M/S. N.G. PROJECTS LIMITED VS M/S. VINOD KUMAR JAIN

M/S. N.G. PROJECTS LIMITED VS M/S. VINOD KUMAR JAIN - Supreme Court Case 2022

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1846 OF 2022
(ARISING OUT OF SLP (CIVIL) NO. 2103 OF 2022)
M/S. N.G. PROJECTS LIMITED .....APPELLANT(S)
VERSUS
M/S. VINOD KUMAR JAIN & ORS. .....RESPONDENT(S)
O R D E R
HEMANT GUPTA, J.
1. The challenge in the present appeal is to an order dated 6.1.2022 passed
by the Division Bench of the High Court of Jharkhand at Ranchi whereby
the appeal filed by the State against the order of the learned Single
Bench allowing the Writ Petition No. 5416 of 2019 was dismissed.
2. The Special Leave Petition came up for hearing before this Court on
7.3.2022, when the following order was passed: -
“Leave granted.
The appeal is allowed.
The appellant shall be permitted to complete the project but will
not claim escalation for the period the matter was pending before
the Court.
The writ petition before the High Court is dismissed.
Detailed Judgment/Order to follow”.
3. The Road Construction Department of Jharkhand invited tenders on
7.6.2019 for reconstruction of Nagaruntari – Dhurki – Ambakhoriya Road.
1
Respondent No. 1 participated in the tender process and also submitted
Bank Guarantee as bid security but such tender was cancelled on
20.8.2019 and fresh Notice Inviting Tender1
 was invited for reconstruction of the said Nagaruntari – Dhurki – Ambakhoriya road.
4. The Tender Evaluation Committee held a meeting for technical
evaluation of bids and 13 out of 15 bids were held to be non-responsive
in terms of Standard Bidding Document2
, including that of respondent
No. 1. The reason for arriving at such conclusion was that respondent
No. 1 submitted a letter along with the amended Bank Guarantee to the
effect that such letter forms an integral part of Bank Guarantee. Such
Bank Guarantee was not in the format as prescribed in the SBD. It was
also found that the Bank Guarantee was valid from 8.7.2019 to 7.3.2020,
which was prior to the date on which NIT was issued on 20.8.2019, apart
from the fact that the amount mentioned in numerical and in words were
different. Still further, the bid capacity of respondent No. 1 amounting to
Rs.60.66 crores was less than the estimated cost of work of
Rs.1,05,71,13,019/-. Additionally, the affidavit and undertaking
supporting the bid were not properly notarized.
5. The technical bid of the appellant was declared to be substantially
responsive and after due evaluation of its financial bid, work contract
was issued to the appellant on 3.10.2019. The appellant started the work
on the stipulated date of commencement on 22.10.2019 and completed
earth work for 21.9 kms out of the 24 kms proposed road. As per the
1 For short, the ‘NIT’
2 For short, the ‘SBD’
2
appellant, it had completed work of approximately Rs.8.5 crores and had
mobilized the plants and machinery to Garwa.
6. Respondent No. 1 filed a Writ Petition on 11.10.2019 for quashing of the
decision of the Technical Evaluation Committee holding its bid to be nonresponsive.
7. The State in its counter affidavit has taken the following objections:
(i) State could not have accepted the amended bank
guarantee as it had conditions beyond what was stipulated in
the format.
(ii) An amendment changes the prescribed format.
(iii) By abundant caution, the Bank was asked to verify the
said Bank Guarantee but there has been no reply as on date.
(iv) NIT is of 20.8.2019 but the Bank Guarantee is from
9.7.2019 to 8.3.2020.
(v) The undertaking and affidavit has not been duly notarized.
(vi) Bid Capacity is also negative.
(vii) The other tender referred to in the writ has since been
cancelled.
(viii) Financial details of bid cannot be known till opening of
the bid.
