04 Jan 2121

The matter of the Disqualification Conditions contained in the General Information to Tender (GIT) appended to the Notice Inviting Tender (NIT) is not liable to be set aside and quashed - Gauhati High Court

Case : M/s Purvanchal Communication Pvt. Ltd. V. Food Corporation of India and 3 Ors WP(C)/9153/2019

Court : Gauhati High Court

Bench : Justice Kalyan Rai Surana

Decided on : 04 Jan 2121

The Relevant Statutes

Section 9 of the Arbitration & Conciliation Act, 1996

Article 226 of The Constitution of India, 1950

Brief Facts and Procedural History

1. Petitioner no.1 that is Purvanchal Communication has an interest in a proprietorship firm that entered into a joint-venture with one Radhika Express Service in the name of Purvanchal Communication Radhika Express and participated in a tender process bearing issued by the N.F. Railway authorities.

2. It is seen that petitioner no.1 was the lead partner of the joint-venture with 51% share while the other joint-venture partner had 49% share.

3. The said joint-venture could not deposit the performance guarantee in time, and the Chief Engineer N.F. Railway terminated the contract of the mentioned tender and the Earnest Money Deposit   EMD i.e. Earnest Money Deposit of Rs.17.00 lakh was forfeited and the said joint-venture was barred from participating in the re-tender of the said work.

4. Petitioner no.1 had participated in another tender process of Respondent no. 1 which is Food Corporation of India (FCI) bearing Notice Inviting Tender (NIT) dated 29.05.2019 and came out as a successful bidder. However, the said tender process was challenged and ultimately given the challenge, respondent no.1 withdrew the contract which is reflected in the order passed by the Guwahati High Court.

5. The petitioners say that the adverse effect of the termination of the contract by the N.F. The railway became known to the petitioner for the first time after the filing of the writ petition. Thereafter, on the ground that the N.F. Railway authorities had not followed clause 36 of the Tender Conditions before terminating the contract and forfeiting Earnest Money Deposit  (EMD), after the service of notice, petitioner no.1 took recourse to law by filing an application under section 9 of the Arbitration and Conciliation Act, 1996.

6. The Additional District Judge (FTC) No.3 Kamrup (Metropolitan), Guwahati by order dated 13.09.2019 stayed the termination of contract and forfeiture of Earnest Money Deposit (EMD) issued vide letter.

7. In the meanwhile, the N.F. Railway authorities by their letter dated 30.08.2019 clarified that petitioner no.1 would not be barred from participating in other tenders of the railways and in other departments. The petitioners filed a petition to challenge the rejection of the technical bid of the petitioner in connection with Notice Inviting Tender(NIT).

8. The Guwahati High Court provided that if any letter of acceptance is issued to any successful bidder, the same will be subject to the outcome of the writ petition. Thereafter, as regards, the technical bid of the petitioner was rejected and uploaded on the website on 02.12.2019 wherein it was indicated that the bid was rejected as per clause no.4(II) and (III) of the Disqualification Conditions contained in the General Information to Tenderers(GIT).

The Issue(s) of the Case

Whether the matter, clause nos. 4(II), 4(III), and 4(V) of the Disqualification Conditions contained in the General Information to Tender (GIT) appended to the Notice Inviting Tender (NIT) are liable to be set aside and quashed under the unique facts of this case?

The observations of the Court

1. There is nothing on record from which the Guwahati High Court can draw a presumption that the said tender condition was to favour someone or mala fide. There is no material on record from which it can be held that the tender clauses were arbitrary or unreasonable.

2. Therefore, as a constituent of the joint venture, when the NF Railway, which is a Govt. of India enterprise had revoked and/or rescinded the tender work awarded to the joint venture of the petitioner no.1 on the ground that performance guarantee could not be provided and that the Earnest Money Deposit( EMD) was forfeited, the Court does not find any fault in the clause nos. 4(II), 4(III) and 4(V) of General Information to Tender(GIT) appended to the Notice Inviting Tender(NIT)

3. In the considered opinion of the Honourable Gauhati High Court, in commercial considerations, it is within the domain of the respondents to decide that they do not want to award work to a bidder who has defaulted in any previous contract work given by another Government department of agencies.

4. In the present case, the respondent was not a party to the interlocutory application filed under section 9 of The Arbitration & Conciliation Act, 1996 and there is no document on record to show that any dispute between the NF Railway and the petitioner was finally decided by an Arbitral Tribunal.

5. Reference may be made to the case of Jagdish Mandal Vs. The state of Orissa, (2007) 14 SCC 517, wherein the Supreme Court of India has inter-alia, laid down that a court before interfering in tender or contractual matters in the exercise of the 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

ii. 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”

iii. whether the public interest is affected?

6. It was held that if the answers are in the negative, there should be no interference under Article 226 of the Constitution of India. In the present case, the aforesaid three questions can all be answered in the negative. Therefore, no case is made out for interfering with the said clause nos. 4(II), 4(III) and 4(V) of General Information to Tender (GIT) appended to the Notice Inviting Tender (NIT).

The Decision held by Court

1. The Honourable Guwahati High Court is of the considered opinion that in any view of the matter, clause nos. 4(II), 4(III), and 4(V) of the Disqualification Conditions contained in the General Information to Tender (GIT) appended to the Notice Inviting Tender (NIT) are not liable to be set aside and quashed under the unique facts of this case.

2. The Honourable Guwahati High Court dismissed both the petitions and left the parties to bear their own cause.

Click here to view/download the judgement >