2017 (5) TMI 1472 - SC - Indian Laws

Supreme Court overturns disqualification in tender process, emphasizing review for arbitrariness.

CRRC Corporation Ltd. Versus metro Link Express For Gandhinagar & Ahmedabad (Mega) Company Ltd.

The Supreme Court found the appellant's disqualification from a tender process to be illegal, arbitrary, and perverse. The Court overturned the High ... Determination of the eligibility and qualification criteria for tender - Initial Filter-cum-Qualification Requirement Bid - eligible bidders - Held that:- The expression used in the present clause being “single entity”, understandably, it is inclusive of a private as well as a government owned entity. The unit envisaged as a single entity is thus independent of any combination or formation in the form of a J.V. or a Consortium and thus is visualised to be one integral and composite whole. In such a logical premise, a government owned company with its 100% wholly owned subsidiaries has to be comprehended as a single entity, eligible to bid in terms of clause 4.1 of the tender conditions and is to be regarded as single, coherent and homogeneous existence and not a disjointed formation. The improvement endeavoured by the respondent in its reply affidavit is belied by the records and is unacceptable. No other view or elucidation of the relevant clauses of the tender conditions is at all possible. The interpretation offered by the respondent and endorsed by the High Court in the contextual framework is thus patently impermissible and absurd. Not only the appellant as the record testifies had offered its responses to the clarifications sought for, its status as a government owned corporation, by no means, has been disputed by MEGA. Further, in the face of its demonstrated structural integrity and functional unity qua its subsidiaries with all consequential legal implications, the apprehension of MEGA that the subsidiary companies of the appellant, if necessity so arises, would not be available for the execution of the project, not being a party to the contract, to say the least, is speculative, unfounded, farfetched and wanting in reason and rationale. Whether the subsidiary companies of the appellant would be responsible for the execution of the work is evinced by the formational specifics and functional dynamics of the appellant and its wholly owned subsidiary companies, as noticed in Consortium of Titagarh Firema Adler SPA (supra) in the affirmative and does not call for further dilation. In the face of a forensic analysis of the decisions cited at the Bar in the above adjudication, it is inessential as well to retraverse the same. In the wake up of above determination, the impugned disqualification of the appellant on the ground of deficiency, in experience in terms of clause 2.4, is unsustainable in law and on facts being grossly illegal, arbitrary and perverse. As a corollary, the judgment and order of the High Court in challenge is also set-aside. The tender process in view of the above conclusion, would be furthered hereinafter as per the terms and conditions thereof and in accordance with law and taken to its logical end as expeditiously as possible. We make it clear that the present adjudication is confined only to the issue of disqualification of the appellant on the ground of experience on the touchstone of clause 2.4 of the “Eligibility and Qualification Criteria” of “Tender Document” and no other aspect. The appeal is allowed. In the facts and circumstances of the case, there shall be no order as to costs. Issues Involved:1. Eligibility Norms in Tender Conditions2. Disqualification of the Appellant3. Clarifications on Tender Queries4. Legal Interpretation of 'Single Entity' and 'Government-Owned Entity'5. Judicial Review of Administrative DecisionsDetailed Analysis:1. Eligibility Norms in Tender Conditions:The central issue revolves around the interpretation of eligibility criteria in the tender conditions for a prestigious project with global participation. The appellant was disqualified by the respondent based on their understanding of the qualifying criterion, which was upheld by the High Court.2. Disqualification of the Appellant:The appellant, a corporation formed by the merger of M/s. CSR Corporation Ltd. and M/s. CNR Corporation Ltd., was disqualified for not meeting the experience criteria as per clause 2.4 of the tender documents. The appellant argued that it should be allowed to use the experience of its subsidiaries to meet the qualification requirements. The respondent, however, maintained that the experience of subsidiary companies could not be counted unless they formed a joint venture or consortium with the parent company.3. Clarifications on Tender Queries:During pre-bid meetings, the respondent clarified that the experience of subsidiary companies would not be considered unless they formed a joint venture or consortium. The appellant contended that this clarification was in response to a different context and should not apply to its bid as a single entity.4. Legal Interpretation of 'Single Entity' and 'Government-Owned Entity':The Supreme Court examined whether the appellant, as a government-owned entity with 100% wholly owned subsidiaries, could be considered a single entity eligible to bid. The Court referred to a previous case, Consortium of Titagarh Firema Adler SPA, where it was held that a government-owned entity with its subsidiaries could be treated as a single entity for bidding purposes. The Court found that the appellant's structural integrity and functional unity with its subsidiaries should allow it to use their experience to meet the tender requirements.5. Judicial Review of Administrative Decisions:The Court emphasized that judicial review of administrative decisions should be limited to checking for arbitrariness, unreasonableness, or bias. The Court found that the respondent's decision to disqualify the appellant was arbitrary, discriminatory, and lacked a reasonable basis. The Court reiterated that technical evaluations should be left to experts unless there is clear evidence of mala fide or perversity.Conclusion:The Supreme Court concluded that the appellant's disqualification was unsustainable in law and on facts, being grossly illegal, arbitrary, and perverse. The Court set aside the High Court's judgment and directed that the tender process should proceed in accordance with the terms and conditions of the tender documents. The appeal was allowed, and the appellant's bid was reinstated for further consideration.