VIDARBHA IRRIGATION DEVELOPMENT CORPORATION versus M/S ANOJ KUMAR AGARWALA & ORS. on 23 January 2019

VIDARBHA IRRIGATION DEVELOPMENT CORPORATION

v.

M/S ANOJ KUMAR AGARWALA & ORS.

(Civil Appeal No.1049 of 2019)

JANUARY 23, 2019

[R. F. NARIMAN AND NAVIN SINHA, JJ.]

Tenders – Essential tender condition – Non-compliance of –Tender called by the appellant on 06.01.2018 for balance earthworkto be done in a canal – Tender was ultimately replied to by threepersons – Clause 2.22 of the tender conditions inter alia stated thatbank guarantee that was to be furnished had to be valid up to onemonth after the defect liability period, which was for a period of 40months – Bank guarantee furnished by Respondent No.2 was initiallyfurnished only for a period of six months – Bids were opened on06.04.2018 – One day later, Respondent No. 2 sought to make upthis deficiency by adding a period of 34 months to the bankguarantee – Bid of Respondent No. 2 being the lowest bid wasaccepted – Appellant condoned the initial bank guarantee givenby Respondent No. 2 for an admittedly incorrect period of 6 months– Propriety of – Held: Clause 2.35 made it clear that a substantiallyresponsive bid was one which conforms to all terms, conditions andspecifications without any material deviation – Inter alia, a materialdeviation is one which limits, in any substantial way, or isinconsistent with the bidding documents or the employer’s rights orbidder’s obligations under the Contract – A bank guarantee, for aperiod of six months and not for a period of 40 months, would notonly be directly inconsistent with the bidding documents but wouldalso be contrary to the employers’ right to a bank guarantee for alonger period – Since a material deviation from the terms andconditions of the tender document was made by Respondent No. 2,such bid would have to be considered as not substantially responsiveand ought to have been rejected by the employer – When an essentialtender condition which had to be strictly complied with was not socomplied with, the appellant would have no power to condone lackof such strict compliance – Any such condonation, as has beendone, would amount to perversity in the understanding or

A

B

C

D

E

F

G

H

Aappreciation of the terms of the tender conditions, which must beinterfered with by constitutional court – Judgment of the High Court,insofar as para 8 is concerned, set aside – Work now be performedby the Respondent No. 1 (one of the bidder) at the bid of Rs. 39.15Crores that was the bid of Respondent No.2.BDisposing of the appeals, the Court HELD: 1.1 Clause 2.15 of the tender conditions made itclear that it is only at a pre-tender stage that a clarification maybe obtained regarding tender conditions. Sub-clause 4 of Clause2.15 is important because all tenderers were cautioned by thisCClause that tenders containing any deviation from the contractualterms and conditions, specifications or other requirements, willbe rejected as non-responsive. [Para 6] [501-B-C]

1.2 In the pre-tender meetings that took place betweenthe Chief Engineer and prospective parties on 30.01.2018Dquestions were raised as to the period of bank guarantee, andthe Department specifically relied upon a GR dated 12.02.2016,together with the corrigenda thereto, and stated that as a policydecision, modification in this Clause cannot be made. It is clear,therefore, that a modification to this very tender condition wassuggested at the pre-tender stage, and was rejected to theEknowledge of all prospective tenderers. Sub-clause 4 of Clause2.15, therefore, becomes important in this context as theRespondent No. 2 was put on notice from the beginning itselfthat if there is any deviation in terms of the period of bankguarantee, its bid would be treated as non-responsive. ClauseF2.22, also makes reference to the self-same PWD Circular dated12.02.2016 with the corrigenda. A reading of this Clause wouldalso show that a bank guarantee that is to be furnished has to bevalid up to one month after the defect liability period which,admittedly, is for a period of 40 months. [Paras 7, 8] [501-C-D,F-H; 502-A-B]G

