Action of Technical Evaluation Committee if neither actuated by extraneous considerations nor malafide, does not warrant interference in grant of contract to successful bidder: SC

Read Judgment: M/s. N.g. Projects Limited V. M/s. Vinod Kumar Jain & Ors. 

Pankaj Bajpai

New Delhi, March 22, 2022: Highlighting that the authority inviting the bids is aware of expectations from the tenderers while evaluating the consequences of non-performance, the Supreme Court has opined that when the action of the Technical Evaluation Committee was neither actuated by extraneous considerations nor was malafide, then its decision does not warrant for interference in a grant of contract to a successful bidder.

Justice Hemant Gupta and Justice V. Ramasubramanian therefore observed that 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, as the Court does not have the expertise to examine the terms and conditions of the present day economic activities of the State. 

Going by the background of the case, Road Construction Department of Jharkhand invited tenders for reconstruction of Nagaruntari – Dhurki – Ambakhoriya Road and Vinod Jain (first respondent) participated in the tender process and also submitted Bank Guarantee as bid security. But such tender was cancelled and fresh Notice Inviting Tender (NIT) was invited for reconstruction of the said road. 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 the first respondent. 

Observing that Bank Guarantee was not in the format as prescribed in the SBD, the Bank Guarantee was issued prior to the date on which NIT was issued, apart from the fact that the amount mentioned in numerical and in words were different and the bid capacity of first respondent was less than the estimated cost of work.Not only this but the affidavit and undertaking supporting the bid were not properly notarized and the technical bid of N.G Projects (appellant) was declared to be substantially responsive and after due evaluation of its financial bid, work contract was issued to the appellant. 

Thereafter, the appellant started the work on the stipulated date of commencement and completed earth work. In the meanwhile, the first respondent filed a petition in the High Court for quashing of the decision of the Technical Evaluation Committee holding its bid to be non-responsive. The Single Judge set aside the award of contract granted to the appellant and directed the respondents to issue fresh tender. On appeal, the Division Bench of the High Court noticed the fact that the appellant had already started the execution of the work. 

After considering the submissions, the Apex Court found that the interference in contract awarded to the appellant was wholly unwarranted and had caused loss to public interest, as construction of roads was an essential part of development of infrastructure in any State. 

The position of law with regard to the interpretation of terms of the contract was 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, added the Court. 

Speaking for the Bench, Justice Gupta noted that in the present matter, the first respondent submitted its first bank guarantee in relation to the first tender for the same project, which was however cancelled through a notice, and 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, the first respondent 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”, added the Bench.   

Justice Gupta opined that Courts should be even more reluctant in interfering with contracts involving technical issues, as injunction or interference in the tender leads to additional costs on the State and is also against public interest.

Therefore, finding that the termination of contract would cause additional financial burden on the State and also deprive the amenity of road for a longer period, the Apex Court concluded 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.

Accordingly, the Top Court directed the State to allow the appellant to resume and complete the work by excluding the period spent in the stay of execution of the contract.