2023 (3) TMI 1581 - HC - Indian Laws

Rejection of technical bids for not signing irrational Declaration-II violated Article 14 equality principles

General Manager (Contracts Cell), India Oil Corporation Ltd. and Deputy General Manager (Contracts Cell), India Oil Corporation Ltd Versus Jyothi Constructions and Others

General Manager (Contracts Cell), India Oil Corporation Ltd. and Deputy General Manager (Contracts Cell), India Oil Corporation Ltd Versus Jyothi ... 1. ISSUES PRESENTED and CONSIDERED- Whether the rejection of the respondents' technical bids on the ground of striking off Declaration-I, which was part of the tender document requiring a declaration of compliance with the standard agreement, was legally valid.- Whether the declaration clause in the tender document, as worded, was clear, rational, and enforceable, or whether its ambiguity and irrationality rendered the rejection arbitrary and violative of Article 14 of the Constitution.- Whether the court should interfere with the tender process on the ground of a technical defect in the bid submission, especially when no mala fide or discriminatory motive was alleged against the Tender Inviting Authority.- The scope of judicial review in tender evaluation, particularly concerning the interpretation of tender documents and the decision to reject bids for non-compliance with procedural requirements.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of rejection of bids for striking off Declaration-IRelevant legal framework and precedents: The tender documents explicitly mandated submission of Declaration-I, II, and III as part of the technical bid. The tender conditions required strict compliance, and the Tender Evaluation Committee was empowered to reject bids not conforming to these conditions. Precedents cited include judgments emphasizing the sanctity of tender conditions and the limited scope of judicial interference in administrative tender processes, such as Tamil Nadu Police Housing Corporation Ltd. v. P & C Projects (P) Ltd., K.M. Mustafa v. IRCTC Ltd., and W.B. State Electricity Board v. Patel Engineering Co. Ltd.Court's interpretation and reasoning: The appellants contended that the respondents admitted their mistake of striking off the declaration and that the tendering authority acted within its rights to reject non-compliant bids. The Court acknowledged that the tender documents required strict adherence and that ordinarily, failure to comply with mandatory conditions justifies rejection.Key evidence and findings: The respondents' bids were rejected because they struck off Declaration-I, which was required to confirm compliance with the standard agreement. The respondents claimed inadvertent error during uploading.Application of law to facts: The Court found that while the rejection was procedurally correct on paper, the actual wording and meaning of the declaration were problematic, which impacted the validity of the rejection.Treatment of competing arguments: The appellants stressed strict adherence to tender conditions; respondents argued the declaration was ambiguous and meaningless, warranting benefit of doubt.Conclusion: The Court found that the rejection based solely on striking off the declaration was questionable due to the ambiguous nature of the declaration itself.Issue 2: Ambiguity and irrationality of the declaration clauseRelevant legal framework and precedents: The doctrine of contra proferentem was invoked, which holds that ambiguous contractual terms are construed against the drafter. The Court referred to United India Insurance Co. Ltd. v. Pushpalaya Printers and Central Bank of India v. Virudhunagar Steel Rolling Mills Ltd., which reinforce this principle.Court's interpretation and reasoning: The Court examined the wording of Declaration-I, which stated 'We declare that we have complied with and have not violated any clause of the standard Agreement.' The Court found this wording to be irrational and bordering on absurdity because compliance with an agreement cannot be declared before the agreement is executed. The Court reasoned that a prudent tenderer could not reasonably be expected to sign such a declaration at the tender stage.Key evidence and findings: The declaration wording itself was ambiguous and illogical. The appellants conceded that the declaration could have been worded better.Application of law to facts: Given the ambiguity, the Court applied the contra proferentem rule against the Tender Inviting Authority, holding that the respondents should not be penalized for the unclear wording.Treatment of competing arguments: The appellants argued that the declaration was clear from their perspective and that bidders should have complied strictly. The Court rejected this, emphasizing the ambiguity and the unfairness of penalizing bidders for unclear terms drafted by the authority.Conclusion: The declaration's ambiguous and irrational nature rendered the rejection of bids on this ground arbitrary and violative of Article 14.Issue 3: Scope of judicial review in tender evaluation and interference in administrative decisionsRelevant legal framework and precedents: The Court referred to multiple precedents, including Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), emphasizing the limited scope of judicial interference in tender processes. Courts generally do not substitute their own views for administrative decisions unless there is malafide, perversity, or violation of fundamental principles.Court's interpretation and reasoning: The Court noted that the learned Single Judge did not rewrite the contract but rather interpreted the declaration in light of its ambiguity and public interest considerations. The Court recognized the importance of fairness and the public interest in ensuring that tenders attract the best prices and are not defeated by hyper-technicalities.Key evidence and findings: No mala fide or discriminatory motive was alleged against the Tender Inviting Authority. The respondents had invested significantly in preparing for the tender.Application of law to facts: The Court held that the rejection of bids on such a technical and ambiguous ground was arbitrary and that judicial intervention was justified to prevent injustice and protect public interest.Treatment of competing arguments: The appellants urged judicial restraint and adherence to tender conditions. The respondents emphasized fairness and the need to interpret ambiguous terms against the drafter.Conclusion: The Court found that interference was warranted due to the arbitrariness and irrationality of the rejection, consistent with established principles of judicial review.3. SIGNIFICANT HOLDINGS- 'The declaration, as contained in the form, is not only irrational, but borders on absurdity. There was no question of any violation of the standard agreement even before entering into the same.'- 'Where the words of a document are ambiguous, they shall be construed against the party who prepared the document.'- 'When on the face of the document, Declaration-II is irrational and absurd, the rejection of the technical bids for not signing the same would be arbitrary and whimsical and violation of the Article 14 of the Constitution of India which would compel this Court to interfere with the process.'- The Court emphasized that the tender documents should be given the meaning ascribed by the Tender Inviting Authority but only if such meaning is rational and clear; ambiguity invites application of contra proferentem and judicial scrutiny.- The Court upheld the principle that judicial interference in tender processes is limited but permitted where arbitrariness, irrationality, or violation of constitutional principles occurs.- Final determination: The technical bids of the respondents, which were rejected solely on the ground of striking off the ambiguous declaration, must be considered along with other bids in accordance with law. The appeals filed by the Tender Inviting Authority were dismissed, affirming the decision of the Single Judge to allow the writ petitions.