Calcutta High Court (Appellete Side)
Mrt Signals Limited And Another vs Union Of India And Others on 1 October, 2024
Author: Shampa Sarkar
Bench: Shampa Sarkar
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
Present:
Hon'ble Justice Shampa Sarkar
WPA 13366 of 2024
MRT Signals Limited and another
vs.
Union of India and others
Mr. Jayanta Kumar Mitra, Ld. Sr. Adv.
Mr. Jishnu Saha, ld. Sr. Adv.
Ms. Rajshree Kajaria,
Mr. Sarvapriya Mukherjee
Ms. Ishan Saha
... for the petitioners
Mr. S.N. Mookherjee, Ld. Sr. Adv.
Mr. Srijib Chakraborty,
Mr. Subhasis Chakraborty,
Mr. Dhruv Chadha,
Mr. Amit Chowdhury
Ms. Susmita Kumari Singh,
Mr. Aditya Mondal
... for the Respondent No.4
Mr. Debasish Kundu, Ld. Sr. Adv.
Mr. Pinaki Ranjan Chakraborty,
Ms. Susmita Sarkar
... for the Union of India
Hearing concluded on : 23.08.2024
Judgment on : 01.10.2024
Shampa Sarkar J.:-
1. The petitioner No.1 is a company incorporated under the provisions of
the Companies Act 1956. The petitioner No.2 is the senior executive of the
petitioner No.1. In this writ petition, the rejection of the technical bid of the
petitioners on the ground that the same was found to be technically
unsuitable, is under challenge.
2
2. The respondent No.2 published a Request For Proposal (RFP), which
contained the notice inviting tender No. NCR-S&T-EPC-ABS-GMC-VGLJ
dated January 19, 2024, hereinafter referred to as the 'said tender'. The
description of the work was "Provision of EI based Automatic Signaling
with continuous track circuiting and other Associated works including
suitable indoor alterations in EI/RRI/PI stations enroute in GMC(Incl)-
VGLJ (Incl) section of Jhansi Division of North Central Railway",. The said
tender was in respect of an Engineering Procurement and Construction
(EPC) contract. The advertised value/the estimated cost of the project was
Rs.274,34,40,010.47/-.
3. The tender was for a single stage two packets system, namely,
technical bid and financial bid. The last date for submission of bids was
February 27, 2024 at 12.00 noon. The petitioner No.1 participated and
deposited the earnest money to the tune of Rs.1,37,17,200/-. After
submission of the bids, the petitioner No.1 received a letter dated March
18, 2024, from the respondent No.2, that is, the Chief Signal and Telecom
Engineer-III, ALD/NCR/Subdarganj/Prayagraj, calling upon the petitioners
to submit an undertaking in an enclosed format. The letter stated that an
undertaking showing fulfillment of clause 2.2.2.1 (ii) of the RPF had to be
filed, inter alia, stating that the petitioner No.1 had undertaken at least one
eligible project of the railway sector as mentioned in clause 2.2.2.4/iii, of
value not less than 35% of the estimated project cost, i.e.,
Rs.96,02,04,003/- and had received payment for not less than 75% of the
present contract value.
3
4. Mr. Jayanta Mitra, learned Senior Advocate for the petitioners
submitted that the said undertaking was called for in terms of the
Amendment No.6 dated December 29, 2023, incorporated by the railway
board in the standard terms and conditions. The terms and conditions of
the RFP did not require that an undertaking in the enclosed format would
have to be filed. The petitioners did not submit the purported undertaking,
but explained in detail why the petitioners were not covered by the
illustration. The petitioners explained that the amendment did not debar
the petitioners from participating in the tender. The technical eligibility of
the petitioners remained unaffected by the amendment. By the said
amendment, after clause 2.2.2.1 (ii), an illustration had been introduced.
The illustration applied in cases of receipt of money from prior eligible
projects of the railway sector, in which there was a scope for part-payment
to the contractor on procurement of goods and equipment on the basis of
an indemnity bond/bank guarantee. The prior eligible railway projects in
which the petitioners participated did not have a provision for part
payment on procurement of goods and equipments on the basis of
indemnity bond/guarantee. Thus, the petitioners received payments as a
whole, in the projects they had participated.
5. According to the petitioners, clause 2.2.2.1 (ii) prescribed that the
bidders should have received payment of not less than 75 % of the contract
value from any prior eligible project. The newly introduced illustration by
the sixth amendment did not change the purport of clause 2.2.2.1 (ii), as it
stood prior to such amendment. The amendment only explained that if the
prospective bidders had received payment on the basis of indemnity
4
bond/bank guarantee for procurement of goods and equipments from prior
projects, they would have to satisfy the tendering authorities that they had
received payments of not less than 75 % of the contract value for the
construction work as well. In other cases where such payment mode was
not prescribed by the terms of the contracts of such prior eligible projects,
as in the case of the petitioners, the illustration would not be applicable.
6. Thus, it was contended by Mr. Mitra, that the railway authorities had
demanded such undertaking arbitrarily, only to oust the petitioners from
the bidding process. As the petitioners had not received part payment upon
furnishing indemnity bond/bank guarantee, for procurement and supply of
goods, the petitioners were required to satisfy the tendering authority that
payment amounting to 75% payment of the present contract value had
been received from a prior eligible project. The petitioners had submitted a
certificate dated June 14, 2023, issued by the Deputy Chief Signal &
Telecom Engineer (construction) South-Eastern Railways, Kharagpur,
certifying that the petitioner had carried out work in an eligible project and
received payment amounting to more than 75% of the present contract
value. On the basis of such certificate, the petitioners claimed to have
satisfied the condition set out in clause 2.2.2.1 (ii).
7. Such explanation was forwarded to the respondent No.2 vide reply
dated April 9, 2024. Thereafter, the petitioners received an electronic mail
dated May 4, 2024, at about 12.07 with the information that their bid was
found to be technically unsuitable.
8. Mr. Mitra urged that such communication was in violation of the
principles of natural justice. No reasons had been assigned as to why the
5
technical bid was found to be technically unsuitable. The e-mail was
received at the registered office of the petitioners, at Kolkata. Before such
rejection, an opportunity of hearing should have been given to the
petitioners. Had the petitioners been given an opportunity to explain why
the sixth amendment would not be applicable in their case, the authority
could have understood that the undertaking would not be necessary. The
cancellation on the ground of non-furnishing of such undertaking, was
unfounded. The bid was cancelled on extraneous considerations and not in
terms of the tender conditions. Thus, the rejection was arbitrary, irrational
and unreasonable.
9. Mr. Mitra submitted that the petitioner No.1 duly furnished all
necessary documents. The petitioners were singled out, only to favour the
respondent No.4. To demonstrate technical capacity, eligibility and
experience, the petitioner No. 1 was required to satisfy the authority that
the petitioner No.1 had undertaken at least one eligible project of the
railway sector as mentioned in clause 2.2.2.4/ iii of value of not less than
35 % of the estimated cost of the project and had received payment for
value not less than 75 % of the project. The certificate of eligibility
submitted by the petitioners was in respect of a contract, having value of
Rs.98,74,31,628.32/-. Out of the contract value, for the work already
carried out by the Petitioner No. 1, the Petitioner No. 1 had received
Rs.74,29,14,380/- which was more than 75% of the project value. 35 % of
the present contract value was Rs.96,02,04,003/-. The rejection of the
technical bid dated May 4, 2024, was done in a wrongful manner, without
6
taking into consideration the documents which were furnished by the
petitioners.
