
13
evaluate competing bids, does not link the said criteria with the census figures of
2011.
Facts
of the present appeals
11. On 12 April 2018, the Board initiated the bidding process for authorising
entities to lay, build, operate or expand CGD networks for the ninth round. The
bids were invited by means of an application-cum-bid-document for each GA.8
The bidding process covered various GAs, including those of (i) GA 51 –
Puducherry District; (ii) GA – 61 Kanchipuram District; and (iii) GA 62 -Chennai-
Tiruvallur.
12. Clause 1.1. of the Bid Document was titled ‗Geographical area and related
information‘. Clause 1.1.1 stipulated that the Board had identified a GA and was
accordingly inviting applications-cum-bids for the grant of authorisation for
developing a CGD network in the GA. Each GA was depicted in a map at
Annexure-1 of the Bid Document for the relevant GA. Under Clause 1.1.3, it was
the responsibility of each bidder to obtain all information related to the present
gas supply availability, pipeline connectivity and information about existing
customers, if any, in the specified GA. Clause 1.1.3 stated:
―1.1.3. It is the bidder’s responsibility to obtain all
information related to the present gas supply availability
and pipeline connectivity and also existing customers, if
any, in the specified geographical area. The bidder can
also refer to list of NOCs/Permissions granted by PNGRB to
various entities under the provisions of the Internal Guidelines
for grant of NOC/Permission for (i) supply/distribution of
CBM/natural gas through cascades; and (ii) setting up of
CNG/LNG Daughter Booster Stations (DBS), in the areas
where the Board has not yet authorized any entity for8
With respect to the relevant GA, ―Bid Document‖14
developing or operating CGD networks at
http://www.pngrb.gov.in/CGD-NOCs.html.‖
(Emphasis supplied)The scope of work was defined in Clause 1.2 of the Bid Document:
―The entities bidding for this work shall be required to lay,
build, operate or expand the CGD networks to meet
requirement of natural gas in domestic, commercial and
industrial segments including Natural Gas in the vehicular
segment in the said geographical area to be authorized and
also comply with the relevant regulations notified from time to
time.
The entities shall be required to carry out the development of
CGD project in line with the regulations laid down by the
PNGRB.‖
13. Clause 2.1.1 required the bidders to examine the contents of the Bid
Document and the regulations of the Board. Clause 2.1.2 described Annexure-1
as the map depicting the GA and charge areas. Under Clause 2.2.1, any
clarifications were required to be obtained from the Secretary of the Board on or
before the bid closing date. Clause 4.2 stipulated that all financial bids would be
tabulated and compared in accordance with the bidding criteria specified in
Regulation 7 and Schedule-C(1) of the CGD Authorisation Regulations.
Moreover, the bidder with the highest composite score would be declared as
successful in the bid. Under Clause 4.4 of the Bid Document, the Board reserved
the right to accept or reject any bid which it considered to be ―unreasonably high
or low‖:
―4.4 PNRGB’S RIGHT TO ACCEPT OR REJECT ANY OR
ALL APPLICATION-CUM-BIDS4.4.1 PNRGB reserves the right to reject any Application-
cum-Bid comprising quoted work programme considered by it
to be unreasonably high or low.‖
15
On 31 May 2018, Addendum-1 to the Bid Document was issued by the Board.
Clause 14.2, inserted as a result of Addendum-1, contained the following
clarification:
―14.2 What should be considered to be the level of
“unreasonably high” or “unreasonably low” quotes shall be
decided by Board at the time of bid evaluation on a case to
case basis after considering the relevant factors.‖According to the above stipulation, the Board clarified that the determination of an
unreasonably high or low quote would be made by the Board at the time of bid
evaluation on a case to case basis after considering the relevant factors.
14. On 10 July 2018, three bid evaluation committees9 were nominated by the
Board for evaluating the bid documents. On 12 July 2018, a press release was
issued by the Board setting out the date and time for the opening of technical
bids for different GAs. The technical bids for GA 51 (Puducherry) were to be
opened on 16 July 2018 at 14.00 hours; for GA 61 (Kanchipuram) on 17 July
2018 at 12.30 hours; and for GA 62 (Chennai-Tiruvallur) on 17 July 2018 at 13.30
hours. The technical bids were opened by the Board in the presence of the
bidders‘ representatives.
15. On 23 July 2018, a note10 was moved for the approval of the members of
the Board with a view to encourage serious bidders and to avoid
unrealistic/unreasonable bidding in terms of Clause 4.4.1 of the Bid Document.
The Board Note, insofar as is material provided:
9
(―BECs‖)
10
―Board Note‖
16
―Subject: Reasonability of Bidding Parameters
Bid evaluation for technical bid is under progress for all 86
GAs. Technical bid queries are being issued and it is
expected that the Financial bid opening may be started from
this week (24th July onwards) for various GAs. The bidding
parameters have been completely changed in current round.
In order to promote serious bidders and to avoid any
unrealistic/unreasonable bidding number committed by entity,
PNGRB has included a rejection clause in Para 4.4.1 of
application-cum-bid documents. The clause is reproduced
below:
―PNGRB reserves the right to reject any Application-cum-Bid
comprising quoted work programme considered by it to be
unreasonably high or law.‖
Since technical bids for some of the GAs are about to be
concluded, it is essential to decide upon the reasonability of
the bidding parameters which are constituting work
programme. In this regard, following is proposed:
1. No of PNG Domestic connections:
Lower Limit: Ministry of Petroleum and
Natural Gas (MoP&NG) vide letter No L-
16021/9/2013-GP-1 (pt.) dated 16th August
2016, constituted a committee to examine the
City Gas Distribution (CGD) bidding related
issues. The committee in its report
recommended minimum work programme
(MWP) for inter-alia PNG domestic
connections as 7.5% of within district
headquarters/ municipal limit. Prior to 9th
round, MWP for PNG domestic connections
was fixed for 5 % total household. Considering
above it is proposed that 2 % of total
Household (Census 2011 data) may be
considered as minimum.
Maximum Limit: In order to reach at
maximum value various possibilities has been
discussed in house which includes conversion
of LPG to PNG, maximum penetration at
present in GAs etc. It is proposed to keep
maximum limit of PNG Domestic connections
as 100 % of Household (Census 2011 data).
Beyond 100 % household may be treated as
unreasonable quote.‖
17
The Board Note was approved by the members of the Board including the
Chairperson. Between 24 July 2018 and 18 August 2018, the financial bids
submitted by the bidders for various GAs were opened by the Board.
16. The Board Note of 23 July 2018 adopted the Census 2011 data on the
total number of households as the basis for computing the minimum and
maximum limits for the purpose of determining unreasonably low or unreasonably
high quotes. The Board Note stipulated that 2 per cent of the total households in
terms of the Census 2011 data would be regarded as the minimum quote.
Anything below 2 per cent would be considered unreasonably low. Similarly, on
the upper end of the spectrum, the Board Note proposed that 100 per cent of the
total households in terms of the Census 2011 data would be regarded as the
maximum. A quotation beyond this upper limit would be construed to be
unreasonably high. Now, two features of the note of the Board Note dated 23 July
2018 must be noted. First, the Board Note was generated after the last date for
the submission of bids. Second, the Board Note was an internal document of the
Board which was not notified to the bidders.
17. The Board commenced the process of opening the financial bids on 24
July 2018. On 2 August 2018, an agenda note was prepared for the Board. The
agenda note outlined that three BECs were nominated for evaluating the bids
received. Technical bids submitted by the bidders were evaluated by ICF, a
consultant, based on the requirements of the Regulations and the Bid
Documents. A summary sheet of the technical bid evaluation was prepared and
checked by the BEC. Thirty-eight entities had submitted bids against 86 GAs.
18
The financial bids of technically eligible bidders were recommended for opening.
