Libertatem Magazine

SC: Adherence to the Prescribed Format for the Submission of Bid is Essential

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This case relates to whether the respondent had filed the tender in the prescribed format and who has to be allotted the tender in the bidding process which is in the public interest.

Brief Facts of the Case

The state of Madhya had issued a notice inviting tender for the construction of an Elevated Corridor at an estimated cost of ₹ 272.66 crores. The Bid for the tender has to be submitted in the format prescribed. Clause 7(b) of Annex I, provides that there should be no investigation pending against the bidder/ any member of a joint venture or their sister or their CEO concern or any of their directors/ managers/ employees. Clause, provides that the bidder must have experience of similar work with an estimated cost of at least 25% of the aforesaid project. 

Eleven Companies had bid for the project, the bid of U.P. State Bridge Corporation Limited (UPSBC), was considered non-responsive, as they were found to suppress information required to be disclosed as per para 13 of Appendix IA and clause 7(b) of Annex I. Similarly, Rachana Construction Co. did not fulfill criteria under clause, thus considered non-responsive. 

The writ petition filed by UPSBC, according to rejection of the technical bid, led to an interim order by the Court to open the financial bid of UPSBC. UPSBC had a bid of ₹ 306.27 crores, Rajkamal had a bid of ₹ 315.80 crores, and Rachna Construction of ₹ 293.25 crores. Rachna Construction, being disqualified was not taken into consideration. The Court, further, directed the State of Madhya Pradesh on 15.06.2020, to issue LOI in favor of UPSBC for the financial bid of 306.27 Crores within 30 days from the judgment. 

Rachna Construction also filed a writ petition challenging the rejection of its technical bid. The High Court held that there was nothing wrong with the rejection by the state of Madhya Pradesh. The state of Madhya Pradesh aggrieved by order in favor of UPSBC filed this SLP. 

Appellant’s Argument

The state argued that “investigation pending” cannot be taken in the sense of Cr.P.C., otherwise, it will render the said clause otiose. “Investigation Pending” should include all subsequent steps towards criminality of an accused, however, the High Court considered that a charge sheet being filed, cannot be considered as “investigation pending”. 

The material facts being suppressed will fall within the fraudulent practice. The fact that the bridge constructed by UPSBC collapsed resulted in FIR being lodged against it, not disclosed by UPSBC, would be fatal under the fraudulent practice clause also. 

Respondent’s Argument

The UPSBC submitted that in the case of Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., it was held where a tender was in a particular format, no additional information beyond the one required by format needs to be given. No investigation was found to pending against it as clause 7(b) of Annex I could not be invoked to non-suit UPSBC. 

Further, it was contended that no other ground except clause 7(b) of Annex I, could now be taken as the ground of fraudulent practice, which was sought to be argued by the state of Madhya Pradesh in this Court, was no ground for rejection of UPSBC’s bid. The public interest will require the financial bid to be accepted, as it is being 9 crores less than that of Rajkamal. 

The Counsel for Rachna Construction argued that the work of construction of two nos. of the road over bridges for an amount of  ₹ 76.87 crores, 95% of this had been completed, for which ₹ 68.71 crores had been received. This being so, this is 25% above the estimated cost of the present tender ( fixed at ₹ 68.17 crores)., he stood technically qualified. The authorities were incorrect in bifurcating one project awarded under one tender, in two, just because two roads over bridges had to be built. 

The non-joinder cannot be held against him as all facts were known to UPSBC and could have intervened in Rachna Construction Co.’s matter. Contrary to the High Court saying that UPSBC should be arrayed as Respondent, if not, then the petition would be dismissed. 

The Counsel for Rajkamal submitted that UPSBC was indicted in a criminal case, thus cast doubt on its ability to undertake the project and is sufficient to reject UPSBC’S bid. Insofar as, Rachna Construction co. is concerned, referring to clause, it was found that the bidder requires an additional experience of constructing at least one similar major bridge of a span equal to or greater than 50% of the longest span of the proposed project.

The two road bridges constructed by Rachna Construction Co. were of the length of 2380 meters when taken together. This would fall short of 50% of 7.473 kilometers, which would amount to 3.736 kilometers, on this ground as well Rachana Construction Co.’s bid ought to be rejected. 

Observation by Court

The Court relying on the judgment of Montecarlo Ltd. v. NTPC Ltd. and Caratel Infotech, observed that the court must defer on the understanding of clauses in tender documents by the author thereof unless, pithily put, there is perversity in the author’s construction of the document or mala fides. 

In the facts of the present case, the FIR had been lodged against UPSBC for the collapse of the bridge, but no investigation is pending and no conviction by a court of law, UPSBC was certainly indicted, in that, a charge sheet has been filed against the FIR, in which trial is pending, though stayed by High Court. Fraudulent practice as defined in clause 4.3(b) includes omission of facts and disclosure of incomplete facts.

This being in the case, Secy., Deptt. Of Home Secy., A.P. v. B. Chinnam Naidu, the expression “convicted” could not possibly include the factum of arrest that is pre-conviction. The suppression of facts that UPSBC was indicted for offenses relatable to the construction of bridges, which had collapsed. In the judgment of Vinubhai Haribhai Malaviya v. the State of Gujarat, the distinction between investigation, inquiry, and trial in a criminal case had been made, is of no avail in the finding hereinabove.  The principle of contra proferentem as in the case of Bank of India v. K. Mohandas, is also of no avail, given the fact that there is no ambiguity as to the fraudulent practice clause and para 11 of Appendix IA are concerned. 

It was held that para 13 read along with para 11, clearly states that a person who is “indicted” for a criminal offense has to disclose the factum of the indictment. A technical objection based on rejection order cannot be allowed to prevail in face of suppression of the most material, that FIR is filed for the collapse of the bridge. 

The Rajkamal agreed to do the same amount as the financial bid of UPSBC, as the UPSBC was being disqualified. For all these reasons, impugned judgment dated 15.06.2020 was set aside. Relying on the argument of the counsel for Rajkamal, the Rachna Construction Co.’s  SLP was dismissed. 

The Decision of the Court

The State of Madhya Pradesh was directed to issue LOI as soon as practically possible to Rajkamal as the present tender is concerned at the same financial bid as that of UPSBC. 

All appeals were disposed of accordingly. 

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