10. Mr. Mitra further submitted that the clause 2.2.2.1 (ii) should have
been followed verbatim and applied in the case of the petitioners, in order to
assess the technical eligibility of the petitioners. The illustration was an
explanation introduced only to demonstrate what was actually expected
from the bidder. Such illustration could only be applied in case of those
category of bidders who had not received part payment from a prior eligible
project for supply of goods and equipments on furnishing indemnity bond
and bank guarantee and part payment for construction. Such illustration
and the requirement to file an undertaking justifying eligibility on the basis
of the illustration, were beyond the scope of the terms and conditions of the
tender. The illustration could not have an overriding effect to the main
condition. A bidder who fulfilled the condition, was not required to submit
an undertaking demonstrating the break up of receipt of payment as per the
illustration. The illustration was not a term. It was an explanation of a
situation, under the term. The rejection of the technical bid also suffered
from non-application of mind. As per the tender terms, to demonstrate
Technical Capacity and experience, bidders were required to show that
during the five previous financial years and current financial year upto the
base month, they had the necessary qualifications to satisfy the criterions
under two separate and independent terms of the tender, inter alia:- a)
Clause 2.2.2.1(i), i.e. had received payments for construction of Eligible
Projects as mentioned in Clause 2.2.2.4(i) & (ii), the sum total of which was
more than 2.5 times the Estimated Project Cost; i.e.; Rs.685,86,00,026/-
7
(Threshold Technical Capacity). In Support of such technical capacity the
bidder was required to furnish information as per Annexure II of Appendix
IA. b) Clause 2.2.2.1(ii), i.e., Undertaken at least one Eligible Project of
Railway Sector as mentioned in clause 2.2.2.4/iii. The value of such project
should not be less than 35% of the Estimated Project Cost, i.e.
Rs.96,02,04,003/- and had received payment for not less than 75% of the
contract value of the present project. In support of such technical capacity
the bidder was to furnish information as per Annexure IV of Appendix IA.
The certificate dated 14th June 2023 at page 47 of the petition
demonstrated the eligibility of the petitioner No.1 under clause 2.2.2.1 (ii).
11. According to Mr. Mitra, in order to satisfy the eligibility of the
petitioner No.1 under clause 2.2.2.1(i), the petitioners submitted the
contract wise payment received in the past five years in Annexure II of
Appendix 1, 1A, showing receipt of Rs.788.96 crores, which was
significantly more than the technical capacity threshold of the subject
tender. The petitioners submitted several documents, namely, a certificate
from south-eastern railway dated June 14, 2023, which showed the contract
value of eligible project was Rs.98.74 crores (more than 35% of the
estimated project cost) and also payment received of Rs.74.29 crores (more
than 75% of the contract value of the project). Annexure IV of Appendix 1A
of the bid documents showed the details of the eligible project. The eligible
project relied upon by the petitioners did not have any provision for part
payment on procurement of goods and equipment on the basis of indemnity
bond/bank guarantee. The petitioners had received a total of Rs.74.29
8
crores and such payment was not referable to either any indemnity bond or
a bank guarantee.
12. Mr. Mitra submitted that the only ground for cancellation as would be
evident from the affidavit-in-opposition filed by the railway
authorities/tendering authorities, was that the petitioner No.1 had failed to
demonstrate eligibility in terms of the illustration to clause 2.2.2.1(ii) of the
RFP. Such contention of the railways was on the face of record, contrary to
the provisions of clause 2.2.2.1(ii). The illustration could not be pressed into
service by the railways, in order to whimsically reject the bid of the
petitioners, when the illustration was not applicable at all. The illustration
could neither expand nor curtail the main provision. The illustration could
at best be an explanation to the provisions of the main clause.
13. Mr. Mitra referred to the decisions, of Aniruddha Mitra vs
Administrator-General of Bengal reported in AIR 1949 PC 244 and Ram
Gopal Sen vs Abhoya Charan Ghose and Ors. reported in AIR 1915 Cal
594 for the proposition that an illustration could not have the effect of
modifying the language of the original section of a statute. Mr. Mitra also
relied on the decisions Union of India vs. A.L. Rallia Ram, reported in AIR
1963 SC 1685 and Lalit Mohan Pandey vs Pooran Singh reported
in(2004) 6 SCC 626. According to Mr. Mitra, the other contention of the
railways that the petitioners had not received payment of at least Rs.27
crores from construction work was also baseless. Article 1.2(f) of the RFP
defined construction to include survey, investigation, design, developing,
engineering, procurement, supply of plant materials, equipment, etc. The
railways tried to create a confusion by making a distinction between the
9
expressions 'construction' and 'procurement', in order to justify the rejection
of the technical bid of the petitioners. They combined the qualifications
prescribed under the illustration to clause 2.2.2.1(ii) and those under clause
2.2.2.5 of the RPF. The railways did not ever raise any dispute that the
project relied upon by the petitioners was not an eligible project. Such was
not the reason for rejection of the technical bid as per the averments in the
affidavit-in-opposition, but a statement from the bar. The railways did not
mention that the petitioners did not qualify under clause 2.2.2.1(i) of the
RFP. Eligible project was defined under clause 2.2.2.4 (i) and (ii) read with
clause 2.2.2.5(ii) A or B. Most importantly, the submissions of the
respondent No.4 were adopted by the railways at the stage of arguments,
although, the railways had never raised the question of eligibility of the
project in respect of which experience was claimed to have been acquired by
the petitioners.
14. With regard to the submissions of Mr. S. N. Mukherjee, learned Senior
Advocate for the respondent No.4, Mr. Mitra urged that the reasons provided
by the railways in respect of their decision, must be looked into by this
court. The submissions of the added respondent were not relevant. The
respondent No.4 did not have the authority to analyse, explain, elaborate
and justify the decision of the tendering authority. The decision of the
tendering authority had to be independent, based on the clauses of the RFP
and not on the grounds which were beyond the terms and conditions of the
RFP. The contentions of the respondent No.4 were contrary to the literal
interpretation of clause 2.2.2.1(ii).
10
15. The respondent No.4 attempted to create a confusion by submitting
that to qualify under Clause 2.2.2.1(ii), the Eligible project Undertaken by
the petitioner must be one qualifying under Category 3 of Clause 2.2.2.5 of
the RFP, thus making it compulsory that payment of at least Rs.27 Crores
(approx.) on account of construction work should have been received by the
bidder. Such was not the case run by the railways. Mr. Mitra submitted that
to qualify under Clause 2.2.2.1(i), an Eligible Project of Railway Sector was
as mentioned in clause 2.2.2.4/iii, which did not require qualification as per
Category 3 under clause 2.2.2.5(ii)(A) or (B). Only for qualification under
Clause 2.2.2.1(i), an Eligible Project should be as those mentioned in clause
2.2.2.4(i) and (ii), which expressly required further qualification under
clause 2.2.2.5. The petitioner had, in fact, submitted all required forms
including Annexure-ll and Annexure-IV of Appendix IA. Thus, for a project
to be eligible under clause 2.2.2.1(ii), clause 2.2.2.5(ii) (A) or (B) was
inapplicable and accordingly the requirement of receipt of Rs. 27 crores for
construction work was also inapplicable. As per clause 2.2.2.5(i) (A) or (B),
the exclusion of supply of materials from the word 'construction' was
confined only to such contracts which were neither construction contracts
(on Turnkey basis) nor EPC contracts. The certificates produced by the
petitioners were evidence of them having qualified in an eligible project and
the works undertaken under different contracts cited in different certificates
were all in respect of Turnkey Projects/EPC contracts. Hence, the qualifying
words of clause 2.2.2.5(ii) (A) and (B) were not applicable to the petitioners
at all, for fulfilling the criterion under Clause 2.2.2.1(ii).