The agenda note dated 2 August 2018 spelt out the stipulation contained in
paragraph 4.4.1 of the Bid Document, and of the previous decision of the Board,
to adopt 2 per cent of the total households as the minimum and 100 per cent as
the maximum, both on the basis of 2011 Census data. The agenda note
contained a tabulation of the bids of technically qualified entities. The agenda
note indicated that for four GAs: 35, 46, 48 and 49 where two bids had been
received for each, the highest bidder had quoted an unreasonably low number of
projected PNG connections at the end of eight contract years. Where the bid
below 2 per cent was the sole bid for the GA, the bid was accepted as the GA
would have gone ‗dry‘ otherwise. The agenda note proposed the adoption of
three courses of action with respect to the remaining bids:
(i) Rejection of the bids received for the above four GAs as being
unreasonably low;
(ii) Acceptance of the bids for the four GAs by extending to them the
same logic that was applied for single bid GAs; or
(iii) Inviting the concerned entities with the highest scores for each of
the GAs for negotiation to improve the quoted work programme.
18. The agenda note dated 2 August 2018 was presented before the Board for
deliberation on 3 August 2018. In its meeting, the Board accepted the proposal
for the issuance of LOIs to entities of 48 GAs mentioned in table 3 of the agenda
note. The proposal to invite entities with the highest scores which had submitted
unreasonably low bids for each of the GAs for negotiations and to improve the
19
quoted work programme was approved. Accordingly, on 3 August 2018, the
Board issued a press release recording that it had approved the issuance of LOIs
to 18 successful bidders for 48 GAs. The press release indicated that the
remaining GAs were being evaluated and the outcome would be notified shortly.
19. On 9 August 2018, an agenda note was issued by the Board noting that in
pursuance of the decisions which were taken by the Board on 3 August 2018,
letters have been addressed to the entities which had obtained the highest
composite score but had quoted unreasonably low PNG connections, to confirm
their acceptance of the minimum requirement of 2 per cent of households as per
the 2011 Census data. Table 5 to the agenda note contained a tabulation of bids
which were liable to be rejected due to unreasonably high or as the case may be,
unreasonably low quotes. Among these bids were the bids received from H1
bidders who had quoted unreasonably high PNG connections for the three GAs
which form the subject matter of the present appeals. These were:
―Table -5
Sl No GA Name of GA Name of Quote Remarks
No. bidding
entities
11. GA 61 Kanchipuram Consortium of 114% of 7 other
District AG&P LNG total HH valid bids
Marketing Pte remains
Ltd. & Atlantic
Gulf & Pacific
Company of
Manila Inc.
12. GA 62 Chennai & Torrent Gas 157.00% of 9 other
Tiruvallur Private Limited total HH valid bids
Districts remains
13. GA 63 Coimbatore IMC Limited 107.06% of 12 other
District total HH valid bids
remains…
20
From the above Table-5, it can be seen that in 3 GAs have unreasonably
High PNG Connections quoted have been received & also happens to be H1
bidder and are liable for rejection.‖
20. At this stage it may also be necessary to note that table 4 contained a
tabulation of bids among them being those of bidders who were treated as not
―Not-Qualified‖. The agenda note recommended that in three GAs, the bids of the
highest bidders were liable to be rejected since they had quoted an unreasonably
high number of PNG connections to be achieved at the end of eight contract
years. Consequently, the names of the entities which were to be declared as
successful bidders were tabulated in table 6 of the agenda note. According to the
agenda note, after the names of the entities with the highest bids were removed,
IMC Limited was recommended for being declared as the successful bidder for
GA 61 (Kanchipuram District). Similarly, for GA 62 (Chennai & Tiruvallur
Districts), Adani Gas Limited was recommended to be the successful bidder after
the highest bid was declared as ―Not Qualified‖. The agenda note was prepared
by the Authorisation Division and records that it was concurred with by the
Member (I&T) and Member (C&M) and was approved by the Chairperson ―for
deliberations and approval of the Board‖.
21. On 10 August 2018, a meeting was held by the Board. The minutes of the
Board meeting recorded that out of four cases where the quotes for projected
PNG domestic connections were higher than 100 per cent of the households
under the 2011 Census, one of the bidders for GA 63 was not under
consideration as its composite score was not the highest amongst the bids
received for the GA. The other three bidders who had quoted more than 100 per
21
cent of the households for PNG domestic connections were reflected in the
following table:
―
Sl GA GA name Bidding Entity Quoted for PNG
No. No. Domestic
connections as %
of households as
per 2011 census
1. 61 Kanchipuram Consortium of 114%
Distt. AG&P LNG
marketing Pte
Ltd. and Atlantic
Gulf & Pacific
Company of
Manila Inc.
2. 62 Chennai & Torrent Gas Pvt 157%
Tiruvallur Ltd.
Districts
3. 72 Medchal, Torrent Gas Pvt 220%
Rangareddy Ltd.
& Vikarabad
Districts
‖
The minutes of the meeting went on to record that:
―During deliberations in the Board, the Board referred to
clause 4.4.1 of ACBD which reads, ―PNGRB reserves the
right to reject any application cum bid comprising quoted work
program considered by it to be unreasonably high or low.‖ In
terms of this clause vide note dated 23.07.2018 (i) lower and
upper limits were decided for PNG domestic connections (ii)
lower limits was decided for CNG Stations and (iii) no limit
(higher or lower) was decided for Inch-KM of Steel pipeline.
The Board deliberated that though lower and upper
households were decided, the same need not be a
mechanical exercise and an opportunity be given to affected
entities to explain reasonableness of their quotes.‖
22. The Board thus took a decision that the disqualification of bidders on the
basis of the lower and upper thresholds of 2 per cent and 100 per cent of the
2011 households which it had decided earlier ―need not be a mechanical
exercise‖. Hence, a decision was taken to offer to the three affected entities for
22
GAs 61, 62 and 72, an opportunity to present their case on why their bids shouldnot be rejected for being unreasonably high. The Board appears to have done so
on the basis that the rejection of their bids, without an opportunity to present their
case would not be ―legally correct‖. This is reflected in the following decision
which was taken by the Board on 10 August 2018:
―(a) To call the bidding entities for GA- 61, GA-62 and GA-
72 which quoted for PNG domestic connections higher than
fixed vide note that 23.07.2018 for discussion on 14.08.2018
to present their case as to why the bids submitted by them for
PNG domestic connections be not considered unreasonably
high. The Board also decided that under these
circumstances, it would not be legally correct to reject their
bids without providing them a chance to present their case.‖
23. On 10 August 2018, a press release was issued by the Board. In
pursuance of the decision which was taken by the Board, on 14 August 2018
presentations were made before it by the three entities for GAs 61, 62 and 72
which had quoted more than 100 per cent of the number of 2011 households.
Apart from the above three GAs, the financial bid for Puducherry (GA 51) was
opened on 18 August 2018. The bidder with the highest composite score for GA
51 had also quoted more than 100 per cent of the total 2011 households and was
called on 23 August 2018 for a presentation before the Board.
24. On 28 August 2018, an agenda note was prepared with respect to the
Board‘s decision on four GAs: 51, 61, 62 and 72. The agenda note contained a
summation of the submissions made by each of the four bidders who had been
called upon to explain why their bids in excess of 100 per cent of the total number
of households as per 2011 Census data should not be considered unreasonably
high. The agenda note contained a tabulation of the percentage of PNG
23
penetration in the projected households in 2026 with respect to the number of
households as per the 2011 Census. The comparative table is extracted below:
24
Sl GA GA PNG HH as per 2011 Projected PNG PNG
No. ID connections Census i.e. Upper HH in 2026* penetration penetration
quoted by Limit of PNG in 2026 as in 2026 as
the bidder Connections fixed per PNGRB per H1
by PNGRB upper limit bidder
A B C D E F G=(E/F) H=(D/F)
*100 *100
1 51 Puducherry 2,75,000 2,31,513 3,91,852 59% 70%
2 61 Kanchipuram 11,51,111 10,06,245 20,89,765 48% 55%
3 62 Chennai 12,70,391 20,87,729
Tiruvallur 10,63,109 21,34,971
Total (Chennai & 33,00,000 23,33,500 41,87,734 56% 79%
Tiruvallur)
4 72 Ranga Reddy (except 10,05,300 4,56,557 10,17,097 45% 99%
authorised area)
Presently, Medhchal,
Rangareddy &
Vikarabad Districts
25
25. The Board held a meeting on 29 August 2018. During the meeting, the
Board approved the submission of the following three bidders who had made
presentations before the Board with respect to the reasonableness of their
quotes:
―GA-51: Consortium of SKN Haryana City Gas Distribution
Pvt. Ltd.
