REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3193 OF 2006
UNION OF INDIA & ANR. ..Appellants
Versus
HBL NIFE POWER SYSTEMS LTD. ..Respondent
J U D G M E N T
R. BANUMATHI, J.
This appeal assails the order dated 27.10.2005 passed by the
High Court of Delhi allowing the appeal in LPA No.2448 of 2005 thereby
directing the Union of India to issue an advertisement in leading
newspapers having wide circulation inviting tenders for the submarine
batteries mentioning the detailed technical specifications and the
appellants to consider all the products which meet the technical
specifications and thereby proceed to select the best product in accordance
with law.
2. The subject-matter involved in the present case is submarine
batteries required for the Indian Navy. Indian Navy has three types of
submarines for which three different types of batteries are used. Type-I
battery for EKM submarines, Type-II battery for SSK class submarines and
Type-III battery for Foxtrot class submarines. Initially, these batteries
were imported from the Original Equipment Manufacturer. In view of the
recurring requirement of the batteries, subsequently a decision was taken
to progress their indigenisation. Director General Quality Assurance (DGQA)
working under the Ministry of Defence has a detailed procedure to
‘develop/indigenise’ critical items/spares. As per the said procedure, the
Government identifies the possible vendors and assesses their
capacity/technical qualifications and thereafter a development order is
placed on the proposed supplier. During this period of development of the
spares, the Government carries out regular inspection and the product is
developed under the aegis of officials of the Defence Ministry and officers
of the DGQA are associated throughout the development process right from
the time of sourcing of raw materials to ensure that the product not only
meets the technical qualifications but is fully reliable and free from any
errors in actual performance.
3. By following the above rigorous procedure, M/s.
Standard Batteries Ltd. was developed as an indigenous manufacturer for
supplying Type-III submarine batteries. M/s. Standard Batteries
Ltd. was subsequently developed as a manufacturer of Type-I submarine
batteries in the year 1988. M/s. Exide Industries Ltd. was developed as
an indigenous manufacturer of Type-II submarine batteries in 1989. In the
year 1998, M/s. Standard Batteries Ltd. sold its business to M/s. Exide
Industries Ltd. Since then, M/s. Exide Industries Ltd. has become a
single vendor in supplying batteries for all three classes of submarines to
the Indian Navy. Officers of DGQA are constantly associated with the
manufacturing of the submarine batteries in Exide Industries Ltd. as and
when they are required by the Indian Navy. As M/s. Exide Industries Ltd.
has become the single vendor, in 2004, Government started exploring the
possibility of developing another supplier as second source for submarine
batteries. But as per the policy, the Government cannot register anyone for
supply of submarine batteries without following the procedure or putting
the vendor through the process of the development. In any event, the
requirement of the supervision of DGQA in development of the product and
thirteen quality tests intended to test submarine batteries could never be
dispensed with.
4. The respondent made its representation in October 2004 to the
Ministry of Defence claiming that it had developed submarine batteries and
that they are under internal evaluation. On 31.03.2005, the respondent
requested the Ministry of Defence for a development order so that the
respondent can be developed as the second source of submarine batteries and
the respondent agreed to undergo stringent tests before it could be
registered for supplying the product. As the residual life of the existing
batteries was coming to an end, in July 2005, the Government has been
processing the request by the Navy to purchase submarine batteries. Since
only M/s. Exide Industries Ltd. was then the only approved supplier of all
types of submarine batteries, it was proposed to issue ‘Request For
Proposal’ (RFP) to M/s. Exide Industries Ltd. alone and the Defence
Minister gave approval to issue RFP to M/s. Exide Industries Ltd. for
supplying eleven sets of submarine batteries.
5. Respondent filed writ petition before the Delhi High Court on
17.09.2005 claiming that it should be issued a request for proposal as
well, as it was registered for some other products namely torpedo
batteries. Be it noted that the submarine batteries claimed to have been
developed by the respondent were neither developed under the aegis of the
DGQA nor the Government paid for development of the prototype cells. The
learned Single Judge vide order dated 05.10.2005 dismissed the writ
petition observing that if the extant policy envisages selection or
shortlisting of a party for purposes of raising a development indent for an
alternative indigenous source of equipment, this stage must be successfully
crossed before venturing further into the issuance of request for proposal
and thereafter issuance of a PAC. The learned Single Judge further held
that procurement method was a policy matter and the policy did not suffer
from any illegality and in any event, the policy has not been challenged by
the respondent in the writ petition. Aggrieved by dismissal of the writ
petition, the respondent filed LPA No.2448/2005 which was allowed vide the
impugned judgment dated 27.10.2005 and the High Court issued directions to
the Ministry of Defence to procure even the critical spare parts like
submarine batteries only after issuing advertisement and calling for open
tender. Assailing the impugned judgment, the appellant-Union of India has
preferred this appeal.