11
16. The term 'construction' as defined in the contract would also include
supply. The decision of the railways was ex facie contrary to the tender
terms. The issue was not with regard to interpretation of the terms, but with
regard to justification of the decision of the railways by wrongly applying
those terms, which did not have a bearing on the eligibility of the bidders.
The railways had arbitrarily rejected the bid on an incorrect reading of
clause 2.2.2.1 (ii). The decision was taken by the authorities only to favour
the respondent No.4.
17. Mr. Debashis Kundu, learned Senior Advocate appeared on behalf of
the railway authorities, that is, the respondent Nos.1, 2 and 3. According to
Mr. Kundu, four bidders had submitted their respective bids, including the
petitioners. At a pre-bid conference, all the bidders participated. Neither any
query nor any clarification was sought for by the petitioners after meaning
thereby, the petitioners were well-acquainted with the clauses and terms
and conditions of the RFP. The tender document had two parts. The first
part was the RFP and the second part was the agreement, which was to be
signed by the successful bidder and railway authorities, after selection of the
bidder.
18. The interpretation of the terms and conditions in the RFP and in the
agreement, were significantly different. For example, the expression
'construction' in the RFP was defined as construction and payments
received on account of construction, excluding supply of equipment.
Whereas, in the agreement, construction included supply. Reliance of the
petitioner on the definition of construction, as provided in the agreement,
was misplaced.
12
19. By the letter dated March 18, 2024, the railway authorities called
upon the petitioners to submit an undertaking in the format attached to the
letter with the project code and project name, in respect of which the
petitioners were claiming fulfilment of clause 2.2.2.1 (ii) of the RFP. It was
submitted by Mr. Kundu that in order to demonstrate technical capacity
and experience, the bidder was required to satisfy the authorities that
during the previous five financial years and in the current financial year up
to the base month, the bidder had received payments for construction of
eligible projects and the sum total thereof, was more than 2.5 times the
estimated project cost, that is, Rs.685,86,00,026/-. Reliance was placed on
clause 2.2.2.1.
20. The clause further provided that payment of one-fourth of the
threshold capacity should have been received from the eligible project, either
in category 1 and or category 3 specified in clause 2.2.2.4 (i) and (ii). To
satisfy such eligibility, the bidder would have to also show that the bidder
had undertaken one eligible project of the railway sector as mentioned in
clause 2.2.2.4/iii of value of not less than 35 % of the estimated cost, that
is, Rs.960,204,003/- and had received payments for not less than 75% of
the present contract value, excluding payments made after adjustment of
price variation of such project. The illustration only clarified the above term.
21. By a letter dated April 9, 2024, the petitioners refused to provide such
undertaking on the ground that the illustration as cited under clause
2.2.2.1 (ii) was not applicable. All the other participants had submitted such
undertaking, including the respondent No.4.
13
22. According to the railway authorities, the terms and conditions of the
tender document were read as a whole. The decision of the authority was
based on a composite reading of the terms and conditions of the contract
and not on the basis of the illustration. First and foremost, the writ
petitioners refused to submit the undertaking as was required from them
under clause 2.2.2.1(ii). On the ground of non-furnishing of the
undertaking, the railway authority was entitled to invoke the provisions of
clause 2.6.2 of the RFP. The clause gave the right to the railways to reject
any bid and bar a bidder from participating in any tender under the Union
Railway, for a period of 12 months from the date of such banning. The
conditions of the RFP required the petitioners to satisfy the evaluation
committee of their technical capacity under Annexure II and of having
participated in an eligible project. The tender document indicated that
emphasis was supplied on 'construction'. The conditions that the
participating bidders would have to indicate that they had received 75%
payment of the present contract value solely on account of construction, and
the composite amount received for both construction and supply of goods
would not be taken into account to evaluate the technical capacity, were
clearly spelt out in the tender document.
23. According to the railways, such requirement was incorporated in order
to ensure that a successful bidder, after having supplied the goods and
equipments (which could have been a major part) in the prior project, had
not abandoned the project without undertaking the construction work.
24. Reliance was placed on clauses 2.2.2.1, 2.2.2.4, which dealt with the
factors for evaluation and clause 2.2.2.5, which dealt with eligible
14
experience and eligible projects. Clause 2.2.2.6, Annexure II of Appendix 1A
and Annexure IV of Appendix 1A were also relied upon to demonstrate the
meaning of the expressions 'technical capacity' and 'eligible project'.
25. Referring to clause 2.2.2.5 (ii) (B), Annexure II of Appendix 1A and
Annexure IV of Appendix 1A, Mr. Kundu submitted that construction did
not include supply of goods. Thus, payments received in respect of
constructions, were taken into consideration to evaluate the technical
capacity. The writ petitioners did not fulfil the essential terms and
conditions. The parameters which were part of the technical capacity were
not fulfilled. The railway authorities had made an enquiry in terms of clause
2.6.1 of the RPF, into the veracity of the projects relied upon by the
petitioners. The outcome of such enquiry went against the petitioners.
26. The details of such findings and the deficiencies, had been discussed
in the affidavit-in-opposition. All the terms and conditions of the contract
were harmoniously construed by the evaluation committee to come to a
finding that the payment received by the petitioners for construction of the
prior eligible project, did not reach the eligibility threshold.
27. Mr. Kundu submitted that the illustration was not the only reason for
rejecting the bid of the petitioners. The authorities had come to the decision
that the techno-commercial bid of the petitioners was not viable, as per their
interpretation of the terms and conditions. Two bidders were found
technically suitable amongst four. Thus, the question of singling out the
petitioners, did not arise. Another bid was also found to be techno-
commercially unsuitable.
15
28. The work involved public interest. Unless, the decision of the
authority in cancelling the technical bid of the petitioners was adverse to
public interest, the decision should not be interfered with by a writ court.
The basis for rejection was that, the petitioners had not received substantial
amount of payment from construction work in an eligible project. The
authorities laid emphasis on the construction part of the prior experience. In
terms of the various clauses of the terms and conditions of the contract,
method of evaluation of the eligible project and technical capacity were
justified. This was done to ensure that the selected bidder had completed
major portion of the construction work in such prior eligible project and had
executed the project satisfactorily. Work relating to supply of plants,
machines and equipments and the income therefrom were not the primary
eligibility criteria. The tendering authority was justified in laying stress on
the construction aspect, as per their wisdom, knowledge and expertise.
29. Mr. Kundu relied on the following decisions:-
a. Shilppi Constructions Contractors vs. Union of India & Anr.
reported in (2020) 16 SCC 498,
b. N.G. Projects Limited vs. Vinod Kumar Jain. reported in (2022) 6
SCC 127.
c. Maharashtra State Electricity Distribution Company Limited vs.
Ratnagiri Gas and Power Private Limited & Others reported in
(2024) 1 SCC 333 .
30. Mr. S. N. Mookherji, learned Senior Advocate appeared on behalf of
the respondent No.4 and submitted that the petitioners did not qualify for
16
various reasons. The petitioners had not undertaken at least one eligible
project of the railway sector as mentioned in clause 2.2.2.4 /iii of value of
not less than 35% of the estimated project cost. The petitioners had neither
undertaken at least one eligible project of the railway sector nor had they
received payment of not less than 75% of the present contract value, for the
work of commissioning, installation etc.