1.3 Clause 2.35 makes it clear that a substantiallyresponsive bid is one which conforms to all terms, conditionsand specifications without any material deviation. Inter alia, amaterial deviation is one which limits, in any substantial way, or is inconsistent with the bidding documents or the employer’srights or bidder’s obligations under the Contract. A bankguarantee, which is for a period of six months and not for a periodof 40 months, would not only be directly inconsistent with thebidding documents but would also be contrary to the employers’right to a bank guarantee for a longer period. This being thecase, since a material deviation from the terms and conditions ofthe tender document was made by Respondent No. 2, when itfurnished a bank guarantee for only six months initially, it wouldbe clear that such bid would have to be considered as notsubstantially responsive and ought to have been rejected by theemployer. Clause 2.35.2 also makes it clear that such a bid wouldhave to be rejected outrightly and may not be subsequently maderesponsive by correction. [Para 10] [502-D-F]

1.4 The words used in the tender document cannot beignored or treated as redundant or superfluous – they must begiven meaning and their necessary significance. Given the factthat in the present case, an essential tender condition which hadto be strictly complied with was not so complied with, the appellantwould have no power to condone lack of such strict compliance.Any such condonation, as has been done in the present case,would amount to perversity in the understanding or appreciationof the terms of the tender conditions, which must be interferedwith by a constitutional court. The judgment of the High Court,insofar as para 8 is concerned, is set aside. Mr. Basant, learnedsenior counsel appearing on behlaf of Respondent no.1 very fairlysubmitted that he will match the amount of Rs. 39.15 crores thatwas the bid of Respondent No. 2. The work now be performed bythe Respondent No. 1 at this bid amount. [Paras 15 and 18][505-E-F; 506-C]

Bakshi Security and Personnel Services Pvt. Ltd. v.Devkishan Computed Pvt. Ltd. and Ors.(2016) 8 SCC446 : [2016] 3 SCR 310 – relied on.

Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn.Ltd. (2016) 16 SCC 818 : [2016] 3 SCR 551– referred to.

A

B

C

D

E

F

G

H

[2019] 2 S.C.R.

Case Law Reference

A

[2016] 3 SCR 310

relied on referred to

Para 13

[2016] 3 SCR 551

Para 14

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1049Bof 2019.

From the Judgment and Order dated 11.09.2018 of the High Courtof Judicature at Bombay, Bench at Nagpur, Nagpur in Writ PetitionNo. 2932 of 2018

WITH

C

Civil Appeal No.1050 of 2019.

Shekhar Naphade, R. Basant, Raju Ramachandran , Sr. Advs.,Gagan Sanghi, J.B. Kasat, Rameshwar Prasad Goyal, K.Parameshwar,Hrishikesh Chitaley, Anup Gilda, J.T. Gilda, Vijay Kari Singh, RajatJoseph, M.V. Mukunda, Nishant Ramakantrao Katneshwarkar,DMs. Deepa M. Kulkarni, Anoop Kandari, Advs. for the appearing parties.

The Judgment of the Court was delivered by ROHINTON F. NARIMAN, J. 1. Leave granted.

2. A Tender was called by the appellant before us on 06.01.2018Efor balance earthwork to be done in a canal. The Tender was ultimatelyreplied to by three persons whose bids, respectively, were - Rs.39.53crores by Respondent No.1, Rs.39.15 crores by Respondent No.2, andRs.46.81 crores by Respondent No.3. There is no dispute that the bid ofRespondent No. 2 was the lowest bid. At this stage, it is a little importantFto advert to some of the tender conditions:- “Contract” is defined by the e-tender in question as follows:- “1.3.9 CONTRACT :- It shall mean and include following documents.

GTender Documents.

Specifications.

Drawings.

Tender document & information/data submitted by contractor HCommon set of conditions/Minutes of pre-Tender conference.”

Clause 2.15 speaks of “Pre-tender Conference” as follows:- “1) Pre-tenders conference open to all prospective tenderer willbe held in the office as stated in this Section, wherein theprospective tenderer will have an opportunity to obtain clarificationsregarding the work and the tender conditions.

2) The prospective tenderers are free to ask for any additionalclarification either in writing or orally and the reply to the samewill be given by the Chief Engineer/Superintending Engineer inwriting and these clarifications referred to as common set ofconditions, shall form part of tender documents and which willalso be common and applicable to all tenderer.

3) The e-tender submitted by the tenderer shall be based on theclarification, additional facility issued (if any) by the Corporationand this tender shall be unconditional. Conditional tenders willsummarily be rejected as non-responsive.