GA-61: Consortium of AG&P LNG Marketing Pte Ltd. &
Atlantic Gulf & Pacific Company of Manila Inc.
GA-62: Torrent Gas Private Limited.‖
The Board however rejected the submission of Torrent Gas Private Limited in
respect of the reasonableness of its quote for GA 72 and decided to award the
LOI to Megha Engineering & Infrastructure Private Limited, the entity with the
highest composite score after Torrent Gas Private Limited was disqualified. The
basis of the decision of the Board is contained in the following extracts from the
minutes of 29 August 2018 meeting:
―2. The Board further deliberated as under:
(a) Following the earlier decisions, the three bidders i.e.
Torrent Gas Private Limited, Consortium of AG&P
LNG and SKN Haryana City Gas Private Limited
were called for discussion on 14th and 23rd August
2018 to explain reasonableness of high PNG
connections quoted by them for the above GAs.
(b) The Board referred to table in Para 15 of the agenda
note wherein quoted PNG domestic connections for
the above four GAs were compared with the upper
limit fixed vide noted dated 23.07.2018 and
projected households in 2026 (considering the
number of households as per 2011 Census and the
historical growth rate during 2001 to 2011 as per
census data of 2001 to 2011). It was observed that
penetration of PNG domestic connections based
upon upper limit fixed by PNGRB with reference to
projected number of households in 2026 varied from
45% to 59%. However, penetration of PNG
26
domestic connections based upon quoted PNG
connections with reference to projected number of
households in 2026 varied from 55% to 99%. The
variation between two sets of numbers is 7% to
54%.
(c) The Board observed that the highest variation of
54% is in GA-72, which is based on untenable
assumptions made by the bidder as described in
Para 14.3 of the agenda note. Due to this,
10,05,300 PNG domestic connections quoted by the
bidder are 99% of the projected households by
PNGRB in 2026, which is unreasonably high. It was
also observed that for the remaining 3 GAs, the
variation between two sets of numbers given in para
15 of the Agenda note is 7% to 23% of projected
number of households in 2026 and PNG penetration
would be in the range of 55% to 79%.
(d) The Board also referred to regulation 16(2) of CGD
Authorisation Regulations, which provides for rates
of pre-determined penalty for shortfall in achieving
cumulative work program targets for each contract
year. The entities bidding aggressive number of
PNG domestic connections would be liable to pay
pre-determined penalties under afore-mentioned
regulation 16(2).
(e) In view of the above, it was decided to accept the
quoted PNG domestic connections and award the
Chennai & Tiruvallur District GA (GA-62) to Torrent
Gas Private Limited, Kanchipuram District GA (GA-
61) to Consortium of AG&P LNG Marketing Pte. Ltd
& Atlantic Gulf & Pacific Co. of Manila Inc. and
Puducherry District GA (GA-51) to Consortium of
SKN Haryana City Gas Distribution Pvt. Ltd. and
Chopra Electricals to the bidders with highest
composite score for respective GAs, where the
variation in two sets of numbers is in the range of 7
to 23%. Regarding Medchal, Rangareddy (except
area already authorised) & Vikarabad District GA
(GA-72), where the variation is around 54% and the
bid by Torrent Gas Pvt. Ltd. is based on untenable
assumptions and incorrect map, the bid of the entity
with highest composite score may be considered as
unreasonably high and rejected in terms of Clause
4.4.1 of ACBD. Accordingly, the GA may be
awarded to the bidder with second highest
composite score and LOI may be issued to Megha
Engineering & Infrastructure Pvt. Ltd. Subsequently,
on receipt of PBG, authorisation letter (Schedule D)
may be issued to the above entities.‖
27
The Board issued LOIs to SKN Haryana City Gas Distribution Private Limited and
Chopra Electricals11, AG & P LNG Marketing Private Limited and Atlantic Gulf &
Pacific Company of Manila12 and Torrent Gas Private Limited on 30 August 2018
as successful bidders for GAs 51, 61 and 62 respectively. On 6 September 2018
Adani Gas Limited wrote to the Board requesting a copy of the decision with
respect to the issuance of LOIs for the above three GAs. Subsequently, the
Board uploaded the details of the successful bidders under the ninth CGD round
on its website on 14 September 2018.
26. On 19 September 2018, Appeal No 292 of 2018 was instituted before the
APTEL by Adani Gas Limited, aggrieved by:
(i) The decision to award LOIs, in respect of the three GAs – 51
(Puducherry District), 61 (Kanchipuram District), and 62 (Chennai &
Tiruvallur Districts) on the ground that the successful bids were
beyond the unreasonably high limit adopted by the Board; and
(ii) The action of the Board in issuing the LOIs without uploading the
decision on the website and without communicating it to Adani Gas
Limited.
Following the institution of proceedings by Adani Gas Limited, IMC Limited also
instituted proceedings before the APTEL (Appeal No 323 of 2018) challenging
the grant of authorisation by the Board in respect of GA 61. The prayers in both
appeals were identical and the Tribunal heard both appeals together.
11
―SKN Haryana‖
12
―AG & P LNG‖
28
27. During the pendency of the appeal, by an order dated 11 October 2018 the
APTEL directed the Board to file an affidavit explaining its decision taken on 23
July 2018 and the reasons on the basis of which bids were rejected, including on
the ground of high and low quotes. In pursuance of the above order, the Board
filed an affidavit by which it disclosed the Board Note dated 23 July 2018 together
with a compilation of documents containing board agenda notes, minutes of
meetings and press releases. On a perusal of the documents submitted by the
Board, the competing standing of the various bidders is summarised below for
convenience:
GA No Area H1 Bidder H2 Bidder
Torrent Gas
51 Puducherry SKN Haryana
Private Limited
61 Kanchipuram AG & P LNG IMC Limited
Chennai – Torrent Gas Private
62 Adani Gas Limited
Tiruvallur Limited
In GA 51, Adani Gas Limited was the sixth highest bidder and in GA 61 Adani
Gas Limited was the third highest bidder. In Appeal No 292 of 2018 Adani Gas
Limited challenged the grant of authorisation in GAs 51, 61 and 62 and in Appeal
No 323 of 2018 IMC Limited challenged the grant of authorisation in GA 61.
28. On 28 February 2019, the APTEL pronounced a split decision. While the
Chairperson allowed the appeals filed by Adani Gas Limited and IMC Limited, the
Member Technical (Petroleum and Natural Gas) dismissed the appeals. In view
of the divergence of opinion between the Chairperson and Member Technical
29
(Petroleum and Natural Gas), the appeals were referred to the Judicial Member
of the APTEL. The Judicial Member recused from hearing the appeal on 7 March
2019, as a result of which proceedings were instituted before this Court. As noted
earlier, the appeals pending before the APTEL have been transferred to this
Court.
Analysis
29. Having set out the facts, we now turn to the issues raised by the present
dispute before this Court. The first aspect which forms the subject matter of the
controversy is the relevance of the 2011 Census data in the bidding process. The
primary plank on which the appellants contend that the 2011 Census data was
relevant to the bidding process was the reference to population/household figures
derived from 2011 Census data in the map annexed to the Bid Document.
