HC sets aside $125 million ONGC contract
The Oil and Natural Gas Corporation (ONGC)'s decision to award a $125 million contract for laying a 116.5 km-sub-sea pipeline off the western coast of India to a foreign consortium was set aside by the Bombay high court last week.mumbai Updated: Apr 18, 2011 01:28 IST
The Oil and Natural Gas Corporation (ONGC)'s decision to award a $125 million contract for laying a 116.5 km-sub-sea pipeline off the western coast of India to a foreign consortium was set aside by the Bombay high court last week.
Acting on a petition filed by Punj Lloyd Ltd, challenging ONGC's decision to refuse to give the firm the benefit of price preference, a division bench comprising justice DK Deshmukh and justice Anoop Mohta set aside the contract awarded to the consortium led by Singapore-based Swiber Offshore Construction Pvt. Ltd.
Swiber had beaten all the established players in Mumbai offshore engineering, like L&T, Punj Lloyd and Leighton and won the contract that forms part of $1.3 billion worth project taken up by ONGC off the western coast.
However, the bench found the ONGC's decision to decline price preference to Punj Lloyd on the grounds of non-submission of a statutory auditor's certificate in a particular folder "totally unacceptable and arbitrary."
The bidding process gave Indian players an advantage over foreign players by allowing them to claim a price preference - to compete with foreign players with bid amounts 10% higher than them, provided they do not sub-contract 50% of the work to foreign companies.
While the consortium comprising Swiber and Sime Darby of Malaysia had quoted the lowest price of $124.86 million, Punj Lloyd had quoted $ 131.32 million - 5.22% higher than them.
Indian bidders were required to submit a statutory auditor's certificate along with their price bids in a specific folder in order to take advantage of price preference. Punj Lloyd had, however, submitted it in a separate sealed envelope. This resulted in the firm's disqualification from the availing price preference over the Swiber consortium.
Punj Lloyd contended before the high court that had they submitted the statutory auditor's certificate, it would have disclosed the price to be quoted by them to other bidders, putting them at a disadvantage.
The court held that non-compliance on the part of Punj Lloyd had not given an unfair advantage to them. The court termed it a mere technical breach. The court has, however, stayed operation of the order for six weeks in order to allow Swiber to appeal before the Supreme Court.