31. Mr. Mookherji submitted that clause 2.2.2.4, provided the factors and
categories for evaluation of the technical capacity. The subject work fell
within Category 3 project, of clause 2.2.2.4. The petitioners submitted a
certificate in support of their claim to have qualified the dual test as
required under clause 2.2.2.1(ii) and clause 2.2.2.5(ii). The said certificate
was not in respect of an eligible project. According to Mr. Mookherji, to
qualify technically under RFP, the petitioners were required to satisfy other
conditions. In terms of clause 2.2.2.1 (ii), the petitioners should have
undertaken at least one eligible project of the railways sector, as mentioned
in clause 2.2.2.4/iii of value of lot less than 35% of the estimated project
cost, that is Rs.96,02,04,003/- and further, should have received payments
for not less than 75% value of the present contract value.
32. In the event, the petitioners received payment for procurement of
goods and equipment, the petitioners should have received not less than
75% payment of the present contract value under procurement of goods and
equipment as well as not less than 75% payment of the present contract
value for execution, installation and commission. In terms of clause 2.2.2.5
(ii), (B), the petitioners should have actually received cumulative payments
of more than Rs.27 crores, as payment for construction work executed
17
during the last five years. Construction would not include supply, unless
such supply was in an EPC contract.
33. As per pages 47 and 48 of the writ petition, the cost of the earlier
project undertaken by the petitioners was Rs.98,74,31,628.32/-. The total
cost of supply portion was Rs.81,55,281.54/- and the total cost of
construction was Rs.17,19,03,473.78/-. Out of total cost of supply, the
petitioners had received Rs.75,36,66,769.70/- and out of total cost of
construction, the petitioners had received Rs.4,95,74,193.22/-. Thus,
admittedly, the petitioners had received much less than the required
payment of Rs.27 crores.
34. The petitioners admitted in their pleadings that the prior project was a
GCC contract and not an EPC one. The petitioners wrongly relied on the
definition of 'construction' in the agreement part, which was inapplicable.
The definition of 'construction' in the RFP was taken into consideration at
the time of evaluation of the bid. Clause 2.2.2.6 required the bidders to
submit their technical bids as per the format at Annexure II of Appendix 1A
and Annexure IV of Appendix 1A. Annexure II to Appendix 1A indicated that
the bidder was required to submit details of payment for construction of
eligible projects and the annexures further clarified that construction would
not include supply of goods and equipments except when such supply goods
and equipments did not form part of a turn-key construction/EPC contract.
Further, Annexure IV of Appendix 1A, made it clear that in cases of
Categories 3 and 4, payment received only in respect of construction should
be provided.
18
35. Mr. Mookherji argued that upon reading clauses 2.2.2.1, 2.2.2.5 and
Annexures II and IV of Appendix 1A, it was evident that the tender
evaluating committee wanted to ensure that the bidder, who had
undertaken an eligible project had received at least Rs.27,43,44,001/- from
construction work. The railways reserved the right to reject the bid. The
railways were within their right to invoke such provision. The interpretation
of the clauses in the bid document was best left to the wisdom of the author
of the document. The view taken by the tendering authority was a possible
view and judicial review was not permissible.
36. The issue before this court is whether the respondent Nos.1 to 3 had
acted arbitrarily in rejecting the bid of the petitioners on the ground that the
bid was not technically suitable. Although, the petitioners claimed on the
basis of the documents furnished by them that, the technical capacity under
clause 2.2.2.1 of the Request for Proposal had been satisfied, the railway
authorities and the respondent No.4 have relied on several clauses of the
RFP and submitted that the petitioners did not meet the requirements under
various clauses of the said RFP. The disqualification was not only on the
ground of non-compliance of the illustration under clause 2.2.2.1 (ii), but for
other non-compliances as well.
37. The evaluation of the technical capacity of the petitioners was done on
the basis of clause 2.2.2.4 and the sub-clauses thereunder. Other clauses of
the document of the RFP, including the undertakings to be given in the
format provided as annexures were also considered and the petitioners were
found technically ineligible. To demonstrate the eligibility under clause
2.2.2.1(i), the petitioners contended to have submitted contract-wise
19
payment in the previous five years vide Annexure II Appendix 1A, showing
receipt of Rs.788.96 crores, which was significantly more than the threshold
technical capacity. The petitioners claimed to have submitted the relevant
documents and certificates.
38. To demonstrate eligibility as per clause 2.2.2.1(ii) the petitioners relied
on Annexure P7 and P8 of the writ petition. The certificate issued by the
Deputy Chief Signal and Telecom Engineer (Construction) South-eastern
Railway, Kharagpur. The said certificate contained the information with
regard to the work done by the petitioners and the same is quoted below:-
Certificate No.: S&T/Con/KGP/NSI-ROP/MRT/01 Date: 14.06.2023
TO WHOM IT MAY CONCERN
This is to certify that M/s. MRT Signals Ltd., 2, Raja Woodmount Street, Kolkata -
700001 is a working Contractor of this Unit and the following is given:-
1. Name of work Work for provision of New Electronics
Interlocking at NEKURSENI, DANTAN,
LAKSHANNATH ROAD, JALESWAR,
AMARDA ROAD, BASTA and ROPSA in
connection with 3rd line between
Narayangarh-Bhadrak in Kharagpur
Division of South Eastern Railway. This
includes provision of Double Distant Signal
in the existing Signalling installation of
section prior to providing new EI.
2. LOA No. & Date SER-CONST-HQ-S AND T/ST-CON-KGP-
20-EI-NSI-ROP00827810034182 Dated
06.04.2021
3. Contract S&T/CON/KGP/NSI-ROP/8-STN/20-
Agreement No. & 21/07 dated 08.09.2021
Date
4. Contract Value at Rs. 98,74,31,628.33/- (ORIGINAL)
the time of award
of work (Original)
5. Revised Value of Rs. 98,74,31,628.33/- (ORIGINAL)
the Contract
6. Date of 06.04.2021
Commencement
7. Original date of 05.04.2023 (24 Months from the date of
Completion as per issue of LOA)
Contract
Agreement
8. Total payment Rs. 74,29,14,380/- (As on 14.06.2023)
20
made to the Firm
against the work
as on 14.06.2023
9. Status of Work 1. MRT has completed and Commissioned
the Double Distant work in the entire
section.
2. Station NEKURSENI commissioned on
21.04.2023
10. Remarks on Satisfactory
performance and
workmanship of
the Contractor
This certificate is issued on the request of the Firm M/s. MRT Signals Ltd. Kolkata
VIKAS KUMAR SINGH
Dy. Chief Signal & Telecom Engineer (Construction)
South Eastern Railway, Kharagpur
39. Annexure P8 at page 48 was relied upon by the petitioners as per
clause 2.2.2.1 (ii), which is also a certificate dated June 14, 2023, issued by
the Chief signal and Telecom Engineer of South-eastern Railway.
The certificate reads as follows:-
"Contract Agreement No. S&T/CON/KG/ NSI-ROP/8 -STN/20-21/07,
Dated.08/09/2021
Name of the work: "Provision of New Electronics Interlocking at
NEKURSENI, DANTAN, LAKSHANNATH ROAD, JALESWAR, AMARDA
ROAD, BASTA and ROPSA in connection with 3rd line between
Narayangarh-Bhadrak in Kharagpur Division of South Eastern Railway.
This includes provision of Double Distant Signal in the existing
signalling installation of section prior to providing new El."
