as CCL) if the language used in the terms of the NIT or the GTC
is not adhered to and its plain meaning discarded. A problem
could be faced by an employer if every bidder furnishes a bank
guarantee in a different format or one that it is comfortable with.
In such a situation, CCL would have to scrutinize each bank
guarantee to ascertain whether it meets with its requirements
and the NIT and the GTC. Apart from the text of the bank
guarantee, minor changes could be made by a bidder such as
enforceability in a place other than Ranchi (but in Jharkhand)
etc. This would place an avoidable and undue burden on the
employer particularly if there are a large number of bidders.
. Not only this, any decision taken by the employer in
accepting or rejecting a particular bank guarantee in a format
not prescribed by it could lead to (avoidable) litigation requiring
the employer to justify the rejection or acceptance of each bank
guarantee. This is hardly conducive to a smooth and hassle-free
bidding process.
52. There is a wholesome principle that the Courts have been
following for a very long time and which was articulated in Nazir
Ahmad v. King EmperorAIR 1936 PC 253 namely“Where a power is given to
do a certain thing in a certain way the thing must be done in
that way or not at all. Other methods of performance are
necessarily forbidden.” There is no valid reason to give up this
salutary principle or not to apply it mutatis mutandis to bid
documents. This principle deserves to be applied in contractual
disputes, particularly in commercial contracts or bids leading up
to commercial contracts, where there is stiff competition. It must
follow from the application of the principle laid down in Nazir
Ahmed that if the employer prescribes a particular format of the
bank guarantee to be furnished, then a bidder ought to submit
the bank guarantee in that particular format only and not in any
other format. However, as mentioned above, there is no
inflexibility in this regard and an employer could deviate from
the terms of the bid document but only within the parameters
mentioned above.
53. Nazir Ahmed has been followed in dozens of decisions
rendered by this Court and by other constitutional Courts in the
country. The Central Vigilance Commission has accepted this
principle in a modified form as a guiding principle in its circular
dated 31st December, 2007 wherein it is mentioned that all
organizations ought to evolve a procedure for acceptance of bank
guarantees that is compatible with the guidelines of banks and
the Reserve Bank of India. One such requirement is that the
bank guarantee should be in a proper prescribed format and
should be verified verbatim on receipt with the original.
Adherence to this principle of verbatim verification would not
only avoid undue problems for the employer but would also
virtually eliminate subjectivity on the part of the employer.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8004 OF 2016
Central Coalfields Limited & Anr. .
V
SLL – SML (Joint Venture Consortium) &
Ors.
Dated:August 17, 2016
Citation: AIR 2016 SC 3814,(2016) 8 SCC622
1. The first appeal is that of the Central Coalfields Limited.
The first respondent in the appeal is SLL–SML a Joint Venture
Consortium whose bid in response to a Notice Inviting Tender
issued by the Central Coalfields Limited was rejected.
2. The second appeal is by PLR-RPL-SMASL a Joint Venture
whose bid was the lowest in response to the same Notice Inviting
Tender issued by the Central Coalfields Limited and that bid was
accepted.
3. Both the Central Coalfields Limited and PLR-RPL-SMASL
are aggrieved by judgment and order dated 26th October, 2015
passed by the Division Bench of the Jharkhand High Court
whereby the rejection of the bid of SLL-SML by Central Coalfields
Limited was set aside.
4. The question for our consideration is generally whether
furnishing a bank guarantee in the format prescribed in the bid
documents is an essential requirement in the bidding process of
the Central Coalfields Limited and specifically whether a bid not
accompanied by a bank guarantee in the format prescribed in
the bid documents of the Central Coalfields Limited could be
treated as non-responsive in view of Clause 15.2 of the General
Terms and Conditions governing the bidding process. The
answer to the general and the specific question is in the
affirmative.
The facts
5. On 5th August, 2015 the Central Coalfields Limited (for
short CCL) issued a Notification Inviting Tenders (for short NIT).
The name of the work was: “Out sourcing for Overburden
Removal (1050.00 L. CuM) and Coal Extraction (975.00 L. Te)
and transportation by deploying surface miner at Ashok OCP,
Piparwar Area for a period of 8 years.”
6. The notice mentioned that for details of the NIT and online
submissions, an interested person could visit
https://eps.buyjunction.in.