30. Dr A M Singhvi, learned Senior Counsel appearing on behalf of Adani Gas
Limited, submitted that:
(i) The map which was attached to the Bid Document did not only
describe the land area but also the population and households
comprised in it;
(ii) The rationale for this was that the authorisation is to lay the CGD
network in a defined land area and to service the defined
households in that area;
(iii) The figures for population and number of households in the map
attached to the Bid Document were drawn from the 2011 Census;
30
(iv) In several areas out of the 86 GAs which were a part of the ninth
round of bidding, certain parts of the GAs were excluded from the
zone of authorisation;
(v) Whenever certain parts of the GAs were excluded from the zone of
authorisation, the population/household number was proportionally
reduced to reflect the population/households as per the reduced
area. Examples of the above are Surendranagar (GA-8); and
Medchal-Ranga Reddy (GA-72).
(vi) In GA 72, Medchal-Ranga Reddy:
(a) The original map attached to the Bid Document showed the
entire district with a corresponding number of households of
13,47,118 according to the 2011 Census;
(b) The Bid Document was amended to exclude the area in which
an existing entity was already laying a CGD network as a
result of which not only was the land area reduced but even
the number of households was reduced to 4,56,557;
(c) Torrent Gas Limited Private Limited, which was the highest
bidder for the reduced area had bid 10,05,300 PNG
connections, which worked out to 74.6 per cent of the original
number of households (13,47,118) and 220 per cent of the
reduced number of households (4,56,557);
(d) The Board, at its meeting on 29 August 2018 rejected the H1
bidder for GA 72 on the ground that the bid of 220 per cent of
the households was unreasonably high; and
31
(e) The bid of the H1 bidder for GA 72 was in fact 99 per cent of
the estimated households for 2026 but was yet rejected as
the ‗unreasonably high‘ norm was with reference to the 2011
census and not 100 per cent of the 2026 estimate because if
it was the latter, the H1 bidder would have been declared to
be successful.
(vii) The map annexed to the Bid Document depicted not only the land
area but also the population/number of households which were
intrinsically intertwined in the bid parameters;
(viii) Clause 1.1.3 of the Bid Document mandated bidders to look at the
―existing population‖. Hence, it is incorrect to suggest that the
bidders had to keep in mind the population in the GAs in 2018. On
the contrary, Clause 1.1.1 required bidders to bear in mind the
population/households as given in the map annexed to the Bid
Document; and
(ix) The reference to ‗charge areas‘ in Clause 1.1.2 of the Bid Document
means designated sub-areas which are part of the authorised GAs.
The designation of ‗charge areas‘ is only to facilitate the Board in
determining whether the authorised entity has created its network in
all the GAs for which it is authorised.
31. Opposing the above submissions, Mr Paras Kuhad, learned Senior
Counsel appearing on behalf of the Board submitted a written note, explaining
32
the amendments that were made to the CGD Authorisation Regulations after they
were notified initially on 19 March 2008:
(A) 2008 CGD Authorisation Regulations:
Regulation 7 of the 2008 CGD Authorisation Regulations prescribed a four-
fold criterion for bidding:
(i) Criteria (a) was the lowness of the present value of the overall unit
network tariff with a weightage of 40 per cent;
(ii) Criteria (b) prescribed the lowness of the present value of the
compression charge for CNG for dispensing in the CNG stations
with a weightage of 10 per cent;
(iii) Criteria (c) prescribed the highness of the present value of the inch-
kilometre of steel pipelines proposed to be laid in the CGD network
during the period of exclusivity with a weightage of 20 per cent; and
(iv) Criteria (d) prescribed the highness of the present value of the
number of domestic customers proposed to be connected by PNG
with a weightage of 30 per cent.
Under the Regulations, no upper or lower ceiling was provided for bidding in
respect of the Criteria (a) to (d) of Regulation 7.
(B) 2013 Amendment to the CGD Authorisation Regulations13:
(i) The 2013 amendment amended criteria (a) and (b) and substituted
bidding criteria (c) and (d) with criteria (c);
13
21 June 2013
33
(ii) The successful bidder was required to achieve a Minimum Work
Programme14 in respect of the PNG domestic connections and inch-
kilometres of steel pipeline;
(iii) The minimum number of PNG domestic connections to be achieved
within the first five years of authorisation was to be worked out by
the Board. This was based on the total number of households to be
calculated as per the basic data sheet of the respective districts of
the GA and the population according to the latest census data;
(iv) The weightage of bidding was shifted to 70 per cent for criteria (a)
and 30 per cent for criteria (b). No weightage was given to PNG
domestic connections and inch-kilometres of pipeline; and
(v) The successful bidder was to achieve a target of 15 per cent by the
second year, 50 per cent by the third year, seventy per cent by the
fourth year and 100 per cent by the fifth year.
(C) 2014 Amendment to the CGD Authorisation Regulations15:
(i) The 2014 amendment substituted criteria (c) once again;
(ii) Under the 2014 amendment, the Board was to work out the target
for infrastructure for PNG domestic connections as 5 per cent of the
households of the respective GAs to be achieved by the successful
bidder during the first five years from the grant of authorisation; and
(iii) No weightage was given to criteria (c) – PNG domestic connections
and inch-kilometres.
14
―MWP‖
15
7 April 2014
34
(D) On 16 August 2016, the Ministry of Petroleum and Natural Gas constituted
a committee to examine alternative models for the bidding criteria to grant
authorisation for CGD networks. The committee in its report recommended a
MWP for PNG domestic connections at 7.5 per cent, within district
headquarters/municipal limits. Prior to the ninth round, the MWP was fixed at 5
per cent of the total households.
(E) 2018 Amendment to the CGD Authorisation Regulations16:
(i) The 2018 amendment substituted new criteria for bidding applicable
to the ninth round. The present batch of appeals deals with the ninth
round of bidding; and
(ii) Under the new criteria applicable to the ninth round of CGD bidding,
50 per cent weightage was given to PNG domestic connections.
Moreover, no minimum or maximum limits were set for PNG
domestic connections in the 2018 amendment.
Responding to the appellant‘s submissions on the binding nature of the Board
Note dated 23 July 2018 and the legality of the Board‘s decision to hear only the
highest bidder, Mr Paras Kuhad urged that:
(i) The agenda note dated 9 August 2018 is not binding on the Board
as it clearly states that the contents of the agenda note are subject
to the deliberations and approval of the Board;
(ii) Regulation 7 sets out five parameters on which the bids are to be
evaluated. Once a bidder fulfils the criteria set out in Regulations 5
16
6 April 2018
35
and 7 and emerges as the highest bidder, they have a statutory right
to be selected;
(iii) The CGD Authorisation Regulations do not set out criteria for
determining ―unreasonably high or low‖ bids and no such criteria can
be read into the Regulations and enforced on the Board;
(iv) Clause 4.4.1 read with Addendum 1 explicitly states that the Board‘s
power to determine ―unreasonably high or low‖ bids would be
exercised on a ―case to case basis after considering the relevant
factors‖;
(v) The challenge made by the appellants is an adversarial challenge
and not a Public Interest Litigation. The appellants cannot try and
advance their case by relying on decisions taken in relation to
separate GAs which are not presently under challenge; and
(vi) The calculations made by the appellants with respect to the growth
rate and projected number of households are based on irrelevant
factors.
32. Mr Gopal Subramanium, learned Senior Counsel appearing on behalf of
Torrent Gas Private Limited, supported the arguments urged by the Board and
further submitted that:
(i) Torrent Gas Limited has attended the hearing before the Board,
explained its methodology in calculating its quoted number of PNG
connections, and the quoted figure has been accepted by the Board
as reasonable;
36
(ii) The Board Note dated 23 July 2018 had been formulated
subsequent to the submission of bids. At the time of submitting its
bid, the only criteria known to Torrent Gas Private Limited were
those specified in Regulation 7 and the Bid Document, which did not
prescribe a maximum number of PNG connections; and
(iii) There is no condition in either the CGD Authorisation Regulations or
the Bid Document which require the quoted number of PNG
connections to be calculated on the basis of 2011 Census data.
