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PAMKAYU (M) SND BHD (APPEARING BY ITS ATTORNEY,

HEMACHANDRA) AND ANOTHER

v.

MINISTRY OF TRANSPORT
P. LIYANAARACHCHI, SECRETARY,
AND HIGHWAYS AND OTHERS

SUPREME COURT
AMERASINGHE, J.

EDUSSURIYA, J. AND

WIGNESWARAN, J.

SC APPLICATION NO.
658/2000
TH

30 MARCH, 2001

Fundamental rights - Conditions of tender - Non-compliance with conditions which makes a bid void - Duty to notify the determination on tenders to all tenderers -
Equal opportunity and transparency - Article 12(1) of the Constitution.

On 27.01.2000 the 4th respondent (the Secretary of the Ministry of Transport and Highways) on behalf of the Cabinet Appointed Tender Board, by an
advertisement in the "Daily News" called for tenders from suppliers or their accredited agents for the supply of 100,000 Nos. Hardwood Sleepers. Tenders closed
on 16.03.2000.

The Technical Evaluation Committee found that there were only three responsive offers and recommended that the order for the supply of sleepers be awarded to
the 1st petitioner, a Malaysian Company who tendered through the 2nd petitioner, a company registered in Sri Lanka and further registered on 15.3.2000 as the
agent of the 1st petitioner in terms of the Public Contracts Act, No. 3 of 1987 for the purpose of the 1st petitioner's tender. The Committee rejected the offer of the
5th respondent (an Australian Company) on four grounds. However, the Cabinet Appointed Tender Board decided to accept the offer of the 5th respondent having
overruled all those grounds. Two of the said grounds were rightly overruled. The remaining two grounds of rejection were :

(i) The registration of Local Agent had not been submitted.

(ii) The validity of the Bid Bond submitted was for 120 days instead of 150 days as required by Clause 13 of the Instructions to Bidders.

Held :

(1) The failure to submit the registration of the 5th respondent's local agent was a breach of Clause 29 of the Instructions to Bidders which requires registration of
an agent in terms of the Public Contracts Act,

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No. 3 of 1987 before submission of bids. Clause 29 also provides that the Certificate of Registration should be submitted with the bid; and that bids which fail to
submit such certificate shall be rejected. Hence the Committee was right in its decision although it invoked a wrong clause in the Instructions to Bidders, namely
Clause 4; and the Cabinet Appointed Tender Board erred in rejecting the decision of the Technical Evaluation Committee.

(11) The acceptance of the 5th respondents bid which was not accompanied by a bid bond-for 150 days was also bad. Clause 13 of the Instructions to Bidders
provides that a bid which is not accompanied by an acceptable bid security shall be rejected as non-responsive.

Per Amerasinghe, J.

" The award of a tender must be based on compliance with the terms and conditions of the tender documents on the date and at the time specified for the closing
of the tender.

An offer that does not comply with the terms, conditions and specifications at that date and time must be rejected in the same way as a late offer."

(iii) The 1st respondent failed to notify all Tenderers in writing the determination to award the Tender to the 5th respondent and to call for representations, if any,
against the determination. This was a breach of Guideline No. 136 of Government Tender Procedure, the object of which is to provide equal opportunity and
transparency )n the tender process.

(iv) In the circumstances, the fundamental rights of the petitioners under Article 12(1) have been violated; and the award of the tender to the 5th respondent was
unconstitutional and therefore void and of no force or avail in law.

Cases referred to :

1. Smithkline Beecham Biologicals S.A. and Another v. State Pharmaceutical Corporation of Sri Lanka and Others (1997) 3 Sri LR 20 at 50.

2. Roman Dayaran Shetty v The International Airport Authority of India and Others AIR (1979) SC 1628 at 1633 - 1634

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3. Vitarelli v. Seaton 359 US 535, 79 S. Ct 968, 3L. Ed. 2d 1012 (1959)

APPLICATION for relief for infringement of fundamental rights.