7. On a visit to the aforesaid website, details of the e-tender
were made available including further details of the work. It was
stated that tenders could be submitted by experienced
contractors having a Digital Signature Certificate issued from
any agency authorized by the Controller of Certifying Authority,
Government of India. This is being mentioned because anybody
having a Digital Signature Certificate cannot be computer
illiterate.
8. Clause 3 of the e-tender carried the heading “Deposit of
EMD” and the relevant portion of this reads as follows:
“Earnest Money can be deposited in the form of Demand
Draft (DD)/Banker’s Cheque (BC)/Banker’s payorder (BPO)
from any scheduled Bank drawn in favour of “Central
Coalfields Limited” payable at “Ranchi”.
EMD can also be deposited in the form of irrevocable Bank
Guarantee (BG) from any scheduled Bank in the format
given in the bid document. Bank guarantee issued by
outstation bank shall be operative at their local branch i.e.
at Ranchi. The validity of such BG should be minimum 90
days beyond the validity of the bid. BG shall be acceptable
only when value of Earnest money (EMD) exceeds Rs. 5.00
Lakhs.”
9. What is of significance from the above is that the earnest
money deposit was required to be made in the form of an
irrevocable bank guarantee from any scheduled bank “in the
format given in the bid document”.
10. Clause 4 of the e-tender mentioned that for a clarification
of the bid, a bidder may seek clarification on-line from the
Service Provider M/s mjunction services limited whose address,
contact person and email were given in the document.
11. The General Terms and Conditions (for short GTC) for the
NIT were also made available to a visitor and prospective bidder
on the website. The GTC bore the heading “Governing Hiring of
Equipment for removal of Overburden, Extraction of Coal,
Transportation and loading in Areas of Central Coalfields
Limited”.
12. In paragraph 11 of the GTC it was specifically mentioned
that the bid security of earnest money was required to be
deposited in the appropriate form and in paragraph 15.2 thereof
it was specifically stated that any bid not accompanied by an
acceptable bid security/earnest money deposit shall be rejected
as non-responsive.
13. According to CCL it received 11 bids in response to the
e-tender including that of SLL–SML a Joint Venture Consortium
(for short JVC). One of the bids was apparently rejected. Nine of
the bidders submitted a bank guarantee strictly in accordance
with the pro forma provided in the GTC. A bank guarantee was
provided by JVC - not in the prescribed pro forma but in another
format in respect of some other contract provided in the GTC of
which bore the heading “Governing Contractual Transportation
& Loading in Areas of Central Coalfields Limited”.
14. Under the circumstances, an email was sent on behalf of
CCL on 11th September, 2015 to JVC rejecting its bid on the
ground that the documents were incomplete. JVC was informed
that it would not be allowed to participate in the price bid
opening.
15. In response, JVC sent an email on 15th September, 2015
to CCL that all documents as prescribed under the NIT had been
submitted. Therefore, JVC was unable to understand the reason
for rejection of its bid. The email was replied to on behalf of CCL
on the same day in which it was stated that the bid given by JVC
was cancelled as the bank guarantee submitted was not in the
format given in the NIT read with the GTC.
Proceedings before the learned Single Judge
16. Feeling aggrieved by the rejection of its bid and CCL’s
response, JVC preferred a writ petition in the Jharkhand High
Court being W.P (C) No.4559 of 2015. By a judgment and order
dated 7th October, 2015 a learned Single Judge of the High Court
dismissed the writ petition.
17. Before the learned Single Judge two submissions were
made on behalf of JVC. They were:
(i) The NIT did not prescribe a format for the bank
guarantee. Moreover, the bank guarantee pro forma for earnest
money deposit/bid security in the GTC is almost similar to the
bank guarantee furnished by JVC and therefore, its bid was
wrongly rejected by CCL.
(ii) The bank guarantee format and the condition in Clause
3 in the e-tender mandated that the bank guarantee should be
irrevocable and payable at Ranchi and the minimum validity
period should be beyond 90 days. These conditions were met by
JVC.
18. It was also contended that not only was the bank
guarantee in conformity with the basic requirements but that its
terms were stricter than the bank guarantee prescribed by CCL.