Name of the Contractor : M/S.M.R.T. Signals Ltd,
2,Raja Woodmunt street,
Kolkata - 700001.
Value of the Contract : Rs 98,74,31,628.33/-
Amount of total security Money : Rs. 4,93,71,581.41/-
Completion Period: 24( Twenty Four ) Months i.e. up to
05/04/2023.
Estimate No. & Allocation: 4283/Sig/DPR/16/Modi/18 & CAP -
1500
(EBR IF )
Authorized Signature of Contractor
(Jai Prakash Shivaji)
21
Chief Signal & Telecom Engineer/Con
South Eastern Railway"
40. Relying on the above documents, the petitioners contended that the
contract value of the eligible project was more than Rs.98 crores and out of
the said contract value, the petitioners had received more than Rs.74 crores
as payment. The advertised value of the subject tender was
Rs.2,74,34,40,110/- and 35 % thereof, was Rs.96,02,04,003/-. The contract
value of the prior project was more than 35% of the advertised value of the
subject tender and the petitioners had received payment of more than Rs.74
crores meaning thereby, more than 75 % of the value of the project.
41. The other contention of the petitioners was that the illustration would
not be applicable as the prior project executed by the petitioners were
eligible projects and there was no separate mode of payment on
procurement of goods and equipment on the basis of an indemnity bond or
bank guarantee.
42. Reliance was placed on the payments clause of such prior project,
which is quoted below:-
"No advance payment will be made by Railways to the Contractor.
Payment shall be made quarterly after satisfactory completion of
maintenance period of each quarter on submission of monthly audit
reports/Site Register. The Measurement Book and Bills will have to be
signed by Power of Attorney holders of the contractor. The power of
attorney has to be submitted at the time of Measurement Book entry.
In case the contractor fails to maintain (due to any reason whatsoever)
no payment shall be made. However all penalty on the contractor shall
continue as per the penalty clause mentioned in clause-F of Special
Condition of Contract & shall be recovered even after termination of the
contract and the same shall be recovered from any other bill or Security
Deposit against this or other contracts and from other sources."
43. Main thrust of the argument of Mr. Mitra, learned Senior Advocate
was that the illustration could not restrict the applicability of the main
22
provision of clause 2.2.2.1 (ii). The petitioners had received more than 75%
of the present contract value, from a prior project.
44. To counter such contention, the railways categorically explained the
reasons as to why the petitioners were not found to be technically eligible. In
the affidavit-in-opposition, the railways considered the documents relied
upon by the petitioners, which have been quoted hereinabove, and recorded
their reasons for not finding the contents of the said documents to be
adequate qualification, to cross the technical capacity threshold.
45. The relevant paragraphs of the affidavit-in-opposition, in this regard
are quoted below:-
"(d) the writ petitioner, in support of the tender, submitted the
credentials of the two works being ;-
(A) Provision for new electronic interlocking at Nekurseni, Dantan,
Lakshannath Road, Jaleswar, Rajghat, Amarda Road, Basta, Ropsa in
connection with 3rd line between Narayangarh-Bhadrak in Kharagpur
Division of South Eastern Railway and against the said project, the
petitioner had shown receipt of Rs.78.32 crores. But on verification
from petitioner's said client, it was found that out of the total cost of
work being Rs.98,74,31,628.32/-, the total cost for supply portion is
Rs.81,55,281.54/- and the total cost for execution/
installation/commissioning is Rs.17,19,03,473.78/-. Out of the total
cost for supply, the petitioner was paid Rs.75,36,66,769.70/- being
92.41% of the total cost for supply and out of the aforesaid total cost
for execution/ installation/commissioning, the petitioner was paid
Rs.4,95,74,193.22/- being 28.84% of the total cost for execution/
installation/commissioning, which practically the total cost on
construction work.
(B) Provisions for new electronic interlocking at Haldipada, Balasore,
Nilgiri Road, Khantapara, Bahanagabazar, Soro, Sabira and Markona in
connection with 3rd line between Narayangarh - Bhadrak in Kharagpur
division of SouthEastern Railways. Against the said project, the
petitioner had shown receipt ofRs.79.16 Crore. But on verification from
the petitioner's said client it was revealed that the total cost of work in
the said project is Rs. 1044038654.74/-, out of which, cost of supply
portion isRs.816399486.60/- and cost for execution/ installation/
commissioning is Rs. 227639168.20/- and the petitioner received Rs.
730663729.70/- being 89.50% of the total cost for supply and received
Rs.60967119,60/-, being 28.61% of the total cost for
23
execution/installation /commissioning, which actually the payment on
construction."
46. With regard to the work of interlocking at Nekurseni, Dantan it was
found that out of the total cost for supply, the petitioners were paid
Rs.75,36,66,769.70/- being 92.41% of the total cost for supply and out of
the total cost for execution, installation and commissioning, the petitioners
were paid Rs.4,95,74,193.22/- being 28.84% of the total cost. Thus, the
total cost on construction was found to be far less than the required
percentage.
47. With regard to the construction of new interlocking at Haldipara,
Balasore, Nilgiri, it was revealed that the petitioners received
Rs.60967119.60/- that is, 28.61% of the total cost, for execution,
installation and commission. The authorities were of the view that the
payment received for execution, installation and commission were
practically the cost received for construction work undertaken by the
petitioners in each of these projects, and the amount received was far less
than the requirement under the RFP, that is, 75% value of the present
contract.
48. The authorities were of the firm view that, the petitioners could not
satisfy the tender evaluating authority that they had undertaken at least one
eligible project of the railway sector as mentioned in the RFP, of value of not
less than 35% of the estimated project cost and had received the payment of
not less than 75% of the present contract value under execution, installation
and commission, which was an essential requirement, specifically
mentioned in the different clauses as well as the prescribed formats at
24
Appendix 1A and Annexures thereto. As the work was of high priority,
relating to public safety, the requirement of execution of substantial
construction work including survey, investigation, design, development,
engineering, installation, processing, fabrication, testing and commissioning
of railway projects, was an essential condition of the tender.
49. Mere supply of goods was not sufficient for selection of the bidder for
the project. The relevant clauses of the RFP were to be construed as a whole,
to understand the requirements of the authorities. Experience in
construction had been given a primacy in all of such clauses and the railway
authorities had laid great emphasis on such requirement. Further
opportunity was given to the petitioners by a letter dated 18th March, 2024,
to provide a breakup of the receipt of payment for supply and for
construction. The petitioners neither submitted the breakup nor the
undertaking, although, all the other three bidders had done so. Two bidders
qualified in the technical round and two did not. The bids of the petitioners
and another bidder were found to be technically not viable.
50. The fact that the petitioners did not submit the breakup and instead
responded by saying that the illustration would not be applicable, is a
violation of the requirements. The tendering authority was the supreme
authority to decide how the clauses should be interpreted. The bidders
would have to satisfy the tender evaluation committee with relevant records
and documents. The tendering authority had acted within its jurisdiction to
require the petitioners to furnish the undertaking and non-compliance of
such instruction, could well be a ground for the authorities to disqualify the
petitioners.
25
51. The relevant clauses of the R.F.P. relating to eligibility requirements of
the bidders are extracted below:-
"2.2.2 Qualification requirements of Bidders: To be eligible for
Qualification an individual Bidder or a Consortium/Joint Venture as
whole as per clause 2.1.11(c), shall fulfil the following conditions of
eligibility:
2.2.2.1 Technical Capacity- For demonstrating Technical Capacity and
experience (the "Technical Capacity"), the Bidder shall, during the last
5(five) previous financial Years and the current financial year up to the
Base month(not to be read with para-2.1.13).