8. After the pleadings were completed, the learned Single Bench of the
High Court passed a common order in respect of two other works and the
work in question on 14.1.2020, setting aside award of contract granted
to the appellant. The learned Single Bench of the High Court passed the
following directions:
3
“48. Under the aforesaid facts and circumstances, all the writ
petitions are disposed of by passing following orders:-
(i) xx xx xx
(ii) The decision of the Tender Committee dated 3rd October,
2019, for the work, namely, “Reconstruction of NagaruntariDhurki-Ambakhoriya Road (MDR-139)” in relation to W.P.(C) No.
5416 of 2019 is hereby quashed. All the consequential action of
the State respondents taken in relation to the said tender
including the award of the tender in favour of the private
respondent – M/s. N.G. Projects Limited is also quashed. The
State respondents are directed to issue fresh tender for the said
work and to proceed accordingly.
(iii) xx xx xx”
9. The Division Bench of the High Court dismissed two appeals against two
other tenders on 7.10.2021. However, in appeal against the work in
question, the Division Bench of the High Court noticed the fact that the
appellant had already started the execution of the work and that part of
the work had already completed but held that there was no valid
distinction with the case of other two works against which Letters Patent
Appeal was dismissed on 7.10.2021. The Division Bench of the High
Court returned the following findings:
“22. On a comprehensive comparison of the bid security
document submitted by the writ petitioner and the appellant, we
gather that the bid security document submitted by both the
tenderers failed to adhere to the specifications professed by the
employer. While the appellant in the final paragraph of the bid
security document made the bank guarantee extendable at the
bank’s sole discretion contrary to the requirement of the format
and the bid document whereunder the employer had the right
reserved to get the bank guarantee extended and notice for
such extensions to the bank waived, the writ petitioner had also
deviated on this count by introducing a notwithstanding clause
4
which was not part of the format…
23. The principles of law as enunciated by the Apex Court and
profusely relied upon by this Court in the judgment dated 7th
October, 2021 therefore do squarely apply to the facts of the
present case as well. If the opinion of the learned Single Judge
on those counts do not suffer from any perversity, there is no
reason for the appellate court to take a different view of the
matter and substitute its opinion.
xx xx xx
25. Having analyzed the reasonings rendered by the learned
single Judge in the conspicuous facts of the case, we are of the
view that the decision of the tender evaluation committee in
accepting the technical bid of the successful tenderer M/s. N.G.
Projects Limited while rejecting the technical bid of the petitioner
did not conform to uniform standards as professed by it. The
selection of one and rejection of another was neither in
consonance with the specific terms of the NIT and SBD read with
the addendum, nor was on uniform yardstick.”
10. We find that the interference in contract awarded to the appellant is
wholly unwarranted and has caused loss to public interest. Construction
of roads is an essential part of development of infrastructure in any
State. The learned Single Bench and the Division Bench of the High
Court were exercising power of judicial review to find out whether the
decision of the State was manifestly arbitrary or unjust as laid down by
this Court in Tata Cellular v. Union of India
3
 and to act as appellate
authority over the decision of the State. This Court in Tata Cellular held
as under:
“70. It cannot be denied that the principles of judicial review
would apply to the exercise of contractual powers by
Government bodies in order to prevent arbitrariness or
3 (1994) 6 SCC 651
5
favouritism. However, it must be clearly stated that there are
inherent limitations in exercise of that power of judicial
review. Government is the guardian of the finances of the State.
It is expected to protect the financial interest of the State. The
right to refuse the lowest or any other tender is always available
to the Government. But, the principles laid down in Article 14 of
the Constitution have to be kept in view while accepting or
refusing a tender. There can be no question of infringement of
Article 14 if the Government tries to get the best person or the
best quotation. The right to choose cannot be considered to be
an arbitrary power. Of course, if the said power is exercised for
any collateral purpose the exercise of that power will be struck
down.
xx xx xx
77. The duty of the court is to confine itself to the question of
legality. Its concern should be:
1. Whether a decision-making authority exceeded its powers?
2. Committed an error of law,
3. committed a breach of the rules of natural justice,
4. reached a decision which no reasonable tribunal would have
reached or,
5. abused its powers.