It was further contended that in any event furnishing a bank
guarantee in the prescribed format was a non-essential
condition of the contract and therefore the rejection of JVC’s bid
only on the ground that the bank guarantee was not in the
prescribed format was arbitrary and unreasonable.
19. The learned Single Judge considered the submissions of
JVC and concluded that furnishing a bank guarantee in a
different format other than the one prescribed would cause
multiple problems and this was certainly not advisable.
20. It was also held by the learned Single Judge that it was
necessary to adhere to the strict terms of the NIT as well as the
prescribed format for the bank guarantee.
21. With regard to the contention that the NIT did not
prescribe any format, the learned Single Judge was of the view
that if JVC had any doubt in this regard it should have sought a
clarification as mentioned in the NIT. Since JVC did not do so, it
was too late in the day to raise an objection about any doubt
relating to the format of the bank guarantee.
22. Considering all the submissions of JVC, the learned Single
Judge held that there was sufficient reason to dismiss the writ
petition.
23. Feeling aggrieved, JVC preferred a Letters Patent Appeal
before the Division Bench of the High Court being L.P.A. No. 625
of 2015. By the impugned judgment and order dated 26th
October, 2015 the Division Bench of the Jharkhand High Court
allowed the appeal.
Proceedings before the Division Bench
24. It was contended by JVC before the Division Bench that
the NIT is ambiguous and that there was no clarity with regard
to the format in which the bank guarantee was required to be
furnished. Additionally, it was contended that in any event there
was substantial compliance with the essential terms of the bank
guarantee as required by CCL. In this regard, it was submitted
that there were five requirements for the bank guarantee to be
acceptable to CCL and JVC met all these requirements. The
requirements, as submitted by JVC in the High Court were:
(a) The bank guarantee should be irrevocable.
(b) The bank guarantee should be from any scheduled
bank.
(c) The bank guarantee should be payable at the local
branch of the issuing bank, that is at Ranchi.
(d) The validity of the bank guarantee should be
minimum 90 days beyond the validity of the bid.
(e) The bank guarantee shall be acceptable only when
value of Earnest Money Deposit exceeds Rs. 5 lakhs.
25. The High Court concluded, reversing the view of the
learned Single Judge that the submission of the bank guarantee
in the prescribed format was a non-essential term of the NIT.
Reliance was placed by the High Court on Poddar Steel
Corporation v. Ganesh Engineering Works1
and Rashmi
Metaliks Ltd. v. Kolkata Metropolitan Development
Authority2
to conclude that since the submission of the bank
guarantee in the prescribed format was a non-essential term of
the NIT, the bid of JVC ought to be entertained.
26. Additionally, it was held that since there was substantial
compliance with the requirement of the bank guarantee being in
the format prescribed by CCL, the rejection of JVC’s bid was
unjustified. This was more so since the bank guarantee
furnished by JVC had stricter terms than the bank guarantee in
the form prescribed by CCL.
27. In view of the above considerations, the High Court was of
opinion that the learned Single Judge had erred in dismissing
the writ petition filed by JVC. The High Court also quashed the
communications sent by CCL rejecting the bid of JVC and
1
(1991) 3 SCC 273
2
(2013) 10 SCC 95
permitted it to participate in the reverse bidding process.
28. It is under these circumstances that the present appeals
have been filed before us.
Discussion
29. What is extraordinary about this case is that the employer,
that is CCL, seeks to adhere to the terms of the NIT and the GTC
issued by it, but the submission of JVC is that CCL should
actually deviate from the terms of these documents so as to
benefit JVC. Indeed, in spite of a specific requirement that the
bank guarantee should be submitted in the prescribed format,
JVC claims an entitlement to a deviation in this regard on the
ground that the prescribed format was a non-essential term of
the NIT and the GTC. Who is to decide this issue of essentiality?
Does CCL with whom the contract has to be entered into by the
successful bidder have no say in the matter? Before adverting to
this, it is necessary to get clarity on some circumstances.
30. The first and the foremost aspect of the case that must be
appreciated is that, as mentioned above, JVC was certainly not
computer illiterate. Like every bidder, it was required to have a
Digital Signature Certificate which clearly indicates that any
bidder (including JVC) had some degree of comfort with
e-tenders and the use of computers for bidding in an e-tender.