(i)have received payments for construction of Eligible Project(s), or has
undertaken construction works by itself in a PPP project, such that the
sum total thereof, as further adjusted in accordance with clause 2.2.2.4
(i) & ii), is more than 2.5 (two and half) times the Estimated Project
Cost i.e. Rs 685,86,00,026/- (Rs Six Eight Five Crore Eighty Six Lakhs
and Twenty Six only) (the "Threshold Technical Capacity").
Provided that at least one fourth of the Threshold Technical Capacity
shall be from the Eligible Projects in Category 1 and/ or Category 3
specified in Clause 2.2.2.4 (i) & (ii).
(ii) Undertaken at least one Eligible Project of Railway Sector as
mentioned in clause 2.2.2.4/iii of value of not less than [35% (thirty
five) per cent] of the Estimated Project Cost i.e. Rs 960204003/- (Rs.
Ninety Six Crores Two Lakhs Four Thousand and Three only) and have
received payments for not less than 75% (seventy-five) per cent value of
present Contract Value(excluding the payment made for adjustment of
Price variation (PVC), if any) of such project.
Illustration for received payments for not less than 75(seventy-five)
percent:
For contract wherein there is provision for part payment on
'procurement of goods and equipment' on basis of indemnity bond
/Bank Guarantee. In all such contract received payments for not less
than 75(seventy-five) percent value of present Contract Value payment'
means not less than 75% payment received under 'procurement of
goods and equipment' as well as not less than 75% payment received
under 'execution/installation/commissioning'
[Note:- For composite works of New lines, Guage Conversion, Doubling,
3rd line, 4th line etc. with Railway electrification and/or Signalling and
telecommunication works..."
52. The work falls under category 3 project, of clause 2.2.2.4. Clause
2.2.2.4 is quoted below:-
"2.2.2.4Categories and factors for evaluation of Technical Capacity:
26
Subject to the provisions of Clause 2.2.2, the following categories of
experience would qualify as Technical Capacity and eligible experience
(the "Eligible Experience") in relation to eligible projects as stipulated
in Clauses (i) and 2.2.2.5 (ii) (the "Eligible Projects"):
Category 1:Project experience on Eligible Projects in Railways sector
that qualify under Clause 2.2.2.5 (i)
Category 2:Project experience on Eligible Projects in core sector that
qualify under Clause 2.2.2.5 (ii)
Category 3:Project experience on Eligible Projects in Railways sector
that qualify under Clause 2.2.2.5 (ii)
Category 4:Project experience on Eligible Projects in core sector that
qualify under Clause 2.2.2.5 (ii)
(i) In case the Bidder has experience across different categories,
the experience for each category would be computed as per
weight of following factors to arrive at its aggregated Eligible
Experience:
Category Project experience on Eligible Factors
Projects
1 Project in Railway sector that qualify 1
under Clause 2.2.2.5(i)
2 Project in core sector that qualify 0.75
under Clause 2.2.2.5 (i)
3 Project in Railways sector that 1
qualify under Clause 2.2.2.5 (ii)
4 Project in core sector that qualify 0.75
under Clause 2.2.2.5(ii)
(ii) The Technical capacity in respect of an Eligible Project situated
in a developed country which is a member of OECD shall be
further multiplied by a factor of 0.5 (zero point five) and the
product thereof shall be the Technical capacity for such Eligible
Project.
(iii) For the purpose of this RFP:
(iv) Railway& Core Sector is defined as under:
Railway & Core Sector is defined as under:
(i) Railways sector would deemed to include S&T work involving
indoor and outdoor work like Relay based interlocking work or
Electronic interlocking work or colour light signaling work or
Automatic Signalling work or Intermediate Block Signalling work or
Track circuiting work (using any AFTCs or any Axle Counters or DC
track circuits) involving Indoor & outdoor work for Indian
Railways/Metro/Suburban Transit/High Speed Railway executed as a
standalone work or as part of composite work. In case of above S&T
work executed in composite work only relevant S&T work shall be
considered for evaluation.
(ii) Core sector would be deemed to include
Railways/Power/Telecom/ Defence/Ports/Airports/ Metro Rail/ Oil/
Gas pipeline and highways.
(iii) The successful bidder shall submit an undertaking from RDSO
approved MSDAC OEM covering supply of the equipment, installation,
27
testing and commissioning by the same RDSO approved source
including after sales support required during the warranty period and
also to confirm compliance with extant RDSO guidelines and to meet
contract specific requirements before supply of equipment
undertaken. The above undertaking (refer Appendix 1A Annexure-VIII)
shall be submitted by bidder to Railway before supply of equipment,
failing which materials will be rejected."
53. Clause 2.2.2.1 (i) also lays emphasis on construction. The proviso is
relevant in this regard. The petitioners, were required to satisfy clause
2.2.2.1 (i), 2.2.2.1 (ii), and clause 2.2.2.5 (ii) and 2.2.2.6. In terms of clause
2.2.2.1 (ii), the petitioners were required to undertake at least one eligible
project of the railway sector as mentioned in clause 2.2.2.4/iii of value not
less than 35% of the estimated project cost, that is, Rs.96,02,04,003/- and
further should have received more payments of not less than 75% value of
the present contract value. As the authorities found that the petitioners
received more payment for procurement and supply and less payment for
construction, and that the payment received for construction was negligible
compared to the present contract value, the authority thought it fit to
disqualify the petitioners, inter alia, on the ground that the payment
received from construction indicated that the petitioners did not have the
required technical qualification.
54. Clause 2.2.2.5 deals with eligible experience and eligible project under
each category. Clause 2.2.2.5 (ii) B, which is relevant in this regard is
quoted below:-
"B. For Railway electrification works: the Bidder should have received
cumulative payments from its client(s) for construction works
executed, fully or partially, during the last 5 (five) previous financial
Years and the current financial year up to the Base month (not to be
read with para-2.1.13), and only the amounts (gross) actually
received, during such years shall qualify for purposes of computing
the Technical Capacity. However, receipt of less than [Rs.
28
274344001/- (Rs. Twenty Seven Crore Forty Three Lakh Forty Four
Thousand and One Only)] shall not be reckoned as receipts/execution
of Eligible projects. For the avoidance of doubt, construction work
shall not include supply of goods or equipment except when such
goods or equipment form part of a turn-key construction
contract/EPC contract for the project.]"
55. Clause 2.2.2.6 is quoted below :-
"2.2.2.6 Submission in support of Technical Capacity
(i)The Bidder should furnish the details of Eligible Experience for the
last 5 (five) previous Financial Years and the current financial year up
to the Base month (not to be read with para-2.1.13).
(ii)The Bidder must provide the necessary information relating to
Technical Capacity as per format at Annex-II of Appendix-IA.
(iii) The Bidder should furnish the required Project-specific
information and evidence in support of its claim of Technical Capacity,
as per format at Annex -IV of Appendix-IA."
56. Clause 2.2.2.5 (ii) (B) required the petitioners to have actually received
cumulative payments for more than Rs.27,43,44,001/-, as payments for
construction work during the last five years, which did not include supply.
This according to the authorities was also an essential requirement.
57. Clause 2.6 deals with the verification and disqualification clause and
under clause 2.6.1, the authority reserved the right to verify the statements,
information and documents submitted by the bidder. In this case, the
authorities verified the documents and the break-up of the payments
received in the prior projects. Upon ascertaining that the amount received
for construction was much below the requirement in the present RFP, the
petitioners' bid was found to be technically unsuitable.