6. Ms. Pinky Anand, learned Additional Solicitor General of India
alongwith Mr. Qadri appearing for the appellants contended that while
tender is issued for common use items, purchase of specialized and
critical spare parts for the Defence Ministry cannot be done by an open
tender and in the instant case, there were justifiable reasons for the
Government to classify submarine batteries as critical and specialized
defence product and to procure the same only from those suppliers who have
developed the submarine batteries under the aegis of DGQA and are duly
approved/registered with DGQA. It was submitted that in relation to
essential defence supplies/critical spare parts, the Government must ensure
that the supplier has the necessary technical qualifications,
infrastructure and capacity to develop the product and in critical spare
parts like submarine batteries, the Government cannot put the life of its
defence personnel and submarine worth several crores of rupees to risk
simply because the respondent claims to have the capability. It was
submitted that the High Court was not right in directing the Government for
issuing tenders for critical spare parts like submarine batteries without
knowing whether the said product can withstand all the thirteen quality
tests and render reliable performance on board.
7. Per contra, learned counsel for the respondent submitted that
the respondent for the first time vide its letter dated 06.10.1999 had
shown its intention to develop the submarine batteries and requested the
appellant to provide the specifications of the same and in response to the
same, appellants vide letter dated 22.11.1999 duly provided the technical
specifications and on the basis of the same, respondent had developed
prototype cells of the said batteries for testing which were offered to the
appellants for evaluation way back in March 2004 and despite such offering,
the appellants did not carry out any test. Contention of the respondent is
that they continued to invest huge sums for developing prototype cells of
submarine batteries under legitimate expectation that the respondent would
be considered as an alternative source for supplying submarine batteries.
Further contention of the respondent is that the goods purchased without
any tender on proprietary basis only from one source is a flagrant
violation of the constitutional mandate of Article 14 and by directing to
issue an advertisement, the High Court rightly held against the monopoly of
single source for supply of submarine batteries.
8. We have carefully considered the rival contentions advanced
by the parties and perused the details of the procedure for development of
submarine batteries and various tests required to be conducted on the
submarine batteries and other material on record.
9. The defence procurement can be classified into two broad heads:-
(i) First category are common use items of generic or commercial
specifications and these are available in open market. For example car
batteries, spare of various vehicles etc. These items are procured by the
Ministry of Defence by Open Tender Enquiry (OTE) i.e. by advertisements in
the press and website.
(ii) Second category are those materials which do not fall within the
above ‘common use’ category. These spares are ‘mission critical’ strategic
defence products, which are procured only from those firms which are
registered with Director General of Quality Assurance (DGQA) which
functions under the Ministry of Defence. The supplier has to be registered
with DGQA for the supply of that specific product.
Defence Ministry/DGQA has a very stringent procedure before any vendor is
registered with DGQA for supplying the product. In the second category,
though the product is manufactured by a private supplier, it is not as if
the Government is totally disassociated from the production process of the
product. As is seen from the Standing Orders of the DGQA (Annexure P-1),
prior to grant of registration, the Government pays the vendor to ‘develop’
the product under its supervision for over a period of time. Officials of
the DGQA are posted at the factory of the supplier to ensure that the goods
so produced are absolutely in order. The inspectors of DGQA inspect every
stage of production right from the sourcing of the raw materials by the
vendor as it is quite possible that the vendor may purchase inferior
quality material which may be difficult to detect in the final product.
Development of the second source would require upto a maximum of three
years, as the development process involves drawing up of detailed technical
specifications and performance criteria based on which the firm has to
prepare a detailed design for each and every component to meet the
stringent military standards.
10. The subject-matter of the present case is submarine batteries.
The importance of submarine batteries to a submarine cannot be
underestimated as it is strategically a vital equipment for submarines.