Therefore, it is not for the court to determine whether a
particular policy or particular decision taken in the fulfilment of
that policy is fair. It is only concerned with the manner in which
those decisions have been taken. The extent of the duty to act
fairly will vary from case to case. Shortly put, the grounds upon
which an administrative action is subject to control by judicial
review can be classified as under:
(i) Illegality : This means the decision-maker must understand
correctly the law that regulates his decision-making power and
must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
6
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out
addition of further grounds in course of time. As a matter of fact,
in R. v. Secretary of State for the Home Department, ex
Brind [(1991) 1 AC 696] , Lord Diplock refers specifically to one
development, namely, the possible recognition of the principle of
proportionality. In all these cases the test to be adopted is that
the court should, “consider whether something has gone wrong
of a nature and degree which requires its intervention”.
xx xx xx
94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision,
without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the
realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by
process of negotiations through several tiers. More often
than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other
words, a fair play in the joints is a necessary concomitant
for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the
decision must not only be tested by the application of
Wednesbury principle of reasonableness (including its
other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
7
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
Based on these principles we will examine the facts of this case
since they commend to us as the correct principles.”
11. Learned counsel for the appellant also referred to a judgment reported
as Central Coalfields Limited & Anr. v. SLL-SML (Joint Venture
Consortium) & Ors.
4
 wherein it was held that it was not for the Court to
substitute its opinion in respect of acceptance of bank guarantee. It was
held that when a particular format for a bank guarantee is prescribed,
then the bidder is required to stick to that particular format alone with
the caveat that the State reserves the right to deviate from the terms of
the bid document within the acceptable parameters. This Court held as
under:
“32. The core issue in these appeals is not of judicial review of
the administrative action of CCL in adhering to the terms of 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.
xx xx xx
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 scrutinise 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 rear4 (2016) 8 SCC 622
8
ranged or asked to be rearranged during the bidding process to
affect the right of some or deny a privilege to some.
xx xx xx
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 [Ramana Dayaram Shetty v. International Airport
Authority of India, (1979) 3 SCC 489] the terms of 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 [Tata Cellular v. Union of India, (1994) 6 SCC 651] 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 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 [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517] followed in Michigan Rubber [Michigan Rubber (India) Ltd. v. State
of Karnataka, (2012) 8 SCC 216] .
xx xx xx
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 rewrite 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 rewritten by the High Court.”
9
12. In Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation
Limited & Anr.
5
, this Court held 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. It
was held as under:
“13. In other words, a mere disagreement with the decision-making process or the decision of the administrative authority is no
reason for a constitutional court to interfere. The threshold of
mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional
court interferes with the decision-making process or the decision.
xx xx xx
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.”
13. This Court sounded a word of caution in another judgment reported as
Silppi Constructions Contractors v. Union of India and Ors.
6
,
wherein it was held that the Courts must realize their limitations and the
havoc which needless interference in commercial matters could cause. In
contracts involving technical issues, the Courts should be even more
5 (2016) 16 SCC 818
6 2019 SCC OnLine SC 1133
10
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 would cause unnecessary loss to the public exchequer. It
was held as under:-
“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.
11
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 realize 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 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.”
(Emphasis supplied)
14. In National High Speed Rail Corpn. Ltd. v. Montecarlo Ltd.
7
, this
Court sounded a word of caution while entertaining the writ petition
and/or granting stay which ultimately may delay the execution of the
Mega projects. It was held as under:
“95. 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
7 2022 SCC OnLine SC 111
12
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 concerned Court(s), which
ultimately may look to the larger public interest and the national
interest involved.”
15. In Uflex Ltd. v. Government of T.N.
8
, this Court stated that 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 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
Court held as under:-
“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
fides. 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. [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517]
8 (2022) 1 SCC 165
13
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”. [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517]
xx xx xx
42. 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 Cellular [Tata Cellular v. Union of
India, (1994) 6 SCC 651] and other cases. The objective is not to
make the Court an appellate authority for scrutinising 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.”