It is this familiarity that enabled JVC to access the “incorrect”
format of a bank guarantee. Under these circumstances, it is
extremely odd that JVC was not able to access the correct and
prescribed format of the bank guarantee. The excuse given by
JVC that the NIT was vague and that it was not clear which was
the prescribed format of the bank guarantee appears to be
nothing but a bogey. A simple reading of the GTC and the terms
of the bank guarantee would have been enough to indicate the
correct prescribed format and the “incorrect” format.
31. Secondly, the heading mentioned in both the GTCs was
different. The correct GTC bore the heading “Governing Hiring of
Equipment for removal of Overburden, Extraction of Coal,
Transportation and loading in Areas of Central Coalfields
Limited” while the not relevant GTC bore the heading “Governing
Contractual Transportation & Loading in Areas of Central
Coalfields Limited”. There is a substantial difference between the
two GTCs and anyone bidding for the work “Out sourcing for
Overburden Removal (1050.00 L. CuM) and Coal Extraction
(975.00 L. Te) and transportation by deploying surface miner at
Ashok OCP, Piparwar Area for a period of 8 years” could
immediately see which GTC is relevant and which is not.
32. In this context and thirdly, it is important to note that if
JVC had any doubt with regard to the format of the bank
guarantee to be furnished, it could have and ought to have
sought a clarification from the concerned authority as mentioned
in the NIT. Moreover, JVC could have and ought to have at least
made a representation to CCL that the prescribed format for the
bank guarantee was either not available or that the NIT was
ambiguous or that it lacked clarity with regard to the prescribed
format of the bank guarantee. JVC neither sought any
clarification nor did it make any representation to CCL. It is
difficult to understand the conduct of JVC in the situation
presented before us, particularly with reference to a contract for
about Rs. 2000 crores for eight years.
33. We were informed by the learned Attorney General that 9
of the 11 bidders furnished a bank guarantee in the prescribed
and correct format. Under these circumstances, even after
stretching our credulity, it is extremely difficult to understand
why JVC was unable to access the prescribed format for the
bank guarantee or furnish a bank guarantee in the prescribed
format when every other bidder could do so or why it could not
seek a clarification or why it could not represent against any
perceived ambiguity. The objection and the conduct of JVC
regarding the prescribed format of the bank guarantee or a
supposed ambiguity in the NIT does not appear to be fully above
board.
34. The core issue in these appeals is not of judicial review of
the administrative action of CCL in adhering to the terms of the
NIT and the GTC prescribed by it while dealing with bids
furnished by participants in the bidding process. The core issue
is whether CCL acted perversely enough in rejecting the bank
guarantee of JVC on the ground that it was not in the prescribed
format, thereby calling for judicial review by a constitutional
court and interfering with CCL’s decision.
35. In Ramana Dayaram Shetty v. International Airport
Authority of India3
this Court held that the words used in a
document are not superfluous or redundant but must be given
some meaning and weightage:
“It is a well-settled rule of interpretation applicable alike to
documents as to statutes that, save for compelling
necessity, the Court should not be prompt to ascribe
superfluity to the language of a document “and should be
rather at the outset inclined to suppose every word
intended to have some effect or be of some use”. To reject
words as insensible should be the last resort of judicial
interpretation, for it is an elementary rule based on
common sense that no author of a formal document
intended to be acted upon by the others should be
presumed to use words without a meaning. The court
must, as far as possible, avoid a construction which would
render the words used by the author of the document
meaningless and futile or reduce to silence any part of the
3
(1979) 3 SCC 489
document and make it altogether inapplicable.”
In that case, the expression “registered IInd Class hotelier” was
recognized as being inapt and perhaps ungrammatical;
nevertheless common sense was not offended in describing a
person running a registered II grade hotel as a registered II Class
hotelier. Despite this construction in its favour, respondents 4 in
that case were held to be factually ineligible to participate in the
bidding process.
36. It was further held that if others (such as the appellant in
that case) were aware that non-fulfillment of the eligibility
condition of being a registered II Class hotelier would not be a
bar for consideration, they too would have submitted a tender,
but were prevented from doing so due to the eligibility condition,
which was relaxed in the case of respondents 4. This resulted in
unequal treatment in favour of respondents 4 – treatment that
was constitutionally impermissible. Expounding on this, it was
held:
“It is indeed unthinkable that in a democracy governed by the
rule of law the executive Government or any of its officers
should possess arbitrary power over the interests of the
individual. Every action of the executive Government must be
informed with reason and should be free from arbitrariness.