Ranjith Mendis with Anil Silva and Bernard S. Peterson for the petitioners.

M.A. Sumanthiran with Ms. v. Arulananthan for 5th and 6th respondents.

Ms. Demuni de Silva, Senior State Counsel for Attorney - General.

Cur. adv. vult.

May 10, 2001.

AMERASINGHE, J.

On 27 January 2000, an advertisement was published in the Daily News in which it was stated that the Secretary, Ministry of Transport and Highways on behalf of
the Cabinet Appointed Tender Board will receive sealed tenders from suppliers or their accredited agents for the supply of 100,000 Nos. Heavy Hardwood
Sleepers. Tenders were to be closed at 2 p.m. on 16 March 2000.

The first Petitioner, Pamkayu (M) SDN BHD, is a Private Limited Company established under the laws applicable to Companies in Malayasia. The second Petitioner
is a Company registered under the laws applicable to Companies in Sri Lanka, and was registered on 15 March 2000 as the agent, sub-agent, representative or
nominee of the 1st Petitioner in terms of the Public Contracts Act, No. 3 of 1987 for the purposes of Tender No. SR/F 5922 for the supply of 100,000 Nos. Wooden
Sleepers.

On 16 March 2000, the first Petitioner tendered for the supply of the Sleepers. According to the letter of the Technical Evaluation Committee dated 8 May 2000
addressed to the Secretary, Ministry of Transport and Highways, the first Petitioner was one of seventeen tenderers, but since one of them had submitted a blank
offer, the tenders of sixteen were considered. The Committee reported that, for stated reasons,

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13 of the offers were 'non-responsive.' Of the three 'substantially responsive' offers, after evaluation and for stated reasons, the Committee recommended that the
order for the supply of Sleepers from 'Shorea cilata, Shorea robusta, Shorea barbata, and Shorea guiso which complies with the tender specifications', should be
awarded to the first petitioner which had 'complied with the technical and commercial requirements of the tender'.

On 27 June 2000, the Cabinet Appointed Tender Board decided to recommend the acceptance of 'Offer No. 10', i.e., the offer of General & Railway Supplies (Pvt.)
Ltd, the fifth respondent in these proceedings, while rejecting the recommendations of the Technical Evaluation Committee. The Technical Evaluation Committee
had rejected the bid of General & Railway Supplies (Pvt.) Ltd. as not being a responsive offer for the following reasons:

"(a) As per clause 4 (b) and (c) of the tender under instructions to bidders the year of registration of business of the Local Agent has not been furnished.

(b) In terms of the same clause audited accounts of the Local Agent for one out of the years 1998 and 1999 are also not furnished.

(c) Also under the same clause the registration of the Local Agent is not submitted.

(d) The validity of the Bid Bond submitted is for 120 days instead of 150 days as required in the tender which does not comply with clause 13 of the tender under
instructions to bidders."

The Cabinet Appointed Tender Board stated that the "first three reasons given in the TEC report for rejection of offer No. 10 were found to be invalid as those
conditions do not apply to offers not exceeding Rs. 250 m. [The] [f]ourth reason was considered as a minor deviation as the validity of the bid security is still in
force and tenderer has time to extend the validity."

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Clause 4 of the 'Instructions to Bidders' stated that All bidders for tenders, the value of which exceeds Rs.250 million shall furnish' certain specified information
'along with the bid', if the bidder uses a local agent. It is stated that 'in the case where a bidder uses a local agent, the bid will be rejected,' inter alia, if 'the bidder
fails to furnish any of the' specified information. In my view, the Cabinet Appointed Tender Board was right in rejecting the views of the Technical Evaluation
Committee with regard to the first two reasons given by the Committee, for the tender sum of General & Railway Supplies (Pvt.) Ltd. Was Rs.1,607,373 and not
being in excess of Rs.250 million, the tenderer was not obliged to furnish the information specified in Clause 4.