33. Mr Gopal Sankaranarayanan, learned Senior Counsel appearing on behalf
of SKN Haryana, urged that:
(i) Adani Gas Limited was neither the second nor third placed bidder in
GA 51 on the basis of the composite score, and therefore has no
standing to challenge the LOI granted to SKN Haryana for GA 51;
(ii) Clause 14.2 of the First Addendum makes it clear that there were no
fixed parameters on which an ―unreasonably high or low‖ bid would
be determined, and specified that such determination would take
place on a case to case basis; and
(iii) According to the calculation of composite scores in Schedule C(1),
the bidder with the highest number of PNG connections is at 100%
and all other bidders are reduced in proportion to the highest
bidder‘s score. If 100% of the 2011 Census data was a ‗hard upper
limit‘ on the quoted number of PNG connections, the calculation in
Schedule C(1) would be rendered redundant.
37
34. Mr Kapil Sibal, learned Senior Counsel appearing on behalf of AG & P
LNG, submitted as follows:
(i) AG & P had quoted a figure of 11.51 lakh in its bid for GA 61.
According to the 2011 Census figures, the number of households in
GA 61 was only 10.06 lakhs. However, the Tamil Nadu Generation
& Distribution Corporation Limited (the state electricity board) noted
that as of 2018, there existed 15.91 lakh households in GA 61;
(ii) In GA 37, Indian Oil Corporation had quoted a number of PNG
connections below the 2% threshold and was the highest bidder.
The Board awarded the GA to Bharat Gas Resource Limited, which
had quoted above the 2% threshold. However, Indian Oil
Corporation has not challenged this decision of the Board before the
APTEL or any court, therefore the appellants cannot rely on the
case of GA 37; and
(iii) Each GA is a separate tender having its own unique geographical
and socio-economic factors. Therefore, one cannot compare cases
of other GAs with the GA of Kanchipuram where AG & P LNG has
been awarded the authorisation.
35. The submission which has been urged on behalf of the appellants in
regard to the relevance of the 2011 census data must first and foremost be
assessed in the context of the CGD Authorisation Regulations as amended on 6
April 2018. The Regulations postulate that bidders must submit both technical
and financial bids. The procedure specified in Regulation 5 applies to an
invitation by the Board for laying, building, operating or expanding a CDG
38
network. Regulation 5(6) requires the fulfilment of minimum eligibility criteria. For
a technical bid to pass muster, the minimum eligibility criteria require the bidder to
be qualified both with reference to technical and financial parameters. This is
evident from Regulation 5(6) under which the Board is to scrutinise the bids of
only those entities which fulfil the minimum eligibility criteria. The minimum
eligibility criteria include the technical capability of the bidding entity to (i) lay and
build; and (ii) operate and maintain a CGD network. Both of them are defined with
reference to qualifying criteria. Besides the technical criteria, the minimum
eligibility requirements under Regulation 5(6)(e) incorporate the financial ability to
execute the project and to operate and maintain it in the authorised area. The
financial criteria are defined with reference to the minimum net-worth of the
bidding entity. The net-worth required is dependent on the population of the GA
under the 2011 Census. The minimum net-worth required is specifically defined
with reference to the 2011 census figures of population for the GA. The bidding
entity is also required to submit a bid bond in the form of a performance bond
guarantee. The quantum of the guarantee is dependent on the population of the
GA.
36. Regulation 7 requires the Board to tabulate all financial bids which meet
the minimum eligibility criteria, in accordance with the bidding criteria specified in
the table. The Table incorporated in the Regulation provides five-fold criteria for
the tabulation and comparison of financial bids. The five criteria are:
(i) ‗Lowness‘ of transportation rate for CGD;
(ii) ‗Lowness‘ for transportation rate for CNG;
39
(iii) ‗Highness‘ of the number of CNG stations to be installed in eight
years from authorisation;
(iv) ‗Highness‘ of the number of domestic PNG connections to be
achieved within eight years of authorisation; and
(v) ‗Highness‘ of inch-kilometre of steel pipeline to be laid within eight
years of authorisation.
The third and fourth criteria together account for 70 per cent of the total
composite score. Among them, the fourth criterion – ‗highness‘ of the number of
domestic PNG connections accounts for 50 per cent of the total composite score.
Significantly, the bidding criteria in Regulation 7 are not linked to the 2011
Census figures. There are two significant facets of Regulation 7:
(i) The absence of a linkage of the projected number of domestic PNG
connections with the 2011 Census data; and
(ii) The absence of a cap or ceiling on the ‗highness‘ norm both in
relation to the third and the fourth criteria (iii and iv above).
37. Regulation 7 (1)(b) requires the successful bidder to achieve the target in
terms of an annual work programme within eight contract years. The programme
is distributed between the first and eighth years for PNG connections‘, CNG
stations‘ and Inch-kilometres of steel pipelines. For PNG connections, the
successful bidder must complete 10 per cent of the work programme at the end
of the second year, 20 per cent at the end of the third year, 30 per cent at the
end of fourth year, 40 per cent at the end of the fifth year, 60 per cent at the end
of the sixth year, 80 per cent at the end of the seventh year and 100 per cent at
40
the end of the eighth year. Under Regulation 7(3), a bidding entity with the
highest composite score in terms of the criteria specified in sub-regulation (1) of
Regulation 7 is to be declared as the successful bidder.
38. The provisions contained in the 2008 CGD Authorisation Regulations, as
amended on 6 April 2018, indicate that where a specific linkage was sought with
reference to the 2011 Census data, a clear and categorical provision was made
to that effect. Such provisions are found in regard to the financial capability of a
bidder as part of the minimum eligibility criteria in Regulation 5(6)(e) and the
extent of the performance bond in Regulation 5(6)(h).
39. Absent a condition in Regulation 7 linking the ‗highness‘ of the number of
PNG connections to be achieved within eight years from the date of authorisation
with the 2011 Census data, it would be contrary to basic principles of
interpretation to read such a restriction into the CGD Authorisation Regulations. A
conditionality which has not been incorporated in Regulation 7 cannot be
introduced as a matter of construction. The court must first and foremost read the
Regulation in accordance with its plain and natural meaning. There is evidently a
reason why Regulation 7 did not introduce a ceiling or provide for a linkage with
the Census data of 2011. Consumers or users, as the case may be, in a CGD
network broadly comprise of four categories namely:
(i) Domestic;
(ii) Commercial;
(iii) Industrial; and
(iv) Vehicular.
41
40. The Board has submitted with justification that in a model of
cross/subsidisation, the viability of the project has to be perceived from a twenty-
five-year perspective. Gains in one category of users can offset the losses in
another category. The CGD Authorisation Regulations are intended to subserve
the object of establishing the infrastructure necessary for setting up an
operational CGD network. In creating the infrastructure, the successful entity is
contractually bound to set up a project for the future. The infrastructure so
created would be of service to consumers or, as the case may be, users.
Infrastructural projects cater to future needs and can legitimately be forward
looking. It is from this perspective that except for the tariff in the first two bidding
criteria of Regulation 7 (the transportation rates for CGD and CNG), no ceiling
was provided by the Board for the criteria set out in Regulation 7. More
particularly, Regulation 7(3) provided for a mandate to tabulate and compare the
bids of all entities which had met the minimum eligibility criteria upon their
qualifying in a competitive bidding process. The Regulations did not contemplate
the disqualification of a bidder with reference to a norm which would limit a bid to
100 per cent of the population figures provided by the 2011 Census data. For the
Board to stipulate an absolute norm to that effect, when it has not been
specifically incorporated in the Regulations would have rendered the decision
making process vulnerable to a challenge on the ground that it was not consistent
with Regulation 7.
41. Now it is in this background, that it becomes necessary to evaluate the Bid
Document. Clause 1.1.1 incorporates a reference to the GA as depicted in the
map set out in Annexure-1, for which the Board was inviting bids for the grant of
42
an authorisation to develop a CGD network. The main plank of the submissions
of the appellants is that the map contained a reference to population and
household figures on the basis of the 2011 Census. Clause 1.1.3 places the
responsibility on the bidder to obtain information about the present gas supply
availability, the pipeline connectivity and the existing customers in the GA.