Submarines or diesel electrical vessels run on battery power. Power to the
submarine is provided by about 240 to 528 batteries, weighing about 800 kgs
each, depending on the nature of submarine. The only source of power to a
submarine when it dives beyond nine metres into sea/ocean is submarine
batteries. Improvement in battery technology and capacity is always an
important goal in submarine design. Batteries are unique source of
electric energy in underwater navigation. When a submarine is under
surface, all its equipments are powered from the batteries, electric
machines, lights, internal communication etc. which means that right from
the first stage, the submarine batteries are vital for operating submarine.
Survival of submarine depends on its radio noise levels which are directly
related to the efficient functioning of onboard equipment and machinery
especially when the batteries which is the only source of power and energy.
If the batteries fail, submarine will be without power and it can have
catastrophic consequences on men as also submarine would be lost. DGQA
therefore ensures that it is associated during the production of the
batteries by the approved vendor and only those batteries which pass the
thirteen tests are purchased by the Navy. In case of submarine batteries,
before a particular vendor is approved for supply of submarine batteries,
as per the policy, first the government issues development indent to the
lowest bidder and the Government pays the proposed vendor to develop the
product and the product is developed by the vendor under the supervision of
the DGQA officials. Product so developed under the supervision of DGQA has
to undergo thirteen tests as stipulated in Annexure P-2. Ministry of
Defence/Navy authorities cannot accept the final product without being
fully associated with the development of the product right from the stage
of procurement of raw material to the stage of final product. As per the
policy, RFP could be issued only to a firm which is duly registered with
DGQA for supply of the product after development of the product under the
aegis of DGQA. Having regard to the requirements of a highly critical
spare part like submarine batteries, the Government has framed the policy
for issuance of the development indent, developing the source and
registration with DGQA. It is pertinent to note that in the writ petition,
policy itself was not under challenge. In fact, in the writ petition,
respondent-company itself prayed only for issuance of request for proposal
under the policy. The High Court did not keep in view the policy of the
Government and the mandatory requirement of DGQA being associated with the
development of submarine batteries which is a critical defence spare part.
11. If the country wishes to play a substantial role in the Indian
Ocean and Arabian Sea, India must ensure high standards of defence power
comparing with the neighbouring countries and it should have modernized
submarines. Modernized submarines require submarine batteries with high
sophisticated standard under the aegis of DGQA. The Government cannot put
the life of its defence personnel and submarine worth crores of rupees to
risk simply because the respondent claims to have the capability and can
supply submarine batteries. For such defence critical spare parts like
submarine batteries, there cannot be any open advertisement inviting
tenders. Advertisements are issued calling for tenders only for common use
items which are normally available in the open market with a wide range of
sources. Submarine batteries do not fall under this category of common use
items. The respondent cannot claim any vested right to be issued a
development indent or RFP or a supply order simply because it has made
investments to manufacture submarine batteries. Straightway RFP cannot be
issued to the respondent by ignoring the procedure for issuing a
development indent and testing the batteries.
12. As the matter was pending for over a decade, we have asked the
appellant-Union of India about the subsequent development of the second
source for supply of submarine batteries and for the status of the
respondent. In response, on instruction Mr. S.W.A. Qadri, onbehalf of the
appellant has filed elaborate written submission. It is stated that after
grant of stay order dated 16.12.2005 by this Court against the impugned
order, the appellant initiated a case for development of an alternate
vendor for submarine batteries seeking development indents from IHQ (N)/DEE
as per directives of Ministry of Defence vide ID No.3536/04/D(N-I) dated
08.02.2005. Accordingly, open tender was issued in newspapers on
29.05.2006 wherein several firms including the respondent responded. For
development of a second source of Type-I batteries, development order was
placed on the respondent HBL Ltd. on 22.03.2007, as per which the firm was
to develop four Type-I cells at a cost of Rs.11.16 lakhs with a delivery
schedule of eighteen months. The prototype batteries manufactured by
respondent-HBL failed to meet DGQA’s stipulated standard for relevant
discharge (C2) test. Thereafter, on 12.07.2011, a meeting was held with the
participants of DEE and M/s. HBL representatives. Post detailed
deliberation, the respondent was asked to manufacture four cells afresh and
present them for type testing. Test of batteries was completed at the
factory premises in June 2012 and batteries were transferred to BCF, Sewri
in January 2013. However, on receipt at BCF, Sewri, visible bulging was
observed in all batteries and lead tape discontinuity in one battery during
first maintenance charge. During analysis in February 2013, bulging was
found to exceed permissible limit of 12 mm on all batteries post first full
charge. However, respondent opined that the bulging was due to improper
packaging whilst transporting batteries from the premises (Hyderabad) to
Mumbai. Thereafter, respondent firm–HBL agreed on certain conditions for
manufacturing of four new prototype cells with a lead time of three-six
months and agreed to complete manufacturing of test cells by February 2014.
