TMI Blog2016 (8) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... bank guarantee furnished by JVC ought to be rejected was flawed in any manner whatsoever. Similarly, there is nothing to indicate that the decision taken by CCL to reject the bank guarantee furnished by JVC and to adhere to the requirements of the NIT and the GTC was arbitrary or unreasonable or perverse in any manner whatsoever. The impugned judgment and order passed by the Division Bench of the Jharkhand High Court is accordingly set aside and these appeals are allowed. - Civil Appeal Nos. 8004 and 8005 of 2016 - - - Dated:- 17-8-2016 - Madan B. Lokur and R.K. Agrawal, JJ. For Appearing Parties: Mukul Rohatgi, AG, Jagdeep Dhankhar, Dhruv Mehta, A.M. Singhvi, Sr. Advs., Rajiv S. Roy, Avrojyoti Chatterjee, Abhijit S. Roy, Aditya Mehrotra, Pranab Kumar Mullick, M.R. Sukumar, M. Chandola, Rajesh Kumar, Ananya Kumar, Divyam Agarwal, Sneha Sheth, Akhil Bhardwaj, M.C. Dhingra, Kaushik Poddar, Deepak Sabharwal and Chandra Shekhar Biswas, Advs. JUDGMENT Madan B. Lokur, J. 1. The first appeal is that of the Central Coalfields Limited. The first Respondent in the appeal is SLL-SML a Joint Venture Consortium whose bid in response to a Notice Inviting Tender issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of irrevocable Bank Guarantee (BG) from any scheduled Bank in the format given in the bid document. Bank guarantee issued by outstation bank shall be operative at their local branch i.e. at Ranchi. The validity of such BG should be minimum 90 days beyond the validity of the bid. BG shall be acceptable only when value of Earnest money (EMD) exceeds ₹ 5.00 Lakhs. 9. What is of significance from the above is that the earnest money deposit was required to be made in the form of an irrevocable bank guarantee from any scheduled bank in the format given in the bid document . 10. Clause 4 of the e-tender mentioned that for a clarification of the bid, a bidder may seek clarification on-line from the Service Provider M/s. Mjunction Services Limited whose address, contact person and email were given in the document. 11. The General Terms and Conditions (for short GTC) for the NIT were also made available to a visitor and prospective bidder on the website. The GTC bore the heading Governing Hiring of Equipment for removal of Overburden, Extraction of Coal, Transportation and loading in Areas of Central Coalfields Limited 12. In paragraph 11 of the GTC it was specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond 90 days. These conditions were met by JVC. 18. It was also contended that not only was the bank guarantee in conformity with the basic requirements but that its terms were stricter than the bank guarantee prescribed by CCL. It was further contended that in any event furnishing a bank guarantee in the prescribed format was a non-essential condition of the contract and therefore the rejection of JVC's bid only on the ground that the bank guarantee was not in the prescribed format was arbitrary and unreasonable. 19. The learned Single Judge considered the submissions of JVC and concluded that furnishing a bank guarantee in a different format other than the one prescribed would cause multiple problems and this was certainly not advisable. 20. It was also held by the learned Single Judge that it was necessary to adhere to the strict terms of the NIT as well as the prescribed format for the bank guarantee. 21. With regard to the contention that the NIT did not prescribe any format, the learned Single Judge was of the view that if JVC had any doubt in this regard it should have sought a clarification as mentioned in the NIT. Since JVC did not do so, it was too late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed by CCL. 27. In view of the above considerations, the High Court was of opinion that the learned Single Judge had erred in dismissing the writ petition filed by JVC. The High Court also quashed the communications sent by CCL rejecting the bid of JVC and permitted it to participate in the reverse bidding process. 28. It is under these circumstances that the present appeals have been filed before us. Discussion 29. What is extraordinary about this case is that the employer, that is CCL, seeks to adhere to the terms of the NIT and the GTC issued by it, but the submission of JVC is that CCL should actually deviate from the terms of these documents so as to benefit JVC. Indeed, in spite of a specific requirement that the bank guarantee should be submitted in the prescribed format, JVC claims an entitlement to a deviation in this regard on the ground that the prescribed format was a non-essential term of the NIT and the GTC. Who is to decide this issue of essentiality? Does CCL with whom the contract has to be entered into by the successful bidder have no say in the matter? Before adverting to this, it is necessary to get clarity on some circumstances. 30. The fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for eight years. 33. We were informed by the learned Attorney General that 9 of the 11 bidders furnished a bank guarantee in the prescribed and correct format. Under these circumstances, even after stretching our credulity, it is extremely difficult to understand why JVC was unable to access the prescribed format for the bank guarantee or furnish a bank guarantee in the prescribed format when every other bidder could do so or why it could not seek a clarification or why it could not represent against any perceived ambiguity. The objection and the conduct of JVC regarding the prescribed format of the bank guarantee or a supposed ambiguity in the NIT does not appear to be fully above board. 34. The core issue in these appeals is not of judicial review of the administrative action of CCL in adhering to the terms of the 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. 