Significantly, the scope of work in Clause 1.2 required bidding entities ―to lay,
build, operate or expand the CDG networks‖ to meet the requirement of natural
gas ―in domestic, commercial and industrial segments including natural gas in the
vehicular segment in the said Geographical Area to be authorised.‖ Bidders are
required under Clause 2.1.1 to examine the contents of the Bid Document
including instructions, terms and conditions and regulations of the Board. The
bidder was required to carefully study the GA and the charge area before
submitting the bid. In other words, bidders were on notice of the actions required
to be taken to implement the Regulations. The Bid Document necessarily had to
be in conformity with the CGD Authorisation Regulations. The map, at best was a
compendium of the latest official record of the GA. The map did not dictate how
the number of domestic PNG connections was to be calculated. There is no such
indication particularly in Clause 1 of the Bid Document where the map is
referenced. The mere attachment of a map to the Bid Document would not result
in the imposition of conditions of eligibility or qualification. These have been
provided in the Regulations which have a statutory character. The depiction of
the GA in a map attached to the bid document does not over-ride the specific
requirements of the bidding criteria as defined in Regulation 7.
43
42. The next basis of the challenge by the appellants is that the decision which
was taken in the form of the Board Note dated 23 July 2018 had categorically
stipulated a range of 2 per cent to 100 per cent of the number of households as
per the 2011 Census as the minimum/maximum thresholds to judge the
reasonableness of the bids. It has been urged that despite this, the decision of
the Board dated 10 August 2018 virtually reversed the earlier decision recorded
in the Board Note of 23 July 2018, thereby tainting the decision-making process
with arbitrariness. The nuances to this challenge have been brought out in the
submissions of Dr AM Singhvi, Mr Vikas Singh, learned Senior Counsel on behalf
of Adani Gas Limited and Mr KV Vishwanathan and Mr Buddy Ranganathan,
learned Senior Counsel on behalf of IMC Limited and can broadly be catalogued
in the form of the following points:
(i) The 2 – 100 per cent criterion based on the 2011 Census data is the
basis on which the bids for 79 out of 86 GAs were evaluated;
(ii) In respect of the bids for four GAs (out of the remaining seven GAs)
where the highest bidder had bid a number of PNG connections
below 2 per cent of the number provided by the 2011 Census, those
four bidders were furnished with an opportunity to improve their bids
and match the 2 per cent threshold;
(iii) It is only for the three bidders with the highest composite scores in
GAs 51, 61 and 62 that the bids were evaluated with reference to
the projected number of households in 2026;
(iv) For example, in GA-62 (Chennai-Tiruvallur), there were ten bidders
of whom the bids of nine were evaluated with reference to the 2011
44
Census data on the number of households, whereas the bid of one
bidder (Torrent Gas Private Limited) has been evaluated with
reference to the number of projected households in 2026;
(v) The agenda note dated 9 August 2018 which was approved by three
out of the four Board members recommended that Torrent Gas
Private Limited was not qualified and Adani Gas Limited be declared
as the successful bidder. Yet on 10 August 2018, the four Board
members including the three who had approved the Board Note
concluded that, though the lower and upper thresholds were
decided ―the same need not be a mechanical exercise‖;
(vi) Neither the Bid Document nor the CGD Authorisation Regulations
contain any provision allowing the Board to call upon bidders to
improve their bids;
(vii) The Board Note dated 23 July 2018 which defined the minimum and
maximum threshold (2-100 per cent of the number of households as
per the 2011 Census) without any caveat or provision for relaxation
has been virtually reversed on 10 August 2018, thereby upsetting
the level playing field between bidders;
(viii) The only reason for the reversal of the decision, which is that the
criterion need not be a mechanical exercise is not supported by
reasons and this volte face introduced un-canalized subjectivity in
the process which was earlier considered to be objective and
definite;
45
(ix) The Board decision dated 28 August 2018 wrongly adopts the 2011
Census number as 23,33,500 whereas in the Board Note, the
number of households as per the 2011 census is 21,01,931;
(x) There has been a breach of the principles of natural justice for the
following reasons:
(a) In the Board decision dated 10 August 2018, it was decided to
give a hearing to all affected parties;
(b) The Board undertook the exercise of hearing only Torrent
Gas Limited, AG & P LNG and SKN Haryana; and
(c) The violation of natural justice lies in the fact that these ―not-
qualified‖ bidders were heard on why their bids were
reasonable despite being above 100 per cent of the 2011
Census household data. Neither Adani Gas Limited nor any of
the other unsuccessful bidders were heard on why the bids of
the ―not-qualified‖ bidders were actually unreasonable.
(xi) This Court is justified in reviewing the process adopted by the Board
in evaluating the bids for the ninth round of CGD bidding. It is well
settled that judicial review cannot be denied even in contractual
matters to prevent arbitrariness.
43. Our analysis of the CGD Authorisation Regulations, as amended on 6 April
2018, as explained earlier, reveals that the Regulations did not contain any
stipulation determining a range of 2 to 100 per cent of the number of households
under the 2011 Census as the criterion to evaluate bids. The Regulations in fact
do not link the ‗highness‘ factor of domestic PNG connections to the 2011
46
Census data. In Clause 4.4.1 of the Bid Document, the Board reserved to itself
the right to reject any unreasonably high or low bid. In Addendum-1 to the Bid
Document, the Board clarified to all prospective bidders that the evaluation of
whether a bid was unreasonably low or high would be conducted on a case to
case basis at the time of bid evaluation.
44. It is in the above background that the Board Note dated 23 July 2018 must
be assessed. The Board Note was formulated after the last date for the
submission of bids. The criterion which the Board Note proposed had not been
notified to bidders. Bidders were not on notice that this would be the basis on
which their bid would be evaluated. The Board Note took notice of Clause 4.4.1
of the Bid Document and stipulated that since technical bids for some GAs were
about to be evaluated, it was necessary to decide upon the reasonableness of
the bidding parameters which constituted the work programme. It was in this
background that the Board Note proposed that; ―…2 per cent of total households
(as per the 2011 Census data) may be considered as minimum‖. As regards the
maximum, the Board note proposed that:
―beyond 100 per cent households may be treated as
unreasonably quote‖(Emphasis supplied)
The terminology adopted by the Board Note indicates that the 2-100 per cent
range was not laid down as an absolute or inflexible basis for disqualifying bids
below the minimum or in excess of the maximum. On the contrary, the use of the
expression ―may be‖ is one indicator that a bid which was below 2 per cent or in
excess of 100 per cent may trigger the exercise of the power which the Board
47
had reserved to itself in clause 4.4.1 of the Bid Document. On its plain terms, theBoard Note cannot be construed to have laid down an absolute norm by which
bids quoting below the minimum of 2 per cent or above the ceiling of 100 per cent
of the number of households under the 2011 Census data would automatically be
rejected as unreasonable.
45. If the Board Note of 23 July 2018 were to be construed in the manner in
which the learned Senior Counsel for the appellants urged, the automatic
disqualification of bidders based on a criterion introduced by the Board Note
would raise serious doubts about its fairness and legality. This is because the
Board Note was not notified to bidders as a basis for the evaluation of bids before
the date for the submission of the bids had closed. To disqualify a bidder on the
basis of a criterion which was not notified and of which bidders had no knowledge
would be arbitrary and would constitute an infraction of Article 14. The Board was
thus correct in determining that the automatic disqualification of a bid on the basis
of a criterion specified in the Board Note (which was never notified to the bidders)
would not be ―legally correct‖. Hence, it would be reasonable to interpret the
Board Note dated 23 July 2018 as being the formulation of a guideline for the
Board. As a guideline in the process of evaluation, the decision taken by the
Board on 23 July 2018 was not to the effect that every bid below 2 per cent or
above 100 per cent would necessarily stand disqualified. Consistently with the
use of the word ‗may be‘, as already noticed, the decision of the Board meant
that the power which the Board reserved to itself in Clause 4.4.1 could be
invoked if it came to the conclusion that the bid had not been justified to be
reasonable. In other words, the breaching of the range of 2-100 per cent was a
48
trigger for the Board to scrutinise the bid and determine whether the power under
Clause 4.4.1 should be invoked. Hence, the course of action which the Board
followed of calling upon the bidders with the highest composite scores in GAs 51,
61 and 62 to justify their bids in terms of their reasonableness cannot be faulted.