4) All tenderers are cautioned that the tenders containing anydeviation from the contractual terms and conditions, specificationsor other requirements and conditionalTenders will be rejected asnon-responsive.”

Clause 2.22 speaks of “Performance Security” as follows:- “PERFORMANCE SECURITY in case of offer below the costput to tender as per PWD Circular BDG-2016/BLD-2/Dt.:12/02/2016) & corrigendum on date 17/03/2016/ WRD CorrigendumNo. Tender 0316/(189/16) Major Projects-1 dated 14.7.16

Condition Regarding payment of performance security (in placeof condition for payment of additional security deposit) if offerquoted by the tenderer is below the cost put to tender.

i) If the tenderer quote upto 1% below the cost put to tender,no additional performance security is required. However, ifthe tenderer quote his offer more than 1% below thec o s tput to tender to 10% below the cost put to tender, tenderershall submit the demand draft or FDR or BG of the amountequal to 1% of cost put to tender towards performance securityin Envelope No.2 of tender.

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

ii) If the tenderer quote his offer more than 10% below (offerbelow than 10%) the cost put to tender, tenderer shall submitthe demand draft or FDR or BG of the cumulative amountwhich is equal to the amount by which offer is more than 10 %below plus the amount as per (i) above in the Envelop No.2 oftender. (For example, for 14% below rate, 1% + (14%-10%)i.e. 4%, then total 5% of the cost put to tender.

iii) The amount of performance security shall be calculated onrounding of contractors offer upto two decimal places. Theoffer in envelop No.2 without demand draft or FDR or BG ofappropriate amount of performance security shall be treatedas invalid offer.

iv) Demand draft/BG/FDR shall be drawn in the name ofExecutive Engineer, Ghodazari Canal Division Nagbhid.

v) Demand draft/BG/FDR/shall be drawn from Nationalisedor scheduled banks.

vi) The BG/FDR shall be valid upto one month after defectliability period. Validity of demand draft shall be minimum 3months from the date of submission of tender.

vii) Scanned copy of BG/FDR/demand draft shall be uploadedby the contractor at the time of e-tendering.

viii) Contractor shall submit the demand draft/FDR/BG in sealedenvelope in the office of the Executive Engineer, GhodazariCanal Division Nagbhid within 5 working days from the dateof submission of tender. Name of work and e-tender numbershall be written on the envelope.

ix) On opening the tender, if papers in Envelop No.1 don’tfulfill the essential qualification/ documents requirements, theExecutive Engineer shall return the envelope of Demand Draft/BG/FDR to concerned Contractor within 7 days from the dateof opening of tender.

x) The Executive Engineer shall refund the amount ofperformance security after completion of work successfully.

xi) Demand draft BG/FDR of the second lowest tender shallbe returned within 3 days after issuing works order to the lowesttender.

xii) EMD of the contractors submitting false documents/demanddraft/BG/FDR in above process shall be forfeited and thecontractor shall be Black listed.

xiii) Executive Engineer shall issue the work order only afterencashing the demand draft of the lowest tenderer.”

“Important Note”

“If any of the documents required as per Technical-Envelope-1 isnot submitted on-line or/and Financial Bid: in Envelope-II(Commercial) is not properly uploaded, or/and information givenin various Undertakings, Proform’s, Forms, Formats, Appendicesetc, in various Sections-II, III, IV, VI is missing, incomplete/misleading/false tender of the bidder shall be liable for out-rightrejection and shall not be considered for further process.”

Clause 2.35 speaks of “Acceptance of Tender” as follows:- “2.35 x x x 2.35.1 A substantially responsive Bid is one which conforms to allthe terms, conditions, and specifications of the Bidding documents,without material deviation or reservation. A material deviation orreservation is one (a) which affects in any substantial way thescope, quality, or performance of the Works, (b) which limits inany substantial way, inconsistent with the Bidding documents, theemployer’s rights or the Bidder’s obligations under the Contract;or (c) whose rectification would affect unfairly the competitiveposition of other Bidders presenting substantially responsive Bids.

2.35.2 If a Bid is not substantially responsive, it will be rejected bythe Employer, and may not subsequently be made responsive bycorrection or withdrawal of the non-conforming deviation orreservation.”

