2016 (6) TMI 388 - SC - Companies Law

Supreme Court clarifies 'Company' in Tender excludes firms, upholds tender award.

The Supreme Court ruled that the term 'Company' in a Notice Inviting Tender (NIT) referred specifically to a legal entity under the Companies Act, ... Qualification of bidder for tender - High Court relied on Section 366 of the Companies Act which falls under Chapter XXI and some other statutes to conclude that the word 'Company' used in the NIT was somewhat vague. Thereafter, it was held that respondent no.1 was erroneously held ineligible and excluded from the tender process - Held that:- Section 366 of the Companies Act is completely inapplicable to the facts and circumstances of the case. The provisions of Section 366 of the said Act are applicable only to that part of the Companies Act to which a reference has been made in that Section. Similarly, reliance placed for interpreting ‘company’ on several other statues such as the Income Tax Act, Negotiable Instruments Act, Employees State Insurance Act and Minimum Wages Act etc. is wholly irrelevant. On reading of the terms of the NIT it is clear that the word “Company” can only mean a company as understood under the Companies Act and cannot be read to include a firm. The word “Company” in the NIT is incapable of any other meaning.The NIT makes it absolutely clear that only an individual or a company is eligible to participate in the tender. Since Respondent No. 1 is neither an individual nor a Company but a firm, Respondent No. 3 was fully entitled to reject the bid of the said respondent. Under the circumstances, we are of the opinion that the decision of the High Court deserves to be set aside and we do so accordingly. Issues:Interpretation of the term 'Company' in a Notice Inviting Tender (NIT) and eligibility criteria for bidders.Analysis:The Supreme Court was tasked with determining the eligibility criteria for bidders in a tender process based on the interpretation of the term 'Company' in the Notice Inviting Tender (NIT). The Respondent No. 3 had issued a notice inviting tender for excavation and removal of sand, specifying that bidders must have executed a work of value not less than Rs. 5.00 crores in the last three years involving mineral excavation. Respondent No. 1, a firm, participated in the bid but was deemed ineligible by Respondent No. 3. The tender was subsequently awarded to the lowest bidder, the appellant, G.V. Pratap Reddy.Upon review, the High Court concluded that the term 'Company' in the NIT was vague and should include a firm based on interpretations from the Companies Act and other statutes. However, the Supreme Court disagreed, emphasizing that the Companies Act's Section 366, cited by the High Court, was inapplicable to the case. The Court examined the NIT terms, which explicitly required documents to be signed with the company's seal, confirming that the term 'Company' referred specifically to a legal entity under the Companies Act.The Supreme Court highlighted clauses in the NIT mandating signatures with the company's seal and affirmed that the eligibility criteria only allowed individuals or companies to participate in the tender. As Respondent No. 1 was a firm, not an individual or a company, the rejection of their bid by Respondent No. 3 was deemed justified. Consequently, the Supreme Court set aside the High Court's decision, upholding the original tender award to the appellant, G.V. Pratap Reddy. The civil appeal was allowed without costs, and the interim orders were vacated, concluding the legal proceedings.