However, there was delay on the part of the respondent and finally the
trial of test cells was completed on 14.11.2014 and the trials were
validated by CQAE, Secunderabad. Test cells were received at BCF, Sewri in
January 2015. Charging/discharging trials commenced wherein charging
parameters were examined and found to be satisfactory. In this regard, in
the written submission filed by UOI, it is stated as under:-
“8. …The performance report forwarded by ASD (Mbi)/BCF wherein all
parameters of the cells were examined, indicates satisfactory test results.
In view of the satisfactory completion of indigenization efforts by
respondent herein (M/s. HBL, Hyderabad) the firm was nominated as IHQ MOD
(N) approved vendor for supply of Type-I submarine batteries for EKM
submarines on 28.05.2015
9. ..the next procurement case shall have an additional qualified vendor
for Type-I submarine batteries to increase the market competence for both
technical and financial aspects.”
Though the subsequent developments may not be relevant to determine the
issue, we have referred to the written submission in extenso for the sake
of completion.
13. The aforesaid discussion and also the written submission as to
how the respondent developed the batteries over a period of time reiterate
that the development of second source could only be as per the guidelines
of DGQA and under the supervision and inspection of the officials of the
DGQA and not independently. The High Court did not keep in view the policy
of the Government in purchasing the critical spare parts for the defence
and in particular, in developing submarine batteries under the aegis of the
Defence Ministry and the High Court erred in directing the appellants to
issue an advertisement giving details about the technical specifications
for submarine batteries and in selecting the product submitted in response
to the advertisement and the impugned order is not sustainable.
14. The impugned order of the High Court is set aside and this
appeal is allowed. In the facts and circumstances of the case, we make no
order as to costs.
..…………………….CJI.
(T.S. THAKUR)
..……………………….J.
(R. BANUMATHI)
New Delhi;
January 20, 2016
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3193 OF 2006
UNION OF INDIA & ANR. ..Appellants
Versus
HBL NIFE POWER SYSTEMS LTD. ..Respondent
J U D G M E N T
R. BANUMATHI, J.
This appeal assails the order dated 27.10.2005 passed by the
High Court of Delhi allowing the appeal in LPA No.2448 of 2005 thereby
directing the Union of India to issue an advertisement in leading
newspapers having wide circulation inviting tenders for the submarine
batteries mentioning the detailed technical specifications and the
appellants to consider all the products which meet the technical
specifications and thereby proceed to select the best product in accordance
with law.
2. The subject-matter involved in the present case is submarine
batteries required for the Indian Navy. Indian Navy has three types of
submarines for which three different types of batteries are used. Type-I
battery for EKM submarines, Type-II battery for SSK class submarines and
Type-III battery for Foxtrot class submarines. Initially, these batteries
were imported from the Original Equipment Manufacturer. In view of the
recurring requirement of the batteries, subsequently a decision was taken
to progress their indigenisation. Director General Quality Assurance (DGQA)
working under the Ministry of Defence has a detailed procedure to
‘develop/indigenise’ critical items/spares. As per the said procedure, the
Government identifies the possible vendors and assesses their
capacity/technical qualifications and thereafter a development order is
placed on the proposed supplier. During this period of development of the
spares, the Government carries out regular inspection and the product is
developed under the aegis of officials of the Defence Ministry and officers
of the DGQA are associated throughout the development process right from
the time of sourcing of raw materials to ensure that the product not only
meets the technical qualifications but is fully reliable and free from any
errors in actual performance.