3. On the facts in this case, it is undisputed that the bank guaranteethat was furnished for Rs. 42.14 lakhs by Respondent No. 2 before uswas initially furnished only for a period of six months on 12.03.2018, inresponse to the tender. It is common ground between the parties thatthe period ought to have been 40 (forty) months. The bids were openedon 06.04.2018, and on 07.04.2018, one day later, Respondent No. 2,sought to make up this deficiency by adding a period of 34 months to the

A

B

C

D

E

F

G

H

Abank guarantee which was valid for 6 months only. The aforesaid bidmade by Respondent No. 2 was accepted initially on 03.05.2018. ATender Evaluation Committee then evaluated all the bids on 07.07.2018,and finally, the bid of the Respondent No. 2 was accepted as it was thelowest bidder among the three bids that had been received. The bone ofcontention between the parties is whether it is possible for the appellantBbefore us to condone the initial bank guarantee being given for anadmittedly incorrect period of 6 months.

4. Mr. Shekhar Naphade, learned senior counsel appearing onbehalf of the appellant, has taken us through the Government Resolution(GR) dated 12.4.2017 in order to contend that the term of bank guarantee,Cif originally wrongly given, and which makes a tenderer ineligible, doesnot disqualify him as a clarification can be sought from the bidder afterwhich the term may be extended in conformity with the tender conditions.Apart from the above, he argued that, ultimately, the moment thedeficiency was pointed out, this deficiency was made good byDRespondent No. 2 and it is only thereafter that the bid of the RespondentNo. 2 was accepted, being the lowest bid. He also added that thedifference between the bid of Respondent No. 1 and Respondent No. 2would amount to roughly Rs. 37 lakhs which again would be a saving tothe public exchequer. He went on to add that given the parameters ofjudicial review and that a bona fide decision has been taken by theEauthority, this could not have been interfered with and was wronglyinterfered with by the judgment under appeal. Mr. Raju Ramachandran,learned senior counsel appearing on behalf of Respondent No. 2, broadlyadopted these submissions.5. Mr. R. Basant, learned senior counsel appearing on behalf ofFRespondent No. 1 has taken us through the tender conditions and hasargued that a period of six months for a bank guarantee, which admittedlyshould have been 40 months, is a material deviation which cannot becondoned later. He further pointed out that in point of fact, objectionswere taken at a pre-tender stage by certain would be tenderers, andGafter considering those objections, the authority made it clear that thePWD Circular dated 12.02.2016, together with corrigenda issuedthereafter, would make it clear that this is a material condition whichcannot be changed. He, therefore, argued that it was known to theRespondent No. 2, right from the beginning, that this particular conditionwas both material and has to be satisfied, and, admittedly, on the facts, itH

was not satisfied. He very fairly stated that the impugned judgmentcould not stand on its own legs but could be supported with the argumentsthat had been made by him.

6. At this stage, it is important to analyse the tender conditions. Aswas correctly pointed out by Mr. Basant, Clause 2.15, as set outhereinabove, makes it clear that it is only at a pre-tender stage that aclarification may be obtained regarding tender conditions. Sub-clause 4of Clause 2.15 is important because all tenderers are cautioned by thisClause that tenders containing any deviation from the contractual termsand conditions, specifications or other requirements, will be rejected asnon-responsive.

7. At this stage, it is important to advert to the pre-tender meetingsthat took place between the Chief Engineer and prospective parties on30.01.2018. Entry 46 of the document that is produced by the appellantreads as follows:- What is important to note is that questions were raised as to theperiod of bank guarantee, and the Department specifically relied upon aGR dated 12.02.2016, together with the corrigenda thereto, and statedthat as a policy decision, modification in this Clause cannot be made. Itis clear, therefore, that a modification to this very tender condition wassuggested at the pre-tender stage, and was rejected to the knowledge ofall prospective tenderers. Sub-clause 4 of Clause 2.15, therefore,becomes important in this context as the Respondent No. 2 was put onnotice from the beginning itself that if there is any deviation in terms ofthe period of bank guarantee, its bid would be treated as non-responsive.