(Emphasis supplied)
16. In Galaxy Transport Agencies v. New J.K. Roadways
9
, a three-judge
bench again reiterated that the authority that authors the tender
document is the best person to understand and appreciate its
requirements, and thus, its interpretation should not be second-guessed
by a court in judicial review proceedings. It was observed as thus:
9 2020 SCC OnLine SC 1035
14
“17. In accordance with these judgments and noting that the
interpretation of the tendering authority in this case cannot be
said to be a perverse one, the Division Bench ought not to have
interfered with it by giving its own interpretation and not giving
proper credence to the word “both” appearing in Condition No.
31 of the N.I.T. For this reason, the Division Bench's conclusion
that JK Roadways was wrongly declared to be ineligible, is set
aside.
18. Insofar as Condition No. 27 of the N.I.T. prescribing work
experience of at least 5 years of not less than the value of Rs. 2
crores is concerned, suffice it to say that the expert body, being
the Tender Opening Committee, consisting of four members,
clearly found that this eligibility condition had been satisfied by
the Appellant before us. Without therefore going into the
assessment of the documents that have been supplied to this
Court, it is well settled that unless arbitrariness or mala fide on
the part of the tendering authority is alleged, the expert
evaluation of a particular tender, particularly when it comes to
technical evaluation, is not to be second-guessed by a writ court.
Thus, in Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517,
this Court noted:
“22. 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
15
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 succour to thousands
and millions and may increase the project cost manifold.
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. Cases involving blacklisting or
imposition of penal consequences on a tenderer/contractor or
distribution of State largesse (allotment of sites/shops, grant of
licences, dealerships and franchises) stand on a different footing
as they may require a higher degree of fairness in action.”
xx xx xx
20. This being the case, we are unable to fathom how the
Division Bench, on its own appraisal, arrived at the conclusion
that the Appellant held work experience of only 1 year,
substituting the appraisal of the expert four-member Tender
Opening Committee with its own.”
17. Therefore, the position of law with regard to the interpretation of terms
of the contract is that the question as to whether a term of the contract
is essential or not is to be viewed from the perspective of the employer
and by the employer. Applying the aforesaid position of law to the
16
present case, it has been the contention of respondent No. 1 that the format for bank guarantee was not followed strictly by the State and that
the relaxation given was not uniform, in that respondent No. 1 was singled out. The said contention has found favour with the Courts below.
18. In the present matter, respondent No. 1 submitted its first bank guarantee on 8.7.2019 in relation to the first tender for the same project. However, this first tender was cancelled through a notice, as acknowledged
by respondent No. 1. This being the case, being fully aware of the fact
that the first tender was no more in force and given that there was
specifically a new tender in place, respondent No. 1 was required to submit a bank guarantee in the format specified as per the Agreement.
However, respondent no. 1 opted to use the same bank guarantee which
was drawn on 8.7.2019, albeit with a letter from the bank indicating that
there is now an amendment with regard to the dates and the contract
therein. It is patently clear that if the format for a bank guarantee is an
essential condition of the Contract, the format in which the respondent
has opted to submit it is a substantial variation in the terms of the contract. If the variation that is done by respondent no. 1 is considered to
be an acceptable variation, then it would create an onerous burden on
the tendering authority to ensure that each underlying bank guarantee is
valid and further to consider whether the amendment letter itself was
with the full knowledge and consent of the bank. As it were, on the facts
17
of the case, the State informed the High Court that it had attempted to
verify the amendment but there was no response from the Bank. This
being the case, it is submitted that the relaxation in the format to bank
guarantee was rightly not provided to the respondent.