3. By following the above rigorous procedure, M/s.
Standard Batteries Ltd. was developed as an indigenous manufacturer for
supplying Type-III submarine batteries. M/s. Standard Batteries
Ltd. was subsequently developed as a manufacturer of Type-I submarine
batteries in the year 1988. M/s. Exide Industries Ltd. was developed as
an indigenous manufacturer of Type-II submarine batteries in 1989. In the
year 1998, M/s. Standard Batteries Ltd. sold its business to M/s. Exide
Industries Ltd. Since then, M/s. Exide Industries Ltd. has become a
single vendor in supplying batteries for all three classes of submarines to
the Indian Navy. Officers of DGQA are constantly associated with the
manufacturing of the submarine batteries in Exide Industries Ltd. as and
when they are required by the Indian Navy. As M/s. Exide Industries Ltd.
has become the single vendor, in 2004, Government started exploring the
possibility of developing another supplier as second source for submarine
batteries. But as per the policy, the Government cannot register anyone for
supply of submarine batteries without following the procedure or putting
the vendor through the process of the development. In any event, the
requirement of the supervision of DGQA in development of the product and
thirteen quality tests intended to test submarine batteries could never be
dispensed with.
4. The respondent made its representation in October 2004 to the
Ministry of Defence claiming that it had developed submarine batteries and
that they are under internal evaluation. On 31.03.2005, the respondent
requested the Ministry of Defence for a development order so that the
respondent can be developed as the second source of submarine batteries and
the respondent agreed to undergo stringent tests before it could be
registered for supplying the product. As the residual life of the existing
batteries was coming to an end, in July 2005, the Government has been
processing the request by the Navy to purchase submarine batteries. Since
only M/s. Exide Industries Ltd. was then the only approved supplier of all
types of submarine batteries, it was proposed to issue ‘Request For
Proposal’ (RFP) to M/s. Exide Industries Ltd. alone and the Defence
Minister gave approval to issue RFP to M/s. Exide Industries Ltd. for
supplying eleven sets of submarine batteries.
5. Respondent filed writ petition before the Delhi High Court on
17.09.2005 claiming that it should be issued a request for proposal as
well, as it was registered for some other products namely torpedo
batteries. Be it noted that the submarine batteries claimed to have been
developed by the respondent were neither developed under the aegis of the
DGQA nor the Government paid for development of the prototype cells. The
learned Single Judge vide order dated 05.10.2005 dismissed the writ
petition observing that if the extant policy envisages selection or
shortlisting of a party for purposes of raising a development indent for an
alternative indigenous source of equipment, this stage must be successfully
crossed before venturing further into the issuance of request for proposal
and thereafter issuance of a PAC. The learned Single Judge further held
that procurement method was a policy matter and the policy did not suffer
from any illegality and in any event, the policy has not been challenged by
the respondent in the writ petition. Aggrieved by dismissal of the writ
petition, the respondent filed LPA No.2448/2005 which was allowed vide the
impugned judgment dated 27.10.2005 and the High Court issued directions to
the Ministry of Defence to procure even the critical spare parts like
submarine batteries only after issuing advertisement and calling for open
tender. Assailing the impugned judgment, the appellant-Union of India has
preferred this appeal.
6. Ms. Pinky Anand, learned Additional Solicitor General of India
alongwith Mr. Qadri appearing for the appellants contended that while
tender is issued for common use items, purchase of specialized and
critical spare parts for the Defence Ministry cannot be done by an open
tender and in the instant case, there were justifiable reasons for the
Government to classify submarine batteries as critical and specialized
defence product and to procure the same only from those suppliers who have
developed the submarine batteries under the aegis of DGQA and are duly
approved/registered with DGQA. It was submitted that in relation to
essential defence supplies/critical spare parts, the Government must ensure
that the supplier has the necessary technical qualifications,
infrastructure and capacity to develop the product and in critical spare
parts like submarine batteries, the Government cannot put the life of its
defence personnel and submarine worth several crores of rupees to risk
simply because the respondent claims to have the capability. It was
submitted that the High Court was not right in directing the Government for
issuing tenders for critical spare parts like submarine batteries without
knowing whether the said product can withstand all the thirteen quality
tests and render reliable performance on board.
7. Per contra, learned counsel for the respondent submitted that
the respondent for the first time vide its letter dated 06.10.1999 had
shown its intention to develop the submarine batteries and requested the
appellant to provide the specifications of the same and in response to the
same, appellants vide letter dated 22.11.1999 duly provided the technical
specifications and on the basis of the same, respondent had developed
prototype cells of the said batteries for testing which were offered to the
appellants for evaluation way back in March 2004 and despite such offering,
the appellants did not carry out any test. Contention of the respondent is
that they continued to invest huge sums for developing prototype cells of
submarine batteries under legitimate expectation that the respondent would
be considered as an alternative source for supplying submarine batteries.
