Tender committee's selective relaxation of essential conditions for two bidders ruled arbitrary and discriminatory

Gauhati HC held that tender committee's decision declaring two bidders as technically qualified was arbitrary and discriminatory. The court found selective relaxation of essential tender conditions (Clauses 1.9 and 1.10) was not applied uniformly to all bidders, and irrelevant documents like Income Tax Returns for 2022-2023 were improperly considered. Citing Poddar Steel Corporation precedent, the court emphasized essential tender conditions must be rigidly enforced or relaxed equally for all participants. The committee's resolution declaring the two respondents' bids as qualified was deemed unsustainable. Matter remanded to tender committee for fresh consideration of remaining valid bidders.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the tendering authority's declaration of certain bids as technically responsive, despite non-compliance with essential conditions of the tender document, amounted to an arbitrary and illegal act.
• Whether the relaxation of essential conditions of the tender document was uniformly applied to all bidders or selectively to some, thereby causing discrimination and arbitrariness.
• Whether the acceptance of documents not prescribed by the tender conditions (such as Income Tax Returns for an incorrect financial year) was permissible and valid.
• The extent and limits of judicial review in tender evaluation processes, particularly regarding adherence to essential eligibility conditions and the permissibility of relaxation thereof.
• The appropriate remedy in case of non-uniform application of tender conditions and procedural irregularities in the tender evaluation.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of declaring bids as technically responsive despite non-compliance with essential tender conditions

The relevant legal framework includes the specific clauses of the tender document, notably Clause 1.9 (minimum annual turnover for the last three financial years), Clause 1.10 (submission of up-to-date Income Tax Returns for specified financial years), and Clause 2.6 (submission of hard copies of technical bids and supporting documents). The Supreme Court precedents in Poddar Steel Corporation vs. Ganesh Engineering Works and B.S.N. Joshi & Sons Ltd. vs. Nair Coal Services Ltd. emphasize that essential conditions of a tender must be rigidly enforced, though relaxation may be permissible if applied equally to all bidders.

The Court noted that respondent no.4 failed to submit the Annual Turnover certificate for the financial year 2022-2023, and respondent no.3 did not upload the Income Tax Return for the required year 2021-2022 but instead submitted the return for 2022-2023, which was not prescribed in the tender document. Despite these non-compliances, both respondents' technical bids were declared responsive by the tendering authority.

The scrutiny and supervisory committees had observed these discrepancies but recommended qualification of these bids based on submission of hard copies and other supporting documents. However, other bidders, such as Monu Enterprise and Marami Enterprise, were disqualified on similar grounds of non-submission of required documents.

The Court found that the acceptance of incomplete or incorrect document submissions by the respondent nos. 3 and 4 was inconsistent with the tender conditions and was not uniformly applied to all bidders, amounting to arbitrariness.

Issue 2: Uniformity and non-discrimination in relaxation of tender conditions

The Court examined whether the relaxation of essential tender conditions was applied uniformly to all bidders. While the tender conditions mandated strict compliance, the tendering authority purportedly relaxed these conditions for respondent nos. 3 and 4 but not for other similarly situated bidders such as Monu Enterprise and Marami Enterprise.

Drawing upon the Supreme Court's guidance in B.S.N. Joshi & Sons Ltd. and Bakshi Security and Personnel Services Private Limited vs. Devkishan Computed Private Limited, the Court emphasized that relaxation of essential conditions is permissible only if applied equally to all bidders. Selective relaxation leads to discrimination and arbitrariness, which is impermissible.

The Court found that the tendering authority's selective relaxation violated the principle of fairness and equality among bidders, undermining the integrity of the tender process.

Issue 3: Consideration of documents not prescribed in the tender conditions

The tender document specifically required Income Tax Returns for the financial years 2019-2020, 2020-2021, and 2021-2022. Respondent no.3 submitted the Income Tax Return for 2022-2023, which was not a required document. The tendering authority accepted this submission as sufficient for technical qualification.

The Court held that accepting documents not prescribed in the tender conditions amounted to a procedural irregularity and was not justified. The tender conditions are explicit, and deviation undermines the tender process's transparency and predictability.

Issue 4: Scope of judicial review in tender evaluation and award of contracts

The Court relied heavily on the Supreme Court's ruling in Bakshi Security and Personnel Services, which underscores that judicial review in tender matters is limited to preventing arbitrariness, mala fides, irrationality, and bias. Courts do not substitute their commercial judgment for that of the tendering authority unless the decision is so unreasonable that no responsible authority could have made it.

The Court applied this principle to assess whether the tendering authority's decision was bona fide and in public interest. It concluded that the selective relaxation and acceptance of incorrect documents were arbitrary and irrational, justifying judicial intervention.

Issue 5: Appropriate remedy in case of procedural irregularities and discrimination

The Court found the tender committee's resolution dated 27.06.2023, which declared the technical bids of respondent nos. 3 and 4 as responsive, unsustainable. It held that the bids should have been disqualified in consonance with the tender conditions.

Consequently, the Court set aside the resolution and any consequential orders passed by the tendering authority. The matter was remanded to the Tender Committee to reconsider the bids of the remaining valid tenderers in accordance with the tender conditions and principles of fairness.

3. SIGNIFICANT HOLDINGS

The Court established the following core principles and determinations:

"The essential conditions of a tender have to be rigidly implemented. However, if the same is to be relaxed, the relaxation of the essential condition of a tender has to be made applicable to all the tenderers."

"The decision to declare the technical bids of the respondent no.3 and respondent no.4 is arbitrary, inasmuch as, not only has there been violation of the essential conditions of the tender notice which has not been relaxed for all, but the respondents have taken into consideration documents which were not to be considered, i.e. the respondent no.3's Income Tax Return for the year 2022- 2023."

"Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences... may increase the project cost manifold." (quoting Bakshi Security)

Final determinations on each issue were:

• The tendering authority's acceptance of incomplete and non-compliant bids of respondent nos. 3 and 4 was illegal and arbitrary.
• The relaxation of essential tender conditions was not uniformly applied, resulting in discrimination and violation of the principle of fairness.
• The acceptance of documents not prescribed by the tender conditions was impermissible.
• The writ petition challenging the tender committee's resolution was allowed, the resolution was set aside, and the matter was remanded for fresh consideration consistent with the tender conditions and legal principles.

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