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The Supreme Court has held that a Writ Court should refrain itself from imposing its decision over and above the decision of the employer, as to whether or not to accept the bid of a tenderer.

The Top Court said that that Court's must be even more reluctant in interfering with contract's involving technical issues as there is a requirement of necessary expertise to adjudicate upon such issues.

It was further held that the Single Bench and the Division Bench of the High Court exercising power of judicial review, to find out whether the decision of the State in giving out work contract was manifestly "arbitrary" or "unjust" was not required and it did not have to act as appellate authority over the decision of the State.

"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....", further remarked the top court.

"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."

While reprimanding the Jharkhand High Court for interfering in work contract awarded under three tenders by the State, the Supreme Court on Monday said,

"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 court also gave a word of caution stating that any contract of 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.

It said that the grant of interim injunction by the Single Bench of the High Court 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. The bench further said,

"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."

Facts:

Road Construction Department of Jharkhand invited tenders for reconstruction of Nagaruntari – Dhurki – Ambakhoriya Road. 

One Vinod Kumar Jain (Respondent No. 1) participated in the tender process and also submitted Bank Guarantee as bid security but such tender was cancelled and fresh Notice Inviting Tender was invited.

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 Document(SBD), including that of Jain.

The reason for such conclusion was that Jain submitted a letter along with the amended Bank Guarantee to the effect that such letter forms an integral part of Bank Guarantee and such Bank Guarantee was not in the format as prescribed in the SBD.

It was also found that the Bank Guarantee was valid for a time period prior to the date on which NIT was issued, apart from the fact that the amount mentioned in numerical and in words were different. Additionally, the affidavit and undertaking supporting the bid were not properly notarized.

The technical bid of M/S NG Projects Limited (appellant) was declared to be substantially responsive and after due evaluation of its financial bid, work contract was issued to it. NG Projects started the work on the stipulated date of commencement and completed earth work for 21.9 kms out of the 24 kms proposed road.

Subsequently, Jain filed a Writ Petition for quashing of the decision of the Technical Evaluation Committee holding its bid to be non-responsive.

After the pleadings were completed, the Single Bench of the High Court passed a common order in respect of two other works and the work in question, setting aside award of contract granted to the appellant.

Court's Analysis:

A bench of Justices Hemant Gupta and V Ramasubramaniam noted that 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.

Since Jain submitted its first bank guarantee in relation to the first tender for the same project which was cancelled through a notice, the bench held that 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, Jain 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....", the bench said.

Furthermore, the court was of the view that the satisfaction whether a bidder satisfies the tender condition is primarily upon the authority inviting the bids and that 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 malafide..... 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", said the bench.

Approach of Writ Courts:

The bench added that 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 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 court opined that 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.

With this view, the appeal was disposed of with a direction to the respondent State to allow NG Projects to resume and complete the work by excluding the period spent in the stay of execution of the contract.

Case Title: M/S. N.G. Projects Limited v.  M/S. Vinod Kumar Jain & Ors.