19. The Specific Relief Act, 1963 was amended by Central Act 18 of 2018
when clause (ha) was inserted in Section 41 of the said Act to say:
“(ha) if it would impede or delay the progress or completion of
any infrastructure project or interfere with the continued
provision of relevant facility related thereto or services being the
subject matter of such project.”
20. Such amendment was in pursuance of the report submitted on 20th June
2016 of the Expert Committee. The report is as under:-
“The Expert Committee set on examining Specific Relief Act, 1963
submits its Report to Union Law & Justice Minister
Recommends modifications for ensuring ease of doing business
The Expert Committee set on examining the Specific Relief Act,
1963 today Submitted its Report To Union Law & Justice Minister
Shri D.V.Sadananda Gowda here in New Delhi. In its report the
committee has recommended modifications in the Specific Relief
Act, 1963 for ensuring the ease of doing business.
In the context of tremendous developments which have taken
place since 1963 and the present changed scenario involving
contract based infrastructure developments, public private
partnerships and other public projects, involving huge
investments; and changes required in the present scheme of the
Act so that specific performance is granted as a general rule and
grant of compensation or damages for non-performance remains
as an exception, the committee decided
i. To change the approach, from damages being the rule
and specific performance being the exception, to specific
18
performance being the rule, and damages being the alternate
remedy..
ii. To provide guidelines for reducing the discretion granted
to Courts and tribunals while granting performance and injunctive
reliefs.
iii. To introduce provisions for rights of third parties (other
than for Government contracts).
iv. To consider addressing unconscionable contracts, unfair
contracts, reciprocity in contracts etc., and implied terms.
The committee observed that there is a need to classify diverse
Public utility Contracts as a distinct class recognising the inherent
public interest/importance to be addressed in the Act. Any public
work must progress without interruption. This requires
consideration whether a court’s intervention in public works
should be minimal. Smooth functioning of Public works projects
can be effectively managed through a monitoring system and
regulatory mechanism. The role of courts in this exercise is to
interfere to the minimum extent so that public works projects will
not be impeded or stalled.”
21. Since the construction of road is an infrastructure project and keeping in
view the intent of the legislature that infrastructure projects should not
be stayed, the High Court would have been well advised to hold its hand
to stay the construction of the infrastructure project. Such provision
should be kept in view even by the Writ Court while exercising its jurisdiction under Article 226 of the Constitution of India.
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
19
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 malafide.
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 presentday 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 malafide manner, still the Court should refrain from interfer20
ing 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 of the infrastructure for which the
present-day Governments are expected to work.
24. The State has paid over a sum of Rs.3,98,52,396/- to the appellant till
date, though the stand of the appellant is that it had submitted bills of
work of Rs.8.5 crores. The termination of contract would cause
additional financial burden on the State and also deprive the amenity of
road for a longer period. Learned counsel for the appellant has stated
that it shall not claim escalation of costs for the period when the writ
petition before the High Court was pending and there was a stay
granted.
25. In view thereof, we find that the action of the respondent in setting aside
the letter of acceptance granted to the appellant suffers from manifest
illegality and cannot be sustained. Consequently, the appeal is disposed
of with a direction to the respondent State to allow the appellant to
resume and complete the work by excluding the period spent in the stay
of execution of the contract.
26. A word of caution ought to be mentioned herein that any contract of
21
public service should not be interfered with lightly and in any case, there
should not be any interim order derailing the entire process of the
services meant for larger public good. The grant of interim injunction by
the learned Single Bench of the High Court has helped no-one except a
contractor who lost a contract bid and has only caused loss to the State
with no corresponding gain to anyone.
27. We also find that multiple layers of exercise of jurisdiction also delay the
final adjudication challenging the grant of tender. Therefore, it would be
open to the High Courts or the Hon’ble Chief Justice to entrust these
petitions to a Division Bench of the High Court, which would avoid at
least hearing by one of the forums.
.............................................J.
(HEMANT GUPTA)
.............................................J.
(V. RAMASUBRAMANIAN)
NEW DELHI;
MARCH 21, 2022.
22

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

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