A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

8. Clause 2.22, extracted herein above, also makes reference tothe self-same PWD Circular dated 12.02.2016 with the corrigenda. Areading of this Clause would also show that a bank guarantee that is tobe furnished has to be valid up to one month after the defect liabilityperiod which, admittedly, is for a period of 40 months.

A

B9. Mr. Naphade’s argument that had a demand draft been drawninstead of a bank guarantee, its validity would only be a minimum ofthree months from the date of submission of tender, which would showthat a deviation from the 40 months period would certainly be permissible,(had a demand draft given instead of a bank guarantee), cannot becountenanced. On the facts of this case, no demand draft was given.COnly a bank guarantee was given, and clearly for a much lesser periodthen that mandated by this Clause.

10. We may now come to Clause 2.35 which makes it clear thata substantially responsive bid is one which conforms to all terms,conditions and specifications without any material deviation. Inter alia,Da material deviation is one which limits, in any substantial way, or isinconsistent with the bidding documents or the employer’s rights orbidder’s obligations under the Contract. It cannot be gainsaid that a bankguarantee, which is for a period of six months and not for a period of 40months, would not only be directly inconsistent with the biddingEdocuments but would also be contrary to the employers’ right to a bankguarantee for a longer period. This being the case, since a materialdeviation from the terms and conditions of the tender document wasmade by Respondent No. 2, when it furnished a bank guarantee for onlysix months initially, it would be clear that such bid would have to beconsidered as not substantially responsive and ought to have been rejectedFby the employer. Clause 2.35.2 also makes it clear that such a bid wouldhave to be rejected outrightly and may not be subsequently maderesponsive by correction.

11. It is important to note that the Government Resolution dated12.04.2017, which applies to the PWD Department, has superseded theGPWD Circular dated 12.02.2016 and corrigenda dated 17.03.2016 and14.07.2016. However, so far as the tender conditions of the tender inquestion are concerned, Clause 2.18 is material and is setout hereunder:- H

“Earnest Money:

All tenderers shall pay entire E.M.D. & the mode of payment isindicated as specified at Sr. No. 4, 6, 4 of Section IV.

As per GR PWD 12.04.2017 – E.M.D. shall be paid online throughbank account of own by contracts, contractor shall submit theundertaking that the EMD has been paid through his bank accountand he will be responsible for any legal action under IPC if it isfound false.”

As against this, when it comes to performance security, the PWDCircular of 12.02.2016 and its corrigeneda have alone to be followed inthe case of performance security. This being the case, it is not possibleto advert to the GR dated 12.04.2017 for the purpose of performancesecurity as it applies only in respect of earnest money, as is clear fromClause 2.18 of the Tender.

12. The fact that a superseded Government Resolution continuesto be utilised for the purpose of performance security may raise eyebrows.However, insofar as the tendering public is concerned, they have beenput on notice that the performance security that is to be furnished, willonly be as per the GR dated 12.2.2016 and corrigenda and not as per theGR dated 12.04.2017.

13. The law on the subject is well settled. In Bakshi Securityand Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd.and Ors., (2016) 8 SCC 446, this Court held:

“14. The law is settled that an essential condition of a tender hasto be strictly complied with. In Poddar Steel Corpn. v. GaneshEngg. Works [Poddar Steel Corpn. v. Ganesh Engg. Works, (1991)3 SCC 273] this Court held as under: (SCC p. 276, para 6)

“6. … The requirements in a tender notice can be classifiedinto two categories—those which lay down the essentialconditions of eligibility and the others which are merely ancillaryor subsidiary with the main object to be achieved by thecondition. In the first case the authority issuing the tender maybe required to enforce them rigidly. In the other cases it mustbe open to the authority to deviate from and not to insist uponthe strict literal compliance of the condition in appropriatecases.”