On the contrary, if the Board had rejected these bids solely on the ground that
they were above the limit of 100 per cent of households under the 2011 Census
data, the decision would have been seriously flawed for having applied a criterion
which was not a part of the Regulations, was not embodied in the Bid Document
and in any event, was not notified to bidders before they had submitted their bids.
46. Another limb of the submission is that, with respect to GA 62, three out of
the four members of the Board had in the Board agenda dated 9 August 2018
recommended that Torrent Gas Private Limited was not qualified and that Adani
Gas Limited be declared as the successful bidder. This, in our view, is an
incorrect reading of the agenda note. What this submission misses is the last
paragraph of the Board agenda note which states:
―20. This Agenda note has been prepared by Authorization
Division, concurred by Member (I&T) & Member (C&M) and
approved by Chairperson for deliberations and approval of
the Board.‖(Emphasis supplied)
The agenda note dated 9 August 2018 was a recommendation which was
prepared on the basis of the 2–100 per cent criterion contained in the Board Note
dated 23 July 2018. Obviously in the light of that decision, a recommendation
was made which was still to be deliberated upon by the Board as a body. When
the Board met on 10 August 2018, it correctly came to the conclusion that the
49
lower and upper thresholds were not to be applied mechanically to disqualifybidders. This decision, as we have indicated earlier, was justified not only by the
terms of the Board Note dated 23 July 2018 but was intrinsic to a fair exercise of
power by the Board. The Board decided that it would call the bidders with the
highest composite score to explain the reasonableness of their bids. This was a
fair opportunity which was granted to the bidders who had the highest composite
score to justify the basis of their computation of projected households over the
eight-contract years.
47. There is no merit in the submission that there was a breach of the
principles of natural justice in calling only the bidders with the highest composite
score to explain the reasonableness of their bids. None of these bidders was
being called upon to revise or improve their bids. In terms of the CGD
Authorisation Regulations, the bidder with the highest composite score has to be
declared as the successful bidder. If despite having the highest composite score,
a bidder was being considered for rejection by the Board, it was that bidder who
was justifiably called to explain the reasonableness of the bid. The other bidders
had no locus to participate in the process. It is a settled principle of law that the
rules of natural justice are attracted where a decision affects a right of a party
against whom the decision has to be made. After the composite score of all
bidders is calculated, the second highest bidder has no rights vis-à-vis the
highest bidder or the Board unless the method of calculating the highest
composite score itself is impugned. Calling upon the bidders with the highest
composite score to explain the reasonableness of their bid did not alter the
composite score of the H1 bidders or any other bidder for the same GA. The
50
question of hearing any other bidder would have arisen only if the H1 bidder
stood disqualified, and the bidder with the next highest composite score also
breached the 2-100 per cent range, thereby warranting scrutiny from the Board.
In the present situation, when the Board decided to call the bidders with the
highest composite score in order to allow them an opportunity to explain
reasonableness of their bid, the administrative decision taken by the Board
cannot be faulted as being in violation of the principles of natural justice.
48. At the 82nd meeting of the Board, which was held on 29 August 2018, the
reasonableness of the bids submitted for GAs 51, 61, 62 and 72 came up for
consideration. In GA 62 (Chennai-Tiruvallur) Torrent Gas Private Limited, relied
on the current LPG domestic connections (41,73,073) according to the statistics
of the Tamil Nadu government. This was extrapolated until 2026 taking the
growth rate at 5 per cent per annum. On this basis, Torrent Gas Private Limited
as the H1 bidder justified before the Board its quoted figure of PNG connections
of thirty-three lakhs. For GA 61 (Kanchipuram), AG & P LNG explained that its
computation was based on:
(i) The urbanisation rates in the Kanchipuram district;
(ii) Extrapolations of the number of households based on historical
growth rates;
(iii) The twin city status of Chennai and Kanchipuram; and
(iv) The per capita income growth in Kanchipuram district.
On this basis, AG & P LNG justified its number for projected PNG connections.
For GA-51 (Puducherry), SKN Haryana based its computation on the compound
51
yearly growth of households in the previous twenty years. Based on this growth
rate, the bidder calculated the projected households till 2026 and accordingly
presented this computation to the Board when called upon.
49. In its minutes dated 29 August 2018, the Board noted that the four GAs:
51, 61, 62 and 72 were compared with the upper limit fixed by the agenda note
dated 23 July 2018 and projected households in 2026. The penetration of PNG
domestic connections based on the upper limit fixed by the Board with reference
to the projected number of households in 2026 varied from 45 per cent to 59 per
cent. However, the penetration of PNG domestic connections based on quoted
PNG connections with reference to the projected number of households in 2026
varied from 55 per cent to 99 per cent. The variation between the two sets of
numbers was between 7 per cent to 54 per cent. The Board noted that it was in
GA 72 where the highest variation of 54 per cent took place. The bid submitted
by Torrent Gas Private Limited for GA 72 was consequently rejected. The Board
observed that the computation for GA 72 by Torrent Gas Private Limited was
based on untenable assumptions as described in para 14.3 of the agenda note.
According to these assumptions, the PNG domestic connections quoted by the
Torrent Gas Private Limited was 99 per cent of the projected households by 2026
which was taken as an unreasonably high penetration figure. However, for the
remaining three GAs, the variation was between 7 per cent to 23 per cent of the
projected households in 2026, and PNG penetration would be in the range of 55
per cent to 79 per cent. This exercise was carried out by the Board to enable it to
consider the reasonableness of the bids. Torrent Gas Limited, whose bid was
accepted for GA 62, was however not considered for acceptance for GA 72 since
52
its computation of the number of projected households and penetration rate was
deemed unreasonable. In our view, the Board has certainly given a possible
basis for coming to the conclusion that the bids submitted by the bidders with the
highest composite score for GAs 51, 61 and 62 were reasonable and ought not to
be rejected.
50. The agenda note dated 9 August 2018 merely tabled discussion on the
disputed GAs. The highest bidders for GAs 61 and 62 were heard by the Board
on 14 August 2018. The highest bidder for GA 51 was heard by the Board on 23
August 2018. The final decision to award authorisation in GAs 51, 61 and 62 to
AG & P LNG, Torrent Gas Private Limited and SKN Haryana (the highest
bidders) respectively was finally taken by the Board in its meeting on 29 August
2018. This decision was taken after hearing the bidders on whether their bids
were reasonable or not. The Board did not reject all other bidders or
presumptively announce these entities as successful bidders before making a
determination as to the reasonableness of their bids. In light of this chronology of
events, at no point did the Board reverse its decision with respect to the GAs in
question.
51. The appeals before APTEL pertained to GAs 51, 61 and 62. The present
proceedings were not in the nature of a public interest litigation instituted under
Article 226 of the Constitution before a High Court challenging the entirety of the
tendering process. Both before this Court and APTEL, it was contended that the
Board had rejected bids in other GAs which were not-qualified on the ground that
they were either below 2 per cent or above 100 per cent of the number of
53
households as per the 2011 Census figures. The Member Technical (Petroleum
and Natural Gas) at APTEL examined the submission in paragraph 60 of the
decision and held:
―60. Though the appeal pertains to only GAs, 51,61 & 62, the
Appellant also submits that the Board rejected 37 numbers of
bids which were not qualified because their bids were below
2% and higher than 100% of 2011 census figures as per the
Board‘s Press Release dated 10.08.2018 uploaded in its
website. Though, the instant appeal also strictly pertains to
only highness of PNG domestic connections, still for the sake
of completeness, let me understand the status of these bids.