Further contention of the respondent is that the goods purchased without
any tender on proprietary basis only from one source is a flagrant
violation of the constitutional mandate of Article 14 and by directing to
issue an advertisement, the High Court rightly held against the monopoly of
single source for supply of submarine batteries.
8. We have carefully considered the rival contentions advanced
by the parties and perused the details of the procedure for development of
submarine batteries and various tests required to be conducted on the
submarine batteries and other material on record.
9. The defence procurement can be classified into two broad heads:-
(i) First category are common use items of generic or commercial
specifications and these are available in open market. For example car
batteries, spare of various vehicles etc. These items are procured by the
Ministry of Defence by Open Tender Enquiry (OTE) i.e. by advertisements in
the press and website.
(ii) Second category are those materials which do not fall within the
above ‘common use’ category. These spares are ‘mission critical’ strategic
defence products, which are procured only from those firms which are
registered with Director General of Quality Assurance (DGQA) which
functions under the Ministry of Defence. The supplier has to be registered
with DGQA for the supply of that specific product.
Defence Ministry/DGQA has a very stringent procedure before any vendor is
registered with DGQA for supplying the product. In the second category,
though the product is manufactured by a private supplier, it is not as if
the Government is totally disassociated from the production process of the
product. As is seen from the Standing Orders of the DGQA (Annexure P-1),
prior to grant of registration, the Government pays the vendor to ‘develop’
the product under its supervision for over a period of time. Officials of
the DGQA are posted at the factory of the supplier to ensure that the goods
so produced are absolutely in order. The inspectors of DGQA inspect every
stage of production right from the sourcing of the raw materials by the
vendor as it is quite possible that the vendor may purchase inferior
quality material which may be difficult to detect in the final product.
Development of the second source would require upto a maximum of three
years, as the development process involves drawing up of detailed technical
specifications and performance criteria based on which the firm has to
prepare a detailed design for each and every component to meet the
stringent military standards.
10. The subject-matter of the present case is submarine batteries.
The importance of submarine batteries to a submarine cannot be
underestimated as it is strategically a vital equipment for submarines.
Submarines or diesel electrical vessels run on battery power. Power to the
submarine is provided by about 240 to 528 batteries, weighing about 800 kgs
each, depending on the nature of submarine. The only source of power to a
submarine when it dives beyond nine metres into sea/ocean is submarine
batteries. Improvement in battery technology and capacity is always an
important goal in submarine design. Batteries are unique source of
electric energy in underwater navigation. When a submarine is under
surface, all its equipments are powered from the batteries, electric
machines, lights, internal communication etc. which means that right from
the first stage, the submarine batteries are vital for operating submarine.
Survival of submarine depends on its radio noise levels which are directly
related to the efficient functioning of onboard equipment and machinery
especially when the batteries which is the only source of power and energy.
If the batteries fail, submarine will be without power and it can have
catastrophic consequences on men as also submarine would be lost. DGQA
therefore ensures that it is associated during the production of the
batteries by the approved vendor and only those batteries which pass the
thirteen tests are purchased by the Navy. In case of submarine batteries,
before a particular vendor is approved for supply of submarine batteries,
as per the policy, first the government issues development indent to the
lowest bidder and the Government pays the proposed vendor to develop the
product and the product is developed by the vendor under the supervision of
the DGQA officials. Product so developed under the supervision of DGQA has
to undergo thirteen tests as stipulated in Annexure P-2. Ministry of
Defence/Navy authorities cannot accept the final product without being
fully associated with the development of the product right from the stage
of procurement of raw material to the stage of final product. As per the
policy, RFP could be issued only to a firm which is duly registered with
DGQA for supply of the product after development of the product under the
aegis of DGQA. Having regard to the requirements of a highly critical
spare part like submarine batteries, the Government has framed the policy
for issuance of the development indent, developing the source and
registration with DGQA. It is pertinent to note that in the writ petition,
policy itself was not under challenge. In fact, in the writ petition,
respondent-company itself prayed only for issuance of request for proposal
under the policy. The High Court did not keep in view the policy of the
Government and the mandatory requirement of DGQA being associated with the
development of submarine batteries which is a critical defence spare part.