That is the very essence of the rule of law and its bare minimal
requirement. And to the application of this principle it makes
no difference whether the exercise of the power involves
affectation of some right or denial of some privilege.”
(Emphasis given)
Applying this principle to the present appeals, other bidders and
those who had not bid could very well contend that if they had
known that the prescribed format of the bank guarantee was not
mandatory or that some other term(s) of the NIT or GTC were not
mandatory for compliance, they too would have meaningfully
participated in the bidding process. In other words, by
re-arranging the goalposts, they were denied the “privilege” of
participation.
37. For JVC to say that its bank guarantee was in terms
stricter than the prescribed format is neither here nor there. It is
not for the employer or this Court to scrutinize every bank
guarantee to determine whether it is stricter than the prescribed
format or less rigorous. The fact is that a format was prescribed
and there was no reason not to adhere to it. The goalposts
cannot be re-arranged or asked to be re-arranged during the
bidding process to affect the right of some or deny a privilege to
some.
38. In G.J. Fernandez v. State of Karnataka4
both the
principles laid down in Ramana Dayaram Shetty were
4
(1990) 2 SCC 488
reaffirmed. It was reaffirmed that the party issuing the tender
(the employer) “has the right to punctiliously and rigidly” enforce
the terms of the tender. If a party approaches a Court for an
order restraining the employer from strict enforcement of the
terms of the tender, the Court would decline to do so. It was also
reaffirmed that the employer could deviate from the terms and
conditions of the tender if the “changes affected all intending
applicants alike and were not objectionable.” Therefore, deviation
from the terms and conditions is permissible so long as the level
playing field is maintained and it does not result in any
arbitrariness or discrimination in the Ramana Dayaram
Shetty sense.
39. Poddar Steel was a rather interesting case and added a
new dimension to the discourse. The decision of the Allahabad
High Court records that the relevant clause in the NIT gave the
bidder the option of depositing the earnest money in cash or by a
“demand draft drawn on DLW Branch of SBI in favour of
Assistant Chief Cashier, DLW/- Varanasi.”5
As many as 21
parties had responded to the NIT, but 8 of them had not
deposited any earnest money at all and the remaining 13 bidders
had “deposited the earnest money by one mode or the other but
5 Ganesh Engineering Works v. Union of India and others, 1990 All. LJ 1140
not necessarily in the manner provided in the NIT except
perhaps a few.” The Tender Committee deviated from the terms
of the NIT and considered the bids of these 13 bidders and
accepted the bid of Poddar Steel, who had given the earnest
money not by cash or a demand draft but by “a loose cheque
drawn on its C/D account in the Union Bank of India,
Sonarpura, Varanasi.” On the issue of discriminatory treatment,
the contention of the employer was that since all the 13 bidders
who had made the earnest money deposit were treated equally,
there was no issue of any discriminatory treatment.
40. However, the High Court took the view, following Ramana
Dayaram Shetty and the privilege-of-participation principle,
that it was possible that if those who did not deposit any earnest
money had known that a crossed cheque (drawn on a bank other
than SBI) towards earnest money was acceptable to the
employer, they too could have been in the fray. Under these
circumstances, the High Court held that excluding them from
competition, through this unannounced deviation affecting
bidders and potential bidders alike, rendered the bidding
process unfair. The High Court introduced an “essential term”
concept and held that the clause in the NIT relating to deposit of
earnest money was an essential term thereof and could not be
deviated from. The Allahabad High Court held:
“The mere fact that all the tenderers who had deposited the
earnest money, whether in terms of Clause 6 or not had been
treated alike cannot make any difference. It is quite possible to
visualise that the parties who had failed to deposit the earnest
money may also have been in the fray had they known that
earnest money through cheque was also acceptable. Thus they
have obviously been deprived from competing with others and
this makes the action of Respondents 1 to 5 unfair when
condition No. 6 of the NIT so specifically points out that
deposit of earnest money in any other mode except in cash or
by demand draft would not be acceptable. It leads us to think
that this was an essential precondition for submitting tenders
and the Respondents were not entitled to deviate from this. All
tenders which were not accompanied by deposit of earnest
money strictly in the manner indicated in the NIT deserved to
be rejected. We reject the contention of the Respondents that
the earnest money could be accepted even when it was
deposited by some mode other than those in NIT. We also hold
that Clause 6 of NIT is not merely ancillary or subordinate
condition but in view of the language in which is couched the
same was a crucial and essential terms of the tender which
could not be deviated from.”