A

B

C

D

E

F

G

H

15. Similarly in B.S.N. Joshi & Sons Ltd. v. Nair CoalServices Ltd. [B.S.N. Joshi & Sons Ltd. v. Nair Coal ServicesLtd., (2006) 11 SCC 548] this Court held as under: (SCCpp. 571-72, para 66)

A

“(i) if there are essential conditions, the same must be adheredto; B

(ii) if there is no power of general relaxation, ordinarily thesame shall not be exercised and the principle of strictcompliance would be applied where it is possible for all theparties to comply with all such conditions fully; C

(iii) if, however, a deviation is made in relation to all the partiesin regard to any of such conditions, ordinarily again a power ofrelaxation may be held to be existing;

(iv) the parties who have taken the benefit of such relaxationshould not ordinarily be allowed to take a different stand inrelation to compliance with another part of tender contract,particularly when he was also not in a position to comply withall the conditions of tender fully, unless the court otherwisefinds relaxation of a condition which being essential in naturecould not be relaxed and thus the same was wholly illegal andwithout jurisdiction; D

E

(v) when a decision is taken by the appropriate authority upondue consideration of the tender document submitted by all thetenderers on their own merits and if it is ultimately found thatsuccessful bidders had in fact substantially complied with thepurport and object for which essential conditions were laid down,the same may not ordinarily be interfered with;…”

F

16. We also agree with the contention of Shri Raval that the writjurisdiction cannot be utilised to make a fresh bargain betweenparties.”

G14. However, learned counsel appearing on behalf of the appellantstrongly relied upon Afcons Infrastructure Ltd. v. Nagpur Metro RailCorpn. Ltd., (2016) 16 SCC 818, and paragraphs 14 and 15 in particular,which state:

“14. We must reiterate the words of caution that this Court hasstated right from the time when Ramana Dayaram Shetty v.

H

International Airport Authority of India [Ramana DayaramShetty v. International Airport Authority of India, (1979) 3 SCC489] was decided almost 40 years ago, namely, that the wordsused in the tender documents cannot be ignored or treated asredundant or superfluous — they must be given meaning and theirnecessary significance. In this context, the use of the word “metro”in Clause 4.2(a) of Section III of the bid documents and itsconnotation in ordinary parlance cannot be overlooked.

15. We may add that the owner or the employer of a project,having authored the tender documents, is the best person tounderstand and appreciate its requirements and interpret itsdocuments. The constitutional courts must defer to thisunderstanding and appreciation of the tender documents, unlessthere is mala fide or perversity in the understanding or appreciationor in the application of the terms of the tender conditions. It ispossible that the owner or employer of a project may give aninterpretation to the tender documents that is not acceptable tothe constitutional courts but that by itself is not a reason forinterfering with the interpretation given.”

15. It is clear even on a reading of this judgment that the wordsused in the tender document cannot be ignored or treated as redundantor superfluous – they must be given meaning and their necessarysignificance. Given the fact that in the present case, an essential tendercondition which had to be strictly complied with was not so compliedwith, the appellant would have no power to condone lack of such strictcompliance. Any such condonation, as has been done in the presentcase, would amount to perversity in the understanding or appreciation ofthe terms of the tender conditions, which must be interfered with by aconstitutional court.

16. A subsidiary contention has been raised that even the bankguarantee subsequently furnished was for a period of 39 months and notfor 40 months. This need not be gone into in view of our finding on thefirst point.

17. We may hasten to add that the judgment under appeal leavesa great deal to be desired. It did not advert to the main point in question,but instead focused on supposed contradictions made in an affidavit filedby the appellant in the High Court. Having gone through the affidavit,

A

B

C

D

EF

G

H

Awe find no such contradiction. It is also necessary to advert to the finalrelief given by the High Court. If, for the reason given by the HighCourt, the bid of the Respondent No. 2 had to be rejected, it cannot beunderstood as to how Respondent No. 2 can be brought back in theevent that Respondent No. 1 does not agree to carry out the work forthe lower bid amount of Respondent No. 2. For all these reasons, evenBthough the reasoning of the Division Bench in the impugned judgmentdoes not commend itself to us, yet, for the reasons contained in thisjudgment, the appeal will have to be dismissed.

18. We may record that Mr. Basant very fairly submitted beforeus that he will match the amount of Rs. 39.15 crores that was the bid ofCRespondent No. 2 before us. We record this statement and order,therefore, that the work now be performed by the Respondent No. 1 atthis bid amount. The judgment of the High Court, insofar as para 8 isconcerned, is set aside.

19. With these observations, the civil appeals are disposed of.D

Divya Pandey

Appeals disposed of.

E

F

G

H