However, the third reason, namely the failure to submit the Certificate of Registration of the local agent, was, in my view, a valid ground for the rejection of the bid
of General & Railway Supplies (Pvt) Ltd., albeit not, as stated by the Committee under clause 4, but in terms of Clause 29 of the `Instructions to Bidders.' Clause 29
states as follows:

All persons who act as an agent or sub-agent, representative or nominee for or on behalf of any bidder are required to Register themselves before submission of
bids with Registrar of Contracts, Sri Lanka as required by the Public Contracts Act, No. 3 of 1987. The Certificate of Registration should be submitted with the bid.
The bid/s of bidders who fail to submit this certificate shall be rejected." (The emphasis is mine.)

It is not difficult to understand why, although the furnishing of certain information with regard to local agents under clause 4 might have been legitimately
restricted to transactions in excess of a certain value, there should nevertheless have been insistence that in all cases the Certificate of Registration should have
been submitted with a bid: No one could have lawfully dealt with the tender of General & Railway Supplies (Pvt.) Ltd: For section 12 of the Public Contracts Act
prohibits Any member of a public body, a technical committee, tender board or

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evaluation board of such body or any officer or employee thereof or any State officer, or the Registrar, except for the purposes of registration," dealing with an
agent, sub-agent, representative or nominee of any tenderer sunless such a person 'first produce[s] a valid certificate of registration issued under [the Public
Contracts] Act.' Any person who contravened that provision would have been guilty of an offence.

I am not concerned here with the question whether the sixth Respondent or any person who dealt with the matter of the tender of General & Railway Supplies
(Pvt.) Ltd. was guilty of an offence. That is a matter for a court having jurisdiction in that regard. I am concerned here with the question whether the Technical
Evaluation Committee was right in rejecting the bid of General & Railway Supplies (Pvt.) Ltd. for not producing a valid certification of registration of its agent, sub-
agent, representative or nominee at the time of making its bid. I am of the view, for the reasons I have stated, that the Committee was right in its decision,
although it invoked the wrong provision of the 'Instructions to Bidders' in support of the decision. Consequently, the Cabinet Appointed Tender Board erred in
rejecting the third reason adduced by the Technical Evaluation Committee for treating the bid of General & Railway Supplies (Pvt.) Ltd. as unresponsive.
I turn now to the matter of the bid security. It was the fourth matter considered by the Cabinet Appointed Tender Board in deciding upon the correctness of the
decision of the Technical Evaluation Committee. Clause 13 of the 'Instructions to Bidders' states, inter alia, as follows:

". . . Bid security shall remain valid for a period of 150 days. However the bidder should agree to extend this period of validity if requested by the purchaser. Any
bid not accompanied by an acceptable bid security shall be rejected by the purchaser as non-responsive. . . ." (The emphasis is mine).

It is not in dispute that the bid bond submitted by the fifth Respondent was valid only for a period of 120 days, whereas

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clause 13 of the 'Instructions to Bidders' plainly requires that "Bid security shall be valid for a period of 150 days". In terms of clause 13, the Technical Evaluation
Committee therefore rejected the bid as being non-responsive. The Cabinet Appointed Tender Board, however, regarded the failure of the bidder to be a 'minor
deviation.' The reason given for that view was that the bid security was still in force and that the 'tenderer had time to extend the validity.' There was no doubt that
there had been a 'deviation' from what was 'an acceptable bid security' as described in clause 13. There was in fact, no 'acceptable bid security' for the period in
the first instance was expressly fixed at 150 days. Extensions of that period were provided for. However, there was no provision enabling the extension of a period
that fell short of the stipulated 150 days. In terms of section 113 of Guidelines on Government Tender Procedure a deviation might have been considered 'minor',
inter alia, if it had not been specified in the bid documents as a ground for rejection of the bid. In the matter before us, the failure to submit an 'acceptable bid
security' was specified as a ground for mandatory rejection of a bid. Therefore, it was not open to the Cabinet Appointed Tender Board to regard the failure of
General & Railway Supplies (Pvt.) Ltd. to comply with the provisions of clause 13 as 'minor.' Bidders were required to furnish bid security. Such security had to be
furnished in accordance with the directions given on matters of importance. The noncompliance related to a matter of substance and not of mere form. The
failure to comply with the directions on so important a matter as the period required to be covered, in my view, made it an unacceptable bid security. A bidder who
submits an unacceptable bid security is in no better position than a person who fails to furnish bid security. Section 112. 6 of the Guidelines on Government
Tender Procedure states that where bid security is required the failure to furnish a bid security with a bid should be considered 'a major deviation' and be a ground
for the rejection of the bid.