35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whether the exercise of the power involves affectation of some right or denial of some privilege. (Emphasis given) Applying this principle to the present appeals, other bidders and those who had not bid could very well contend that if they had known that the prescribed format of the bank guarantee was not mandatory or that some other term(s) of the NIT or GTC were not mandatory for compliance, they too would have meaningfully participated in the bidding process. In other words, by re-arranging the goalposts, they were denied the privilege of participation. 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 scrutinize 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 re-arranged or asked to be re-arranged during the bidding process to affect the right of some or deny a privilege to some. 38. In G.J. Fernandez v. State of Karnataka (1990) 2 SCC 488 both the principles laid down in Ramana Dayaram Shetty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unfair. The High Court introduced an essential term concept and held that the Clause in the NIT relating to deposit of earnest money was an essential term thereof and could not be deviated from. The Allahabad High Court held: The mere fact that all the tenderers who had deposited the earnest money, whether in terms of Clause 6 or not had been treated alike cannot make any difference. It is quite possible to visualise that the parties who had failed to deposit the earnest money may also have been in the fray had they known that earnest money through cheque was also acceptable. Thus they have obviously been deprived from competing with others and this makes the action of Respondents 1 to 5 unfair when condition No. 6 of the NIT so specifically points out that deposit of earnest money in any other mode except in cash or by demand draft would not be acceptable. It leads us to think that this was an essential precondition for submitting tenders and the Respondents were not entitled to deviate from this. All tenders which were not accompanied by deposit of earnest money strictly in the manner indicated in the NIT deserved to be rejected. We reject the contention of the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessful bidder in respect of a technical or procedural violation. This was quite clearly stated by this Court (following Tata Cellular) in Jagdish Mandal v. State of Orissa (2007) 14 SCC 517 in the following words: 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of the commercial standing and reliability of the tendering entity. This feature being absent, we think that the filing of the latest income tax return was a collateral term, and accordingly the Tendering Authority ought to have brought this discrepancy to the notice of the Appellant Company and if even thereafter no rectification had been carried out, the position may have been appreciably different. Essentially therefore, this Court substituted its view for that of the employer who interpreted this term of the NIT to be mandatory for compliance. Rashmi Metaliks followed Poddar Steel and apparently overlooked the dictum laid down in Ramana Dayaram Shetty, G.J. Fernandez, Tata Cellular and Jagdish Mandal and must be confined to its own peculiar facts. In any event, this decision does not advance the case of any of the parties before us. 46. It is true that in Poddar Steel and in Rashmi Metaliks a distinction has been drawn by this Court between essential and ancillary and subsidiary conditions in the bid documents. A similar distinction was adverted to more recently in Bakshi Security and Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd. 2016 (7) SCALE 425 thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereby re-write 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 re-written by the High Court. 50. Yet another problem could be faced by an employer (such as CCL) if the language used in the terms of the NIT or the GTC is not adhered to and its plain meaning discarded. A problem could be faced by an employer if every bidder furnishes a bank guarantee in a different format or one that it is comfortable with. In such a situation, CCL would have to scrutinize each bank guarantee to ascertain whether it meets with its requirements and the NIT and the GTC. Apart from the text of the bank guarantee, minor changes could be made by a bidder such as enforceabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployer. 54. In this context, and in the present times, it is important to note that the World Bank has ranked India extremely low in matters relating to enforcement of contracts and ease of doing business. Out of 189 countries worldwide, India is ranked 178 in the matter of enforcement of contracts and 130 in the matter of ease of doing business2. One of the possible reasons for this extremely low ranking given to our country is the failure of all parties concerned in strictly adhering to the terms of documents such as the NIT and the GTC. In so far as the present case is concerned, the NIT was floated on 5th August, 2015 and one year later, we are still struggling with the issue of acceptance of a bank guarantee for a contract of about ₹ 2000 crores-certainly not a small sum. Conclusion 55. On the basis of the available case law, we are of the view that since CCL had not relaxed or deviated from the requirement of furnishing a bank guarantee in the prescribed format, in so far as the present appeals are concerned every bidder was obliged to adhere to the prescribed format of the bank guarantee. Consequently, the failure of JVC to furnish the bank guarantee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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