41. In appeal, this Court accepted the theory of essential and
non-essential or ancillary or subsidiary terms of an NIT. It was
held that the cheque of the Union Bank of India issued by
Poddar Steel (though a deviation from the terms of the NIT) was
sufficient for meeting the conditions of the NIT, the condition
being ancillary or subsidiary to the main object to be achieved by
the condition and that the employer could waive the “technical
literal compliance” of the earnest money clause of the NIT
“specially when it was in its interest not to reject the said bid
which was the highest.” In other words, this Court concluded
that an essential term of the tender document could not be
deviated from but an ancillary or subsidiary or non-essential
term could be deviated from, and that the deviation could be
without any reference to potential bidders.
42. Unfortunately, this Court did not at all advert to the
privilege-of-participation principle laid down in Ramana
Dayaram Shetty and accepted in G. J. Fernandez. In other
words, this Court did not consider whether, as a result of the
deviation, others could also have become eligible to participate in
the bidding process. This principle was ignored in Poddar Steel.
43. Continuing in the vein of accepting the inherent authority
of an employer to deviate from the terms and conditions of an
NIT, and re-introducing the privilege-of-participation principle
and the level playing field concept, this Court laid emphasis on
the decision making process, particularly in respect of a
commercial contract. One of the more significant cases on the
subject is the three-judge decision in Tata Cellular v. Union of
India6 which gave importance to the lawfulness of a decision
and not its soundness. If an administrative decision, such as a
6
(1994) 6 SCC 651
deviation in the terms of the NIT is not arbitrary, irrational,
unreasonable, mala fide or biased, the Courts will not judicially
review the decision taken. Similarly, the Courts will not
countenance interference with the decision at the behest of an
unsuccessful bidder in respect of a technical or procedural
violation. This was quite clearly stated by this Court (following
Tata Cellular) in Jagdish Mandal v. State of Orissa7
in the
following words:
“Judicial review of administrative action is intended to prevent
arbitrariness, irrationality, unreasonableness, bias and mala
fides. Its purpose is to check whether choice or decision is
made “lawfully” and not to check whether choice or decision is
“sound”. When the power of judicial review is invoked in
matters relating to tenders or award of contracts, certain
special features should be borne in mind. A contract is a
commercial transaction. Evaluating tenders and awarding
contracts are essentially commercial functions. Principles of
equity and natural justice stay at a distance. If the decision
relating to award of contract is bona fide and is in public
interest, courts will not, in exercise of power of judicial review,
interfere even if a procedural aberration or error in assessment
or prejudice to a tenderer, is made out. The power of judicial
review will not be permitted to be invoked to protect private
interest at the cost of public interest, or to decide contractual
disputes. The tenderer or contractor with a grievance can
always seek damages in a civil court. Attempts by unsuccessful
tenderers with imaginary grievances, wounded pride and
business rivalry, to make mountains out of molehills of some
technical/procedural violation or some prejudice to self, and
persuade courts to interfere by exercising power of judicial
review, should be resisted. Such interferences, either interim or
final, may hold up public works for years, or delay relief and
7
(2007) 14 SCC 517
succour to thousands and millions and may increase the
project cost manifold.”
This Court then laid down the questions that ought to be asked
in such a situation. It was said:
“Therefore, a court before interfering in tender or contractual
matters in exercise of power of judicial review, should pose to
itself the following questions:
(i) Whether the process adopted or decision made by the
authority is mala fide or intended to favour someone;
OR
Whether the process adopted or decision made is so arbitrary
and irrational that the court can say: “the decision is such that
no responsible authority acting reasonably and in accordance
with relevant law could have reached”;
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no
interference under Article 226.”
44. On asking these questions in the present appeals, it is
more than apparent that the decision taken by CCL to adhere to
the terms and conditions of the NIT and the GTC was certainly
not irrational in any manner whatsoever or intended to favour
anyone. The decision was lawful and not unsound.