Moreover, there was no acceptable bid security, for the letter of guarantee was issued on behalf of World Wide General Trade

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Agencies (Pvt.) Ltd., the sixth Respondent, and not on behalf of General & Railway Supplies (Pvt.) Ltd. the fifth Respondent bidder. The sixth Respondent was not a
Registered Local Agent of the fifth Respondent at the time of the bid. Thus the bid security, having been issued neither in favour of the bidder nor a duly registered
local agent, sub-agent, representative or nominee of the bidder under and in terms of the Public Contracts Act, was of little or no use, for the guarantee afforded
the purchaser no protection in the event of the default of the bidder.

The sixth Respondent was registered under and in terms of the Public Contracts Act and obtained an extension of the bank guarantee on the 10th of July 2000,
whereas the tenders were closed on 16 March 2000. The award of a tender must be based on compliance with the terms and conditions of the tender, documents
on the date and at the time specified for the closing of the tender. An offer that does not comply with the terms, conditions and specifications at that date and
time must be rejected in the same way as a late offer. SmithKline Beecham Biologicals S.A. and Another v. State Pharmaceutical Corporation of Sri Lanka and others,
(1) Roman Dayaran Shetty v. The International Airport Authority of India and others.(2) The terms and conditions of a tender cannot be arbitrarily dispensed with or
varied by an evaluation committee or tender board to accommodate a particular tenderer. If there are to be negotiations in regard to variations in conditions or
specifications or in regard to any other matter pertinent to the final adjudication other than clarifications, all the tenderers should have due notice of such
negotiations and permitted to make their submissions. It is in that way that a 'level playing field' on which there is equal opportunity for persons to participate and
compete on identical terms, and transparency and uniformity of the evaluation procedure of the tender process which the Guidelines on Government Tender
Procedure aim to achieve, can be achieved. Equality before the law is more than an administrative requirement: It is a fundamental right recognized and
guaranteed by Article 12 (1) of the Constitution.

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The Petitioner's complaint is that equal treatment has been denied to the Petitioner by the arbitrary variation of the published terms and conditions of the
invitation to tender for the supply of Sleepers in order to accommodate a tenderer who failed to make a responsive bid. For the reasons stated above, I am of the
view that the Petitioner's claim is well-founded.

The Guidelines on Government Tender Procedure provides a procedure with regard to appeals against a determination by a Cabinet Appointed Tender Board. It is
as follows:

"136. In the case of a CATB, the Secretary to the Ministry concerned will, within one week of the determination inform in writing, all Tenderers who responded to
the Tender Call, the intention to award the Tender to the successful Tenderer and request that if there are any representations to be made against the
determination, such appeals should be submitted in writing to the Tender Appeal Board with a copy to the Secretary of the Ministry concerned. Simultaneously, a
Cabinet Memorandum should be submitted under the hand of the Minister, forwarding the Reports of the Tender Board and the TEC, with the recommendation of
the Minister.

137. An appeal against an award should be lodged with the Appeal Board within one week of the intimation of the determination. The appeal should contain all
material required to support the averments and should be self-contained for the Board to arrive at a conclusion. Oral submissions will be entertained only at the
discretion of the Board.