58. The relevant provision of clause 2.6.1 is quoted below:-
2.6 Verification and Disqualification
2.6.1 The Authority reserves the right to verify all statements,
information and documents submitted by the Bidder in response to the
29
RFP and the Bidder shall, when so required by the Authority, make
available all such information, evidence and documents as may be
necessary for such verification. Any such verification or lack of such
verification, by the Authority shall not relieve the Bidder of its
obligations or liabilities hereunder nor will it affect any rights of the
Authority there under."
59. Under Clause 2.6.2 the authority reserved the right to reject any bid
and bar the bidder from submission of bids in any works/ service tender
issued by the Indian Railway for a period of 12 months from the date of
banning, on two grounds. In this case, ground 'b' is relevant, which is
quoted below:
"(b) the Bidder does not provide, within the time specified by the
Authority, the supplemental information sought by the Authority for
evaluation of the Bid.
Such misrepresentation/ improper response shall lead to the
disqualification of the Bidder. If the Bidder is a Consortium/Joint
Venture, then the entire Consortium/Joint Venture and each member
of the Consortium/Joint Venture may be disqualified/ rejected. If such
disqualification/rejection occurs after the Bids have been opened and
the lowest Bidder gets disqualified / rejected, then the Authority
reserves the right to annul the Bidding Process and invites fresh Bids."
60. In this case, the bidder did not provide the supplemental information
sought for by the authorities, for evaluation of the bid.
61. Annexure II Appendix 1A mentions the information to be given by the
bidder in support of the technical capacity. The table is set out for
convenience.
"ANNEX-II
Technical Capacity of the Bidder
(Refer to Clauses 2.2.2.1, 2.2.2.4 and 2.2.2.6 of the RFP)
Bidder Project Code Categor % Experience Technical
type y shar (Equivalent capacity
# e Rs. Crore)
Payments Value of
received for self-
constructio constructio
n of n Eligible
30
Eligible projects in
Projects in Categories
Categories 1 & 2 duly
3 & 4 duly multiplied
multiplied by factor
by factor mentioned
mentioned in clause
in clause 2.2.2.4(i)
2.2.2.4(i)
(1) (2) (3) (4) (5) (6) (7)=4*0.5
(for
OECD)/1
(non)
OECD)
Single a
entity b
Bidder
Or c
Member d
s of the
Consorti e
um/Join f
t
Venture
Aggregate Technical capacity=
62. As per the Annexure II, under the column Technical Capacity, the
bidder was required to mention payments received for construction of
eligible projects in category 3 and 4, duly multiplied by the factor mentioned
in clause 2.2.2.4(i).
63. Annexure IV, Appendix 1A is quoted below :-
Particulars of the
Item Refer Instruction
Project
(1) (2)
(3)
Tile & nature of the project
Category 5
Year-wise (a) payments
received for construction,
Or
(b) expenditure on 6
construction works
undertaken by itself in a
PPP project.
Entity for which the
7
project was constructed
31
Location
Project cost 8
Date of
9
completion/commissioning
Equity shareholding (with
period during which equity 10
was held)
Whether credit is being
taken for the Eligible
16
Experience of an Associate
(Yes/No)
64. Instructions 1, 6 and 9 to the bidders are quoted below:-
"1. Bidders are expected to provide information in respect of each
Eligible Projects in this Annex. The projects cited must comply with the
eligibility criteria specified in Clause 2.2.2.5 of the RFP, as the case
may be. Information provided in this section is intended to serve as a
backup for information provided in the Bid. Bidders should also refer to
the Instructions below.
6. The total payments received and/ or expenditure incurred on
construction works undertaken by itself in a PPP project are to be
stated for each Eligible Project in Annex-IT of this Appendix-IA. The
figures to be provided here should indicate the break-up for last 5 (five)
previous Financial Years & the current financial year upto the base
month (not to be read with para-2.1.13). For Categories 1 and 2,
expenditure on construction of the project by the Applicant itself
should be provided, but only in respect of projects having an estimated
capital cost exceeding the amount specified in Clause 2.2.2.5 (i)/(c). In
case of Categories 3 and 4, payments received only in respect of
construction should be provided, but only if the amount received
exceeds the minimum specified in Clause 2.2.2.5 (ii). Receipts for
construction works should only include capital expenditure, and
should not include expenditure on repairs and maintenance.
9. For Categories 1 and 2, the date of commissioning of the
project, upon completion, should be indicated. In case of Categories 3
and 4, date of completion of construction should be indicated. In the
case of projects under construction, the likely date of completion or
commissioning, as the case may be, shall be indicated."
65. As per instruction 6, the total payment received and/or expenditure
incurred on construction work undertaken for each eligible project was to be
provided. In case of categories 3 and 4, (in this case category 3), payments
received only for construction work, were to be provided.
32
66. Instruction 9 required that in case of categories 3 and 4, date of
completion of construction should be indicated. In case of projects under
construction, the likely date of completion or commissioning as the case
may be, should be indicated.
67. Thus, from a conjoint reading of the provisions of the RFP, which have
been quoted below hereinabove, as also the provisions of the Appendix 1A
and the annexures thereto, it is evident that the authorities had given
importance to the experience of the bidders in construction works
undertaken in the eligible project. On verifying the documents supplied by
the petitioners, the authority made an enquiry and discovered that the
break-up of the payments received indicated that a minuscule portion of the
payment was in respect of construction work. When the petitioners were
asked to explain the same by providing an undertaking, the petitioners
refused to do so. Thus, the authorities decided to disqualify the petitioners
upon an interpretation of the clauses and the essential conditions. The
question of singling out the petitioners does not arise because another
person was also found to be ineligible in the technical round.
68. In this case, the power of judicial review cannot be invoked to set
aside the decision of the tendering authority on the ground that the
interpretation of the clauses were either faulty or because another view was
also possible. The court cannot scan the RFP with a magnifying glass to
assess whether another interpretation of the terms and conditions was
available. Some play in the joints should be permitted to the government in
commercial matters. The court is not an appellate authority. The case of the
petitioners is based on the interpretation of the clauses and this court does
33
not find perversity in the decision of the authorities. The authorities did not
act on any extraneous considerations, but on its own interpretation of the
bid document. The experts who authored the document interpreted the
same as per their wisdom, understanding and requirements.
69. In Silppi Constructions Contractors vs. Union of India, reported in
(2020) 16 SCC 489, the Hon'ble Apex Court held as follows:-
"19. This Court being the guardian of fundamental rights is duty bound
to interfere when there is arbitrariness, irrationality, mala fides and
bias. However, this Court in all the aforesaid decisions has cautioned
time and again that courts should exercise a lot of restraint while
exercising their powers of judicial review in contractual or commercial
matters. This Court is normally loathe to interfere in contractual
matters unless a clear-cut case of arbitrariness or mala fides or bias or
irrationality is made out. One must remember that today many public
sector undertakings compete with the private industry. The contracts
entered into between private parties are not subject to scrutiny under
writ jurisdiction. No doubt, the bodies which are State within the
meaning of Article 12 of the Constitution are bound to act fairly and are
amenable to the writ jurisdiction of superior courts, but this
discretionary power must be exercised with a great deal of restraint and
caution. The Courts must realize their limitations and the havoc which
needless interference in commercial matters can cause. In contracts
involving technical issues the courts should be even more reluctant
because most of us in judges' robes do not have the necessary expertise
to adjudicate upon technical issues beyond our domain. As laid down
in the judgments cited above the courts should not use a magnifying
glass while scanning the tenders and make every small mistake appear
like a big blunder. In fact, the courts must give "fair play in the joints"
to the government and public sector undertakings in matters of
contract. Courts must also not interfere where such interference will
cause unnecessary loss to the public exchequer.