45. Rashmi Metaliks was a comparatively different case
inasmuch as clause (j) of the NIT was the subject matter of
consideration. This clause required a bidder to submit “Valid
PAN No., VAT No., copy of acknowledgment of latest income tax
return and professional tax return.” The employer interpreted
this to be an essential term for qualifying in the bidding
process. This view was upheld by a learned Single Judge and
the Division Bench of the Calcutta High Court. This Court
reversed in the following words:
“We think that the income tax return would have assumed the
character of an essential term if one of the qualifications was
either the gross income or the net income on which tax was
attracted. In many cases this is a salutary stipulation, since it
is indicative of the commercial standing and reliability of the
tendering entity. This feature being absent, we think that the
filing of the latest income tax return was a collateral term, and
accordingly the Tendering Authority ought to have brought this
discrepancy to the notice of the appellant Company and if even
thereafter no rectification had been carried out, the position
may have been appreciably different.”
Essentially therefore, this Court substituted its view for that of
the employer who interpreted this term of the NIT to be
mandatory for compliance. Rashmi Metaliks followed Poddar
Steel and apparently overlooked the dictum laid down in
Ramana Dayaram Shetty, G. J. Fernandez, Tata Cellular
and Jagdish Mandal and must be confined to its own peculiar
facts. In any event, this decision does not advance the case of
any of the parties before us.
46. It is true that in Poddar Steel and in Rashmi Metaliks a
distinction has been drawn by this Court between essential and
ancillary and subsidiary conditions in the bid documents. A
similar distinction was adverted to more recently in Bakshi
Security and Personnel Services Pvt. Ltd. v. Devkishan
Computed Pvt. Ltd.
8
through a reference made to Poddar
Steel. In that case, this Court held a particular term of the NIT
as essential (confirming the view of the employer) and also
referred to the “admonition” given in Jagdish Mandal followed
in Michigan Rubber (India) Limited v. State of Karnataka.
9
Thereafter, this Court rejected the challenge to the employer’s
decision holding Bakshi Security and Personnel Services
ineligible to participate in the tender.
47. The result of this discussion is that the issue of the
acceptance or rejection of a bid or a bidder should be looked at
not only from the point of view of the unsuccessful party but
also from the point of view of the employer. As held in Ramana
Dayaram Shetty the terms of the NIT cannot be ignored as
being redundant or superfluous. They must be given a meaning
and the necessary significance. As pointed out in Tata Cellular
there must be judicial restraint in interfering with administrative
action. Ordinarily, the soundness of the decision taken by the
employer ought not to be questioned but the decision making
process can certainly be subject to judicial review. The
8
2016 (7) SCALE 425
9
(2012) 8 SCC 216
soundness of the decision may be questioned if it is irrational or
mala fide or intended to favour someone or a decision “that no
responsible authority acting reasonably and in accordance with
relevant law could have reached” as held in Jagdish Mandal
followed in Michigan Rubber.
48. Therefore, whether a term of the NIT is essential or not is a
decision taken by the employer which should be respected. Even
if the term is essential, the employer has the inherent authority
to deviate from it provided the deviation is made applicable to all
bidders and potential bidders as held in Ramana Dayaram
Shetty. However, if the term is held by the employer to be
ancillary or subsidiary, even that decision should be respected.
The lawfulness of that decision can be questioned on very
limited grounds, as mentioned in the various decisions
discussed above, but the soundness of the decision cannot be
questioned, otherwise this Court would be taking over the
function of the tender issuing authority, which it cannot.
49. Again, looked at from the point of view of the employer if
the Courts take over the decision-making function of the
employer and make a distinction between essential and
non-essential terms contrary to the intention of the employer
and thereby re-write the arrangement, it could lead to all sorts of
problems including the one that we are grappling with. For
example, the GTC that we are concerned with specifically states
in Clause 15.2 that “Any Bid not accompanied by an acceptable
Bid Security/EMD shall be rejected by the employer as
non-responsive.” Surely, CCL ex facie intended this term to be
mandatory, yet the High Court held that the bank guarantee in a
format not prescribed by it ought to be accepted since that
requirement was a non-essential term of the GTC. From the
point of view of CCL the GTC has been impermissibly re-written
by the High Court.