11. If the country wishes to play a substantial role in the Indian
Ocean and Arabian Sea, India must ensure high standards of defence power
comparing with the neighbouring countries and it should have modernized
submarines. Modernized submarines require submarine batteries with high
sophisticated standard under the aegis of DGQA. The Government cannot put
the life of its defence personnel and submarine worth crores of rupees to
risk simply because the respondent claims to have the capability and can
supply submarine batteries. For such defence critical spare parts like
submarine batteries, there cannot be any open advertisement inviting
tenders. Advertisements are issued calling for tenders only for common use
items which are normally available in the open market with a wide range of
sources. Submarine batteries do not fall under this category of common use
items. The respondent cannot claim any vested right to be issued a
development indent or RFP or a supply order simply because it has made
investments to manufacture submarine batteries. Straightway RFP cannot be
issued to the respondent by ignoring the procedure for issuing a
development indent and testing the batteries.
12. As the matter was pending for over a decade, we have asked the
appellant-Union of India about the subsequent development of the second
source for supply of submarine batteries and for the status of the
respondent. In response, on instruction Mr. S.W.A. Qadri, onbehalf of the
appellant has filed elaborate written submission. It is stated that after
grant of stay order dated 16.12.2005 by this Court against the impugned
order, the appellant initiated a case for development of an alternate
vendor for submarine batteries seeking development indents from IHQ (N)/DEE
as per directives of Ministry of Defence vide ID No.3536/04/D(N-I) dated
08.02.2005. Accordingly, open tender was issued in newspapers on
29.05.2006 wherein several firms including the respondent responded. For
development of a second source of Type-I batteries, development order was
placed on the respondent HBL Ltd. on 22.03.2007, as per which the firm was
to develop four Type-I cells at a cost of Rs.11.16 lakhs with a delivery
schedule of eighteen months. The prototype batteries manufactured by
respondent-HBL failed to meet DGQA’s stipulated standard for relevant
discharge (C2) test. Thereafter, on 12.07.2011, a meeting was held with the
participants of DEE and M/s. HBL representatives. Post detailed
deliberation, the respondent was asked to manufacture four cells afresh and
present them for type testing. Test of batteries was completed at the
factory premises in June 2012 and batteries were transferred to BCF, Sewri
in January 2013. However, on receipt at BCF, Sewri, visible bulging was
observed in all batteries and lead tape discontinuity in one battery during
first maintenance charge. During analysis in February 2013, bulging was
found to exceed permissible limit of 12 mm on all batteries post first full
charge. However, respondent opined that the bulging was due to improper
packaging whilst transporting batteries from the premises (Hyderabad) to
Mumbai. Thereafter, respondent firm–HBL agreed on certain conditions for
manufacturing of four new prototype cells with a lead time of three-six
months and agreed to complete manufacturing of test cells by February 2014.
However, there was delay on the part of the respondent and finally the
trial of test cells was completed on 14.11.2014 and the trials were
validated by CQAE, Secunderabad. Test cells were received at BCF, Sewri in
January 2015. Charging/discharging trials commenced wherein charging
parameters were examined and found to be satisfactory. In this regard, in
the written submission filed by UOI, it is stated as under:-
“8. …The performance report forwarded by ASD (Mbi)/BCF wherein all
parameters of the cells were examined, indicates satisfactory test results.
In view of the satisfactory completion of indigenization efforts by
respondent herein (M/s. HBL, Hyderabad) the firm was nominated as IHQ MOD
(N) approved vendor for supply of Type-I submarine batteries for EKM
submarines on 28.05.2015
9. ..the next procurement case shall have an additional qualified vendor
for Type-I submarine batteries to increase the market competence for both
technical and financial aspects.”
Though the subsequent developments may not be relevant to determine the
issue, we have referred to the written submission in extenso for the sake
of completion.
13. The aforesaid discussion and also the written submission as to
how the respondent developed the batteries over a period of time reiterate
that the development of second source could only be as per the guidelines
of DGQA and under the supervision and inspection of the officials of the
DGQA and not independently. The High Court did not keep in view the policy
of the Government in purchasing the critical spare parts for the defence
and in particular, in developing submarine batteries under the aegis of the
Defence Ministry and the High Court erred in directing the appellants to
issue an advertisement giving details about the technical specifications
for submarine batteries and in selecting the product submitted in response
to the advertisement and the impugned order is not sustainable.
14. The impugned order of the High Court is set aside and this
appeal is allowed. In the facts and circumstances of the case, we make no
order as to costs.
..…………………….CJI.
(T.S. THAKUR)
..……………………….J.
(R. BANUMATHI)
New Delhi;
January 20, 2016