On clarification, the Board has stated that there were only 9
bids with H-1 bidders quoting below 2% and above 100%
limits of 2011 census. These 9 bids were accordingly
highlighted to the Board, and final decisions were taken on
these 9 bids by the Board after proper application of mind,
hearing the parties and taking an objective decision. Out of 9
bids, 4 bids having lower than 2% connections were accepted
after raising their bids through discussions with the bidders,
otherwise, these GAs would have gone dry. In GA-37, IOC‘s
bid was rejected because of lower than 2% quote, but this
decision of the Board has not been challenged by IOC. Out of
the remaining 4 GAs where H-1 bidders quoted more than
100% of PNG connections of 2011 census household
numbers for 3 GAs (51, 61 & 62), H-1 bidders were declared
successful bidders after hearing them on their
reasonableness of quotes. For the 4th GA (GA No. 72), the
bid of the H-1 bidder who is the R-2 in the instant case was
rejected having found its bid unreasonable and the GA was
awarded to the next highest bidder and the H-1 bidder has
not challenged this decision.‖
This clarification by the Board as well as the findings which have been recorded
by the Member Technical (Petroleum and Natural Gas) commends itself for
acceptance.
52. In addition to their submissions with respect to the binding nature of the 2 –
100 per cent range set out in the Board Note dated 23 July 2018, the appellants
54
also argued that the Compounded Annual Growth Rate 17 considered by the
Board for the period between 2001 and 2011 was higher than the actual annual
growth rate, leading the Board to project a higher number of households for 2026
than may actually exist. It was alleged that the Board used the figure of 23,33,500
as the number of households existing in 2011 instead of 21,01,931 in calculating
the growth rate, resulting in an inflated growth rate. This high growth rate,
according to the appellants, led the Board to accept the submissions made by
Torrent Gas Private Limited in justifying an ―unreasonably high‖ quote for the
number of households for the year 2026.
53. In his judgement, the Member Technical noted that the appellant had in
fact calculated the CAGR using overall population growth instead of using
household growth. Evidently, for the purpose of projecting the number of PNG
connections within a GA, it is the number of households and not the overall
population that is relevant as each household is unlikely to have more than one
PNG connection. Moreover, as neither the CGD Regulations nor the Bid
Document required the number of projected households to be calculated on the
basis of 2011 Census data, the decision of the Board to accept the justification
provided by the bidders cannot be attacked on the ground that the figures
provided did not strictly match the numbers extrapolated from the 2011 Census
data. Lastly, the Member Technical (Petroleum and Natural Gas) observed:
―51. … Moreover, the calculations have been done by an
expert body (the Board) which has been constituted as per
Statutory Act. In addition, the estimates on future PNG
domestic connections made by the 3 bidders based on
various parameters are only estimates. These are not
meant to be arrived at by any specified formula or direct17
―CAGR‖55
mathematical precision. The power to weed out
unreasonably high or low quote is only an enabling
power and not a yardstick or parameter for evaluation.‖(Emphasis supplied)
The power granted to the Board under Clause 14.2 of the Bid Document is an
enabling clause that allows the Board to apply its mind to a quote and determine
its reasonableness. The quotes submitted by all bidders with respect to the
projected number of households in 2026 are admittedly estimates. Similarly, the
Board‘s own determination of a baseline for comparing the reasonableness of
various quotes is also an estimate. Therefore, the Board‘s use of the baseline
figure and its consequent acceptance of the reasonability of a quote cannot be
faulted because it did not strictly adhere to one particular methodology of arriving
at a number of projected households unless the methodology used is arbitrary,
having no correlation with the result sought to be achieved. We therefore approve
of the finding of the Member Technical with respect to the calculation of the
number of households.
54. The present batch of appeals arises from two divergent opinions of the
Chairperson and the Member Technical (Petroleum and Natural Gas) of the
APTEL. Several arguments urged by the appellants before us find voice in the
opinion of the Chairperson. Therefore, for the sake of completeness it is
necessary to briefly advert to the opinion of the Chairperson allowing the appeals.
The Chairperson observed as follows:
―136. … On 23.07.2018 certain criteria/parameters were
indicated by this so called Evaluation Committee in the
Agenda Note. … This indicates that the exercise so far as
criteria/ parameters was uniform for all the bids. …. The
report on Agenda Note dated 09.08.2018, in fact,
recommended that the highest bidders of GA 51, 61, and56
62 were disqualified since their quote of PNG connections
were beyond 100% of the total households of 2011 census.
… However, the Minutes of the Board dated 10.08.2018
indicate that the four members of the Board out of which three
had approved Agenda Note, changed their opinion so far as
disqualification of highest bidder of these three GAs 51, 61
and 62. It‘s also noticed from the affidavit of the Board filed
09.11.2018 that the Board has correctly applied the
unreasonable low criteria to all the bidders whose bid
was below 2%, but surprisingly the bids which were
beyond the limit of 100% of 2011 census, the Board
thought it fit to relax the criteria by calling the high bidders
for negotiation. If the Board thought it fit to hear the
affected parties, then it ought to have invited all the
affected parties of the said GA i.e., all the bidders who
stand to lose the bid, since such procedure was exercised
so far as unreasonably low criteria to all bidders who quoted
below 2% of 2011 census. Assessment of reasonability of
a bid cannot be equated with the concept of rejection of a
bid as not qualified for a particular criteria. Reasonability
of a bid has reference to subjective assessment/satisfaction.
The assessment of a bid based on the available material
would amount to objective assessment.‖
(Emphasis supplied)
It is evident from the above extract that the Chairperson‘s findings are based on
three key assumptions:
(i) The Board Note dated 23 July 2018 was binding on the Board and
the agenda note dated 9 August 2018 was evidence of the Board
Note‘s binding nature;
(ii) Because the Board disqualified certain other bidders by applying the
2 – 100 per cent range, it was bound to do so against the successful
bidders in GAs 51, 61 and 52; and
(iii) Because the assessment of reasonability was a ―subjective
assessment‖, the Board was obligated to hear other bidders in the
disputed GAs before declaring successful bidders.
55. As noted previously, on a bare construction of the Board Note dated 23
July 2018 and the fact that the Board Note was formulated after the last date for
57
the submission of bids, the Board Note did not set out absolute criteria for
disqualification of bids. The agenda note dated 9 August merely tabled a
proposal to apply the criteria of 2-100 per cent range but the Board did not
subsequently adopt this course of action, a decision within its power and indeed
necessary to preserve the integrity of the bidding process. Having established
that the Board Note was not an absolute binding criteria, and the Tribunal was
approached only with respect to GAs 51, 61 and 62, the Board‘s treatment of
other GAs cannot be decisive in determining the legality of the authorisations
granted in GAs 51, 61 and 62, especially where the Board‘s actions in respect of
these other GAs have not been independently challenged. Lastly, the
Chairperson has construed the assessment of the reasonability of the highest
bidder‘s quote as a decision affecting the rights and liabilities of all other bidders
for the GAs, thus requiring them to be heard. As noted previously, the
assessment of the reasonability of the bid was a matter solely between the
highest bidder and the Board. Such an assessment would not alter the scores of
the highest bidder vis-à-vis the scores of the other bidders. The sole question
was whether the highest bidder‘s quote was reasonable, and the power to
determine such reasonability resided solely with the Board by virtue of Clause
14.2 of the Bid Document. Thus, the presence and hearing of other bidders was
not necessary.
56. For the above reasons, we disagree with the opinion of the Chairperson
and concur with the view which was taken by the Member Technical (Petroleum
and Natural Gas) to dismiss the appeals. The Appeals are accordingly dismissed.
58
Transferred Cases Nos 27 of 2019 and 26 of 2019 are disposed of. There shall
no order as to costs.
57. Pending application(s), if any, shall stand disposed of.
…….………….…………………………………………J.
[DR DHANANJAYA Y CHANDRACHUD]
……..…..…..…….………..……………….………..J.
[HEMANT GUPTA]
New Delhi;
February 17, 2020.
59