50. Yet another problem could be faced by an employer (such
as CCL) if the language used in the terms of the NIT or the GTC
is not adhered to and its plain meaning discarded. A problem
could be faced by an employer if every bidder furnishes a bank
guarantee in a different format or one that it is comfortable with.
In such a situation, CCL would have to scrutinize each bank
guarantee to ascertain whether it meets with its requirements
and the NIT and the GTC. Apart from the text of the bank
guarantee, minor changes could be made by a bidder such as
enforceability in a place other than Ranchi (but in Jharkhand)
etc. This would place an avoidable and undue burden on the
employer particularly if there are a large number of bidders.
. Not only this, any decision taken by the employer in
accepting or rejecting a particular bank guarantee in a format
not prescribed by it could lead to (avoidable) litigation requiring
the employer to justify the rejection or acceptance of each bank
guarantee. This is hardly conducive to a smooth and hassle-free
bidding process.
52. There is a wholesome principle that the Courts have been
following for a very long time and which was articulated in Nazir
Ahmad v. King Emperor10 namely “Where a power is given to
do a certain thing in a certain way the thing must be done in
that way or not at all. Other methods of performance are
necessarily forbidden.” There is no valid reason to give up this
salutary principle or not to apply it mutatis mutandis to bid
documents. This principle deserves to be applied in contractual
disputes, particularly in commercial contracts or bids leading up
to commercial contracts, where there is stiff competition. It must
follow from the application of the principle laid down in Nazir
Ahmed that if the employer prescribes a particular format of the
bank guarantee to be furnished, then a bidder ought to submit
the bank guarantee in that particular format only and not in any
other format. However, as mentioned above, there is no
10 AIR 1936 PC 253
inflexibility in this regard and an employer could deviate from
the terms of the bid document but only within the parameters
mentioned above.
53. Nazir Ahmed has been followed in dozens of decisions
rendered by this Court and by other constitutional Courts in the
country. The Central Vigilance Commission has accepted this
principle in a modified form as a guiding principle in its circular
dated 31st December, 2007 wherein it is mentioned that all
organizations ought to evolve a procedure for acceptance of bank
guarantees that is compatible with the guidelines of banks and
the Reserve Bank of India. One such requirement is that the
bank guarantee should be in a proper prescribed format and
should be verified verbatim on receipt with the original.
Adherence to this principle of verbatim verification would not
only avoid undue problems for the employer but would also
virtually eliminate subjectivity on the part of the employer.
54. In this context, and in the present times, it is important to
note that the World Bank has ranked India extremely low in
matters relating to enforcement of contracts and ease of doing
business. Out of 189 countries worldwide, India is ranked 178
in the matter of enforcement of contracts and 130 in the matter
of ease of doing business11. One of the possible reasons for this
extremely low ranking given to our country is the failure of all
parties concerned in strictly adhering to the terms of documents
such as the NIT and the GTC. In so far as the present case is
concerned, the NIT was floated on 5th August, 2015 and one year
later, we are still struggling with the issue of acceptance of a
bank guarantee for a contract of about Rs. 2000 crores –
certainly not a small sum.
Conclusion
55. On the basis of the available case law, we are of the view
that since CCL had not relaxed or deviated from the requirement
of furnishing a bank guarantee in the prescribed format, in so
far as the present appeals are concerned every bidder was
obliged to adhere to the prescribed format of the bank
guarantee. Consequently, the failure of JVC to furnish the bank
guarantee in the prescribed format was sufficient reason for CCL
to reject its bid.
56. There is nothing to indicate that the process by which the
decision was taken by CCL that the bank guarantee furnished
by JVC ought to be rejected was flawed in any manner
whatsoever. Similarly, there is nothing to indicate that the
11 www.doingbusiness.org/rankings (World Bank Group)
decision taken by CCL to reject the bank guarantee furnished by
JVC and to adhere to the requirements of the NIT and the GTC
was arbitrary or unreasonable or perverse in any manner
whatsoever.
57. The impugned judgment and order passed by the Division
Bench of the Jharkhand High Court is accordingly set aside and
these appeals are allowed.
……....………………….J
(Madan B. Lokur)
…..……….…………….J
New Delhi; (R.K. Agrawal)
August 17, 2016
No comments:
Post a Comment