138.1 The Appeal Board shall report to the Cabinet, through the Secretary to the Cabinet with a copy to the Secretary of the relevant Ministry within two weeks of
an appeal being lodged. The Appeal Board will determine its own procedures for expeditious inquiry and disposal of representations."

It was not in dispute that not all the tenderers were informed of the intention to award the tender to General & Railway

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Supplies (Pvt.) Ltd, although in terms of section 136 of the Guidelines all of them were entitled to be informed. The first Petitioner had in Fax messages dated 03
July and 06 July 2000 to the Chairman of the Cabinet Tender Board (which were copied to the Minister of Transport and Highways) alleged that, for the reasons
stated, General & Railway Supplies (Pvt.) Ltd. were not qualified in terms of the tender documents. When there was no response to the Fax messages and there
was no communication in terms of section 136 of the Guidelines, the Chairman of the first Petitioner on 12 July 2000 wrote to the Minister of Transport &
Highways, with copies to the Chairman of the Cabinet Appointed Tender Board, the Chairman of the Technical Evaluation Committee and the General Manager of
Railways, for stated reasons, objecting to the offer of General & Railway Supplies (Pvt.) Ltd. On 26 September 2000 the Chairman of the second Petitioner wrote to
the Chairman of the Cabinet Appointed Tender Board inquiring about 'the present status' of the tenders opened on the 6th of March 2000. No reply was received
to any of the communications of the first and second Petitioners. There was not so much as an acknowledgment of their receipt. On 31 October 2000 the
Chairman of the first Petitioner wrote to the President of the Republic, for stated reasons, alleging that the award of the tender to General & Railway Supplies (Pvt.)
Ltd was 'irregular.' The receipt of the letter was acknowledged by the Presidential Secretariat.

Neither the first Petitioner, who was a tenderer, nor his local agent, the second Petitioner, were informed by the Secretary of the Ministry concerned of the intention
to award the tender to General.& Railway Supplies (Pvt.) Ltd. within a week of the determination of the Cabinet Appointed Tender Board. That was a violation of
section 136 of the Guidelines, for the decision of the Cabinet Appointed Tender Board. was on 27 June 2000 whereas the first and second Petitioners received
their first formal intimation of the award of the tender through a newspaper notice issued by the General Manager, Sri Lanka Railways published on 02 November
2000 in the Daily News

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announcing, inter alia, that the successful tenderer was M/s. General & Railway Supplies (Pvt.) Ltd. of Australia, and that the Local Agent was M/s. World Wide
General Trade Agencies (Pvt.) Limited.

The President of the Republic and Minister of Finance & Planning states in the Preface to the Guidelines on Government Tender Procedure that they were
designed, inter alia, 'To keep the process fully transparent and honest.' Section 136 was also violated in that the Secretary of the Ministry did not request tenderers
who wished to make representations against the determination to make their appeals to the Tender Appeal Board. Notwithstanding that failure, the first Petitioner,
as we have seen, made several protests. The protests, however, were not submitted to the Appeal Board, for Appeals to the Appeal Board must follow from a
request by the Secretary of the Ministry to tenderers to make their representations against the determination. In the matter before us, no such request had been
made by the Secretary: and so there was no report from the Appeal Board before the Cabinet when the Cabinet considered the Memorandum of the Minister of
Transport and Highways dated 29 August 2000 recommending the award of the tender to General & Railways Supplies (Pvt.) Ltd. of Australia, and at its meeting
on 21 September 2000 accepted the Minister's recommendation.

