BHARTIA -ALLIED JV vs THE UNION OF INDIA and ORS

This intra court appeal is directed against the order dated 31.3.2017 passed by the learned Single Judge of this High Court, whereby he has

allowed WP(C) No.7657/2016 of Respondent No.4 -M/s Royal-CPL (JV).

M/s Allied Infrastructures and Projects Pvt. Ltd., Kolkata has combined with Bhartia Infra Projects Ltd., Guwahati to form a joint venture,

namely, Bhartia-Allied (JV), which is the appellant in present appeal. The dispute between the appellant and respondent No.4 is over awarding of

contract works by the Railways for design and construction of broad gauge ballastless track. Respondent No.3 - the Chief Engineer - issued a

tender notice dated 8.3.2016 inviting sealed tenders from experienced and reputed contractors for design and construction of broad gauge

ballastless track including supply of bi-block sleepers and fastening of various tunnels and all other ancillary works in connection with the

construction of new broad gauge line from Jiribam to Imphal. The total value of the work mentioned in the tender notice is Rs.237.70 crore, but

the same is divided into four sub-sections. The subsectioning has been done essentially with a view to expedite the construction work. The

subsections are as follows:- Tender No. 1(a)-value -73.01 crore -between Dholakhal to Kambiron Tender No. 1(b)-value-54.12 crore - between

Kambiron to Khongsang Tender No. 1(c)-value-56.32 crore -between Khongsang to Noney Tender No. 1(d)-value-54.25 crore -between

Noney to Tupul Total value of the contract- 237.70 crore - between Jiribam to Imphal

The appellant and respondent No.4 along with others submitted their tenders. The constituent partner of the appellant, namely, Bhartia Infra

Projects Limited, Guwahati also submitted its tender. Respondent No.4 submitted its tenders for all the four sub-sections i.e. Tender No.1(a) to

1(d); whereas the appellant submitted its tender for only one sub-section i.e. Tender No.1(b). Bhartia Infra Projects Limited, Guwahati in its

independent capacity submitted tenders for Tender Nos. 1(a), 1(c) and 1(d).

On opening of the tenders by the Railways, only the tenders of appellant and respondent No.4 as well as of Bhartia Infra Projects Limited were

found to be technically suitable. The financial bids were therefore opened on 12.8.2016. And on such opening, respondent No.4 was found to be

L-1 in Tender Nos. 1(a), 1(b) and 1(c); whereas appellant was found L-2 in Tender No. 1(b). Likewise, Bhartia Infra Projects Limited was found

to be L-1 in Tender No. 1(d) and L-2 in Tender Nos. 1(a) and 1(c). In the result, the Railways have allotted the work of Tender No. 1(a) to

respondent No.4 and of Tender No. 1(d) to Bhartia Infra Projects Limited.

The Railways then by applying clause (iii) of special note or Note (viii) of Clause 1(A) 1.1 (both worded same) stipulated in the Tender Notice

found that respondent No.4 was not eligible for other two Tenders i.e. Tender Nos. 1(b) and 1(c), despite it being L-1. The appellant was thus

called for negotiation by letter dated 9.12.2016 in respect of Tender No. 1(b), in which, it was L-2. Aggrieved, Respondent No.4 challenged the

letter dated 9.12.2016 by filing WP(C) No. 7657/2016 on the ground that it being L-1 in Tender Nos.1(a), 1(b) and 1(c) no other tenderer was

entitled for allotment of work of these tenders. Another ground of challenge was that clause (iii) of the special note was not applicable, firstly,

because there were only two (three) eligible tenderers for the work of four sub-sections, whereas note says that only one tender shall be awarded

to one firm and secondly, because no same firm is L-1 in all the sub-sections. Alternatively, it was also averred that even assuming if clause (iii) of

the special note was applicable, the finding of Tender Committee that respondent No.4 has executed a single work of similar nature with a

maximum value of Rs. 29.07 crore, is incorrect. In the writ petition, Respondent No.4 prayed that works of tender nos. 1(b) and 1(c) be also

allotted to it by a suitable direction.

The Railways defended its offer to the appellant in respect of Tender No. 1(b) by filing affidavit-in-opposition on the plea that Respondent No.4

as per tender conditions was not found to be eligible for the same. The appellant also filed separate affidavit-in-opposition and justified the offer

made by the Railways in its favour. But the learned Single Judge, by the impugned order, agreed with Respondent No.4 and by the impugned

order, has allowed the writ petition. The learned Single Judge has held that clause (iii) of the special note is not applicable in the present case

because for four sub-sections only 2 or 3 tenderers were available and none of the tenderer was L-1 in all the sub-sections. And on these findings,

the learned Single Judge directed the Railways to consider the claim of tenderers separately in respect of each individual tender notice and while

doing so due regard be given to eligibility criteria of bidder as mentioned in Clause 1 Note 5. The learned Single Judge has also held that conditions

of Tender Notice permit negotiation with only L-1 tenderer and not with the tenderer whose position is L-2. The appellant, being aggrieved with

the order of the learned Single Judge, has filed the present appeal.

It is argued on behalf of the appellant that the learned Single Judge has committed gross illegality in interfering with the decision making process

of the Railways in inviting it for negotiation by letter dated 9.12.2016 in respect of Tender No.1(b). According to the appellant, clause (iii) of

special note stipulated in the Tender Notice is very much applicable and the same apparently makes Respondent No.4 ineligible for Tender

No.1(b) despite it being L-1. The learned senior counsel for Respondent No.4, on the other hand, strongly defended the order passed by the

learned Single Judge and submitted that since it is L-1 for Tender Nos.1(b) and 1(c), no other tenderer was entitled for allotment of work of these

tenders. The learned senior counsel also reiterated that the finding of Tender Committee about Respondent No.4 having executed a single work of

similar nature with a maximum value of Rs. 29.07 crore, is factually incorrect. However, the Railways although defended its decision of inviting the

appellant for negotiation in the writ petition, it has not challenged the order of the learned Single Judge under the impression that it is at liberty to

reconsider the matter afresh in the selection of successful tenderer.

