On July 14 this year, a Calcutta high court division bench of then chief justice PS Misra and justice Barin Ghosh had handed down the award after L&T appealed justice SB Sinha's dismissal of its writ petition.

The division bench had felt that L&T should have been awarded the contract, but since 60 per cent of the work had already been completed by Subhas Projects, it was their duty to award a token compensation to L&T.

The company moved a special leave petition in the apex court on August 20 under Article 136 of the constitution, raising 23 points of law.

The project involves installation of a water intake and plant water system for the Bakreswar thermal power project in West Bengal. It is being funded by Japan's Overseas Economic Cooperation Fund (OECF) under an agreement signed with the union government on January 24, 1994. The West Bengal Power Development Corp is the executive agency.

There were three bidders apart from L&T and Subhas Projects -- Otto India, Gannon Dunkerley and Simplex.

In its SLP, Subhas Projects' has said that the award of the contract to it could not have been a decision solely of WBPDCL as the loan agreement specifies that the Indian government will have to submit the analysis of the bids and the proposal for the award to OECF for its concurrence.

Subhas Projects was the lowest bidder in the original prices (inclusive of implication amount) indicated by the parties. L&T had quoted Rs 201.38 crore, and Subhas Projects Rs 146.91 crore, with the rest coming in between.

After it received the bids, WBPDCL wrote to all bidders on July 4, 1996, directing them to include the price of seven technical items in the tender. It also noted that: "No other price implications on technical and commercial aspects will be considered either in tender evaluation or contract negotiation". L&T and Otto India offered a rebate on their original quotations -- Otto reduced its price by Rs 31.01 crore, while L&T slashed its bid by Rs 64.40 crore and became the lowest bidder.

The contract was finally awarded to Subhas Projects at a negotiated price of Rs 138.75 crore.

When the division bench, acting on L&T's appeal, awarded the compensation, it was pointed out that Subhas Projects had already implemented 60 per cent of the project.

After the rebates were offered, WBPDCL sought clarifications from the union power ministry's joint secretary and director (thermal) as well as the OECF on the issue of making the final award.

According to the correspondence available with The Financial Express, joint secretary Ajay Dua noted in his letter dated December 2, 1996, that: "It has been observed that the consideration of price discount to the tune of almost a third of the quoted price is not consistent with the tender conditions and OECF's guidelines".

OECF chief representative Y Fuwa, in his letter dated April 23, 1997, stated: "...we hereby inform you that we have no objection to the result of your tender evaluation that the lowest evaluated bidder is Subhas Projects & Marketing Ltd."

Dharam Paul, director (thermal) in the power ministry, noted in his letter dated September 19, 1996, that: "It may please be noted that a subsequent rebate amounts to change of basic price, which is against the general conditions of contract, letter and spirit..."

Paul cited section 5.03 of the OECF guidelines and said no other price application on technical and commercial aspects can be considered.

Subhas Projects, in its petition to the supreme court, has quoted section 5.03. "Except as otherwise provided in Section 5.10 of these guidelines, no bidders should be requested or permitted to alter his bids after the bids have been opened...The borrower (union government) may ask any bidder for a clarification of the bid, but should not ask any bidder to change the substance of the price of the bid," the guideline says, according to Subhas Projects' petition.