The State and its agencies are bound by and must rigorously and scrupulously observe the procedures laid down by the Executive on pain of invalidation of an act
or omission in violation of them. An executive agency must be rigorously held to the standards by which it professes its conduct is to be judged: Accordingly, if an
action is based on a defined procedure, that procedure must be scrupulously observed. As Justice Frankfurter said in Vitarelli u Seaton, (3) (and followed with
approval in SmithKline Beecham Biologicals S.A. and Another v State Pharmaceutical Corporation of Sri Lanka and others (supra) at p. 44.) 'He that takes the
procedural sword shall perish with the sword.' There was, perhaps, a failure with regard

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to all the tenderers to notify the decision of the Cabinet Tender Board within one week of its decision. However, the first Petitioner was, in my view, well within its
rights to complain that in terms of the sections in the Guidelines on Government Tender Procedure there was an invidious discrimination between itself and
General & Railway Supplies (Pvt.) Ltd. for although officially General & Railway Supplies (Pvt.) Ltd. had been informed by the General Manager, Sri Lanka Railways
by his letter on 19 October 2000 that the tender had been awarded to it, other tenderers had not been informed of the award until the newspaper notification on 02
November 2000.

In the Preface to the 1996 version of the Guidelines on Government Tender Procedure, the President and Minister of Finance & Planning stated: 'I sincerely hope
that this document will streamline the purchasing and selling procedures of Government, in order to achieve speed, efficiency and transparency and to provide a
level playing-field for all citizens who participate in the economic process of the country.' It would appear from three documents submitted by the first Respondent
and filed of record marked as IR6, IR7 and IR8 that the tenderer selected by the Cabinet Appointed Tender Board had been given the opportunity of clearing up
doubts, quoting from Australian and Indian sources, on the suitability of Eucalyptus camaldulensis for Railway Sleepers, and casting doubts on the Malaysian
species, offered by the first Petitioner, although not forming a part of the tender documents and with no notice to the other tenderers.

It would appear from the affidavit of the Managing Director of the sixth Respondent and the documents submitted by him and filed of record in these proceedings
that:

(1) on 16 March 2000, i.e. the day the tenders closed, the Deputy High Commissioner for Australia had stated as follows in a letter to the General Manager, Sri
Lanka Railways (X5):

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"I understand that Sri Lankan Railways has opened a tender for the supply of wooden sleepers for maintenance and development of the rail system in the island.

An Australian company, General and Railway Supplies Pty. Ltd. is submitting a bid to supply this material to Sri Lanka Railways. You will recall that I have written to
you on occasion in the past regarding possibilities for this company in the Sri Lankan market.

With respect to this particular tender, subject to assessment, support for this contract may be available from the Australian Government's Export Finance
Insurance Corporation (EFIC).

Under Its Direct Loan facilities, EFIC Is able to lend money to foreign buyers who purchase capital goods and services from Australian exporters.";

(2) on 6 June 2000 the Managing Director of General & Railway Supplies (Pvt.) Ltd. of Australia wrote a letter to the General Manager, Sri Lanka Railways, further
to a Fax of 5 June 2000 on the subject of the supply of 100,000 Sleepers, adducing evidence of the suitability of the Sleepers offered by General & Suppliers (Pvt.)
Ltd. (X 6).

(3) information had been obtained from the Director Track Modernisation Railway Board of the Government of India with regard to a comparative evaluation of
Malaysian and Australian timber where the Malaysian timber was shown in poor light. (X7 dated 16 October 2000).

Although doubts were raised about the suitability of the timber offered by the first Petitioner, (vide X7) the objection was not communicated to the first Petitioner
who therefore had no opportunity of clearing away such doubts. Moreover, there were incentives offered to make the offer of the fifth Respondent more attractive
than it was on the basis of the bid documents. (Vide X5 quoted above). In the circumstances, one could hardly say

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that Pamkayu (M) SDN BHD, the first Petitioner, and General & Railway Supplies (Pvt.) Ltd, the fifth Respondent, were playing on a 'level field.'

For the reasons set out in my judgment, I declare that the fundamental rights of the first and second Petitioners declared and recognized by Article 12 (1) of the
Constitution have been violated. In the circumstances, the award of the tender to the fifth Respondent was unconstitutional and therefore void and of no force or
avail in law.

I make order that the State shall pay the first and second Petitioners a sum of Rs. 25,000 each as costs.

EDUSSURIYA, J. - I agree.

WIGNESWARAN, J. - I agree.

Relief granted.