2022 (1) TMI 1420 - SC - Indian Laws

NVS technical bid rejection upheld as administrative tender decisions cannot be substituted without mala fide allegations

The SC set aside the HC's order that had allowed a writ petition challenging rejection of a technical bid by NVS for failing to meet past performance ... Disapproval of technical disqualification and consequential rejection of the technical bid of writ petitioner in respect of a tender floated by the appellant - whether the High Court has been justified in interfering with the view taken by the tender inviting authority, i.e., NVS, in rejection of the technical bid of writ petitioner for want of fulfilment of ‘Past Performance’ criterion about supply of ‘same or similar Category Products’ of 60% of bid quantity in at least one of the last three financial years? HELD THAT:- The interference by the High Court in this matter does not appear justified, particularly when no case of mala fide or bias is alleged. Every decision of the administrative authority which may not appear plausible to the Court cannot, for that reason alone, be called arbitrary or whimsical. The High Court, in the present matter has obviously proceeded with an assumption that the view as being taken by it, in acceptance of the case of the writ petitioner, was required to be substituted in place of the views of the tender inviting authority. That has been an error of law and cannot sustain itself in view of the consistent binding decisions of this Court, including the 3-Judge Bench decision in M/S GALAXY TRANSPORT AGENCIES, CONTRACTORS, TRADERS, TRANSPORTS AND SUPPLIERS VERSUS M/S NEW J.K. ROADWAYS, FLEET OWNERS AND TRANSPORT CONTRACTORS & ORS. [2020 (12) TMI 1390 - SUPREME COURT]. The High Court, while supporting its process of reasoning, has referred to such principles which, with respect, we find entirely inapposite and beyond the periphery of the question involved in the present case. As noticed, in such matter of contracts, the process of interpretation of terms and conditions is essentially left to the author of the tender document and the occasion for interference by the Court would arise only if the questioned decision fails on the salutary tests laid down and settled by this Court in consistent decisions, namely, irrationality or unreasonableness or bias or procedural impropriety. In the case of Nabha Power Limited [2017 (10) TMI 1549 - SUPREME COURT], as referred by the High Court, this Court, while referring to the concept of ‘Penta test’ for ‘business efficacy’, made it clear that such a test and thereby reading an “implied term”, would come in play only when the five conditions are satisfied. Even in that case, the Court, while dealing with the question of reimbursement of cost incurred by the successful bidder/power supplier towards washing of coal in a power procurement project, analysed as to what charges would be payable by interpretation of all the terms of the contract and held the appellant entitled to certain charges as the formula for energy charges was clear - In the present case too, neither the High Court was reading any “implied term” in the past performance criterion nor NVS had done so. The terms of tender in the present case had been clear, and they were ascertainable with specificity available on the very portal on which NIT was issued. It had not been a case of post facto interpretations by the tender inviting authority-NVS. Certain suggestions made on behalf of the writ petitioner about the tender inviting authority changing the terms to suit a particular bidder remain baseless. No such case of mala fide has been made out; rather, as pointed out on behalf of the appellant, all the other tenderers clearly understood the meaning and requirement of the past performance criterion and stated the particulars of tablets supplied by them in the past. Such contentions of the writ petitioner have only been noted to be rejected. Similarly, the submission made on behalf of the writ petitioner, that it had been awarded another contract for supply of 3,00,000 tablets, carries no meaning at all. Such a supply contract had not been a matter of evaluation in the tender process in question, where the quantity in the last three financial years before the bid opening date was to be considered. Any subsequent event could neither invest the writ petitioner with any right in the present matter nor the impugned order could be sustained on that basis. The petition filed by the writ petitioner was required to be dismissed. The High Court having allowed the writ petition on rather irrelevant considerations, the impugned order is required to be set aside - appeal allowed. Issues Involved:1. Jurisdiction of the High Court of Delhi.2. Interpretation of the term 'same or similar Category Products' in the tender document.3. Validity of the High Court's interference with the tender inviting authority's decision.4. Consistency and clarity of the reasons provided by the tender inviting authority for rejecting the bid.5. Application of the doctrine of 'Contra proferentem' and other relevant legal principles in tender interpretation.Issue-wise Analysis:1. Jurisdiction of the High Court of Delhi:The High Court of Delhi's jurisdiction was challenged on the grounds that all material events took place in Uttar Pradesh, and the tender inviting authority was also in Uttar Pradesh. However, the High Court rejected this objection, noting that the tender inviting authority, NVS, operated under the Department of School Education and Literacy, Ministry of Human Resources Development, New Delhi. This aspect was not emphasized before the Supreme Court, and it was left at that.2. Interpretation of the term 'same or similar Category Products' in the tender document:The crux of the matter was whether 'Smart Phones' could be considered as 'same or similar Category Products' as 'Tablets' under the tender conditions. The High Court held that 'Smart Phones' and 'Tablets' were similar category products, emphasizing that both are electronic products with similar functionalities and are often treated alike in various tenders by different government agencies. The High Court criticized the tender inviting authority for giving a restrictive interpretation to the term 'similar Category Products' and concluded that the intention was to provide maximum competition.3. Validity of the High Court's interference with the tender inviting authority's decision:The Supreme Court emphasized that the author of the tender document is the best person to interpret its terms, and judicial interference is warranted only if the decision is arbitrary, irrational, or mala fide. The Court found that NVS's interpretation of the tender terms, which excluded 'Smart Phones' from the 'similar Category Products,' was neither absurd nor irrational. The Supreme Court concluded that the High Court's detailed analysis of the terms and its substitution of its interpretation over that of the tender inviting authority was unwarranted.4. Consistency and clarity of the reasons provided by the tender inviting authority for rejecting the bid:The Supreme Court found no inconsistency in the reasons provided by NVS for rejecting the bid. Initially, the rejection was stated as a 'technical specification mismatch,' which was later elaborated to clarify that 'Smart Phones' were not considered similar to 'Tablets.' The Court held that mere elaboration of reasons does not imply inconsistency.5. Application of the doctrine of 'Contra proferentem' and other relevant legal principles in tender interpretation:The High Court applied the doctrine of 'Contra proferentem,' which resolves ambiguities in favor of the party that did not draft the document. However, the Supreme Court found this doctrine inapplicable in the context of tender documents, emphasizing that the tender inviting authority's interpretation should prevail unless it is shown to be perverse or mala fide. The Court also referred to the principles laid down in various decisions, reinforcing that the tender inviting authority's interpretation should be respected unless it fails on grounds of irrationality, unreasonableness, or bias.Conclusion:The Supreme Court set aside the High Court's judgment, holding that the High Court's interference was based on irrelevant considerations and that the tender inviting authority's decision was not arbitrary or irrational. The writ petition filed by the writ petitioner was dismissed, and the appeals by NVS and the successful bidder were allowed.