20. The essence of the law laid down in the judgments referred to above
is the exercise of restraint and caution; the need for overwhelming
public interest to justify judicial intervention in matters of contract
involving the State instrumentalities; the courts should give way to the
opinion of the experts unless the decision is totally arbitrary or
unreasonable; the court does not sit like a court of appeal over the
appropriate authority; the court must realise that the authority floating
the tender is the best judge of its requirements and, therefore, the
court's interference should be minimal. The authority which floats the
contract or tender, and has authored the tender documents is the best
judge as to how the documents have to be interpreted. If two
interpretations are possible then the interpretation of the author must
34
be accepted. The courts will only interfere to prevent arbitrariness,
irrationality, bias, mala fides or perversity. With this approach in mind
we shall deal with the present case."
70. In the decision of Montecarlo Limited vs. National Thermal Power
Corporation Limited, reported in (2016) 15 SCC 272, the Hon'ble Apex
Court held that the tender inviting authority was the best person to
understand and appreciate its requirements. The tendering authority had
the freedom to enter into contracts.
71. In Jagdish Mandal v. State of Orissa reported in (2007) 14 SCC
517 the Hon'ble Apex Court held as follows:-
"22. ... 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."
72. In Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn.
Ltd. reported in (2016) 16 SCC 818, the Hon'ble Apex Court held as
follows:-
"15. We may add that the owner or the employer of a project, having
authored the tender documents, is the best person to understand and
appreciate its requirements and interpret its documents. The
constitutional courts must defer to this understanding and
appreciation of the tender documents, unless there is mala fide or
perversity in the understanding or appreciation or in the application of
the terms of the tender conditions. It is possible that the owner or
employer of a project may give an interpretation to the tender
documents that is not acceptable to the constitutional courts but that
by itself is not a reason for interfering with the interpretation given."
35
73. In National High Speed Rail Corpn. Ltd. v. Montecarlo Ltd. and
Anr. reported in (2022) 6 SCC 401, the Hon'ble Apex Court held as
follows:-
"22. ..... whether a bidder satisfies the tender condition is primarily
upon the authority inviting the bids. Such authority is aware of
expectations from the tenderers while evaluating the consequences of
non-performance. In the tender in question, there were 15 bidders.
Bids of 13 tenderers were found to be unresponsive i.e. not satisfying
the tender conditions. The writ petitioner was one of them. It is not the
case of the writ petitioner that action of the Technical Evaluation
Committee was actuated by extraneous considerations or was mala
fide. Therefore, on the same set of facts, different conclusions can be
arrived at in a bona fide manner by the Technical Evaluation
Committee. Since the view of the Technical Evaluation Committee was
not to the liking of the writ petitioner, such decision does not warrant
for interference in a grant of contract to a successful bidder.
***
***
48. Even while entertaining the writ petition and/or granting the stay which ultimately may delay the execution of the Mega projects, it must be remembered that it may seriously impede the execution of the projects of public importance and disables the State and/or its agencies/instrumentalities from discharging the constitutional and legal obligation towards the citizens. Therefore, the High Courts should be extremely careful and circumspect in exercise of its discretion while entertaining such petitions and/or while granting stay in such matters. Even in a case where the High Court is of the prima facie opinion that the decision is as such perverse and/or arbitrary and/or suffers from mala fides and/or favouritism, while entertaining such writ petition and/or pass any appropriate interim order, High Court may put to the writ petitioner's notice that in case the petitioner loses and there is a delay in execution of the project due to such proceedings initiated by him/it, he/they may be saddled with the damages caused for delay in execution of such projects, which may be due to such frivolous litigations initiated by him/it. With these words of caution and advise, we rest the matter there and leave it to the wisdom of the Court(s) concerned, which ultimately may look to the larger public interest and the national interest involved."
74. In the matter of Uflex Ltd. vs Government of Tamil Nadu and Ors.
decided in Civil Appeal No. 4862-4863 of 2021, the Hon'ble Apex Court held as follows:-
36"1. The enlarged role of the Government in economic activity and its corresponding ability to give economic 'largesse' was the bedrock of creating what is commonly called the 'tender jurisdiction'. The objective was to have greater transparency and the consequent right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India (hereinafter referred to as the 'Constitution'), beyond the issue of strict enforcement of contractual rights under the civil jurisdiction. However, the ground reality today is that almost no tender remains unchallenged. Unsuccessful parties or parties not even participating in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. The Public Interest Litigation ('PIL') jurisdiction is also invoked towards the same objective, an aspect normally deterred by the Court because this causes proxy litigation in purely contractual matters.
2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance.
3. We cannot lose sight of the fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, "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.
***
40. We must begin by noticing that we are examining the case, as already stated above, on the parameters discussed at the inception. In commercial tender matters there is obviously an aspect of commercial competitiveness. For every succeeding party who gets a tender there may be a couple or more parties who are not awarded the tender as there can be only one L-1. The question is should the judicial process be resorted to for downplaying the freedom which a tendering party has, merely because it is a State or a public authority, making the said process even more cumbersome. We have already noted that element of transparency is always required in such tenders because of the nature of economic activity carried on by the State, but the contours under which they are to be examined are restricted as set out in Tata Cellular26 and other cases. The objective is not to make the Court an appellate authority for scrutinizing as to whom the tender should be awarded. Economics must be permitted to play its role for which the tendering authority knows best as to what is suited in terms of technology and price for them."37
75. The Hon'ble Apex Court in the matter of N.G. Projects Limited versus Vinod Kumar Jain and Others reported in (2022) 6 SCC 127 held as follows:-
"22. The satisfaction whether a bidder satisfies the tender condition is primarily upon the authority inviting the bids. Such authority is aware of expectations from the tenderers while evaluating the consequences of non-performance. In the tender in question, there were 15 bidders. Bids of 13 tenderers were found to be unresponsive i.e. not satisfying the tender conditions. The writ petitioner was one of them. It is not the case of the writ petitioner that action of the Technical Evaluation Committee was actuated by extraneous considerations or was mala fide. Therefore, on the same set of facts, different conclusions can be arrived at in a bona fide manner by the Technical Evaluation Committee. Since the view of the Technical Evaluation Committee was not to the liking of the writ petitioner, such decision does not warrant for interference in a grant of contract to a successful bidder.
23. In view of the above judgments of this Court, the writ court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the present day economic activities of the State and this limitation should be kept in view. Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. The approach of the Court should be not to find fault with magnifying glass in its hands, rather the Court should examine as to whether the decision- making process is after complying with the procedure contemplated by the tender conditions. If the Court finds that there is total arbitrariness or that the tender has been granted in a mala fide manner, still the Court should refrain from interfering in the grant of tender but instead relegate the parties to seek damages for the wrongful exclusion rather than to injunct the execution of the contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs and secondly, by being deprived 38 of the infrastructure for which the present day Governments are expected to work."
76. Under such circumstances, the writ petition is dismissed. Interim order stands vacated.
77. There will be no order as to costs.
78. Parties are directed to act on the server copy of this judgment.
(Shampa Sarkar, J.) Later:-
Learned Advocate for the petitioner prays for stay of operation of the judgment.
The prayer is considered and rejected.
(Shampa Sarkar, J.)