The main question which calls for our consideration is whether having regard to the conditions of Tender Notice, the decision of the Railways to

invite the appellant for negotiation by letter dated 9.12.2016 in respect of Tender No.1(b) is perverse warranting interference by a constitutional

court.

For better understanding of the case, we deem it proper to reproduce the special note or note as well as relevant eligibility criteria stipulated in

the Tender Notice:-

Special Note (or Note (viii) of Clause 1(A) 1.1? both worded same):

(iii) Sub-sectioning has been done with a view to expedite the work, only one tender will be awarded to one firm; if the same firm

becomes L-1 in all the subsections, then the evaluation of the firm for its fitness for award of all the works should be done for the

works as a whole

Eligibility criteria will be as under:

(A)Technical Criteria

1.1 ......

Note:

(v) The construction firm should have executed at least one single work of ballast less track of construction of RCC structures such as

bridge etc. for a minimum 35% of advertised value of work within qualifying period i.e. last three financial years & current financial

year. For foreign firms, the tender value in Indian currency will be converted to equivalent foreign currency based on exchange rate

prevailing on the date of publishing of the tender.

(B) Financial Criteria:

1.2 Total contract amount received during the last three years (i.e., current year and three previous financial years) should be

minimum of 150% of advertised tender value of work supported by (a) Attested Certificate from the employer/client & (b) Audited

balance sheet duly certified by the Accountant.

A careful reading of the special note quoted above reveals that real purpose of subsectioning of total contract work has been done by the

Railways to ensure early completion of project work. And for this reason, only one tender is contemplated to be awarded to one firm. There is,

however, an exception to this condition in the event of same firm becoming L-1 in all the sub-sections. In such a situation, the special note says that

evaluation of the firm for its fitness for award of all the works should be done for the works as a whole. The exception is also apparent by the

presence of semi-colon (;) after expression ?one firm?. In Prativa Bose vs. Kumar Rupendra Deb Raikat, AIR 1965 SC 540, the Supreme Court

has approved the rule that two parts of a sentence separated by a semi-colon can be dealt with two different states of affairs. Therefore, when the

exception will apply, the condition of one tender being awarded to one firm will not be applicable. Also as per the exception, the eligibility of the

same one firm on becoming L-1 in all the four sub-sections will be evaluated for its fitness for award of all the works taking the same as one single

work. And the evaluation of eligibility is to be done according to the eligibility criteria quoted above i.e. a tenderer must have executed a single

work for a minimum 35% of the combined advertised value of the tenders in the last three financial years. This means that a tenderer being L-1 in

all the four subsections should have executed a single work of Rs.83.20 crore within last three financial years, being 35% of Rs.237.70 crore.

The Special Note (or Note), however, does not contemplate a situation when the same firm becomes L-1 in more than one sub-section, but

not in all the four sub-sections. As seen above, Respondent No.4 became L-1 in three sub-sections instead of all the four. The Railways,

therefore, in its wisdom resolved the situation by giving a purposive interpretation of Special Note (or Note) and decided that after opening of the

financial bid, if any tenderer is found to be lowest in more than one sub-section, the evaluation of the eligibility of the tenderer would be made

based on the combined advertised tender value of the sub-sections in which the tenderer is lowest. Meaning thereby, the tenderer should have

executed similar work of at least 35% and turnover of minimum 150% of the combined advertised value of all the tenders in which he is lowest.

This the Railways did because literal interpretation would have served no purpose.

The Railways, in its affidavit-in-opposition, have mentioned the value of each individual tender as well as 35% of amount required under the

eligibility clause against each tender as under:-

Tender No.1(a)-1st sub-section (Tunnels No.1 to 6:Rs.73.01 cr:35% works out to Rs.25.55 cr.

Tender No.1(b)-2nd sub-section(Tunnels No.7 to11C:Rs.54.12cr:35% works out to Rs.18.94cr.

Tender No.1(c)-3rd sub-section(Tunnels No.12 to 18:Rs.56.32cr:35% works out to Rs.19.71cr.

Tender No.1(d)-4th sub-section(Tunnels No.19 to27:Rs.54.25cr:35% works out to Rs.18.99 cr.

The Tender Committee of Railways comprising of three members meticulously evaluated the experience certificates submitted by Respondent

No.4 in each of the three tenders i.e. Tender Nos.1(a), 1(b) and 1(c) vis-?-vis the requirements specified in the special note and found that the

maximum value of single work of similar nature executed fitting the tender requirements was only Rs.29.07 crore. The Respondent No.4 was,

therefore, found ineligible for more than one tender as the 35% value of the combined advertised value of any two tenders exceeded the value of

Rs.29.07 crore. Hence, the Tender Committee, in all fairness, decided that Respondent No.4 was eligible for one tender out of total four tenders

and recommended for allotment of work in respect of Tender No.1(a) with maximum tender value of Rs.73.01 crore. This recommendation was

also accepted by the Tender Accepting Authority, pursuant to which, Respondent No.1 has been allotted the work of Tender No.1(a). We are

unable to agree with the submission of learned senior counsel for Respondent No.4 that the finding of Tender Committee about Respondent No.4

having executed a single work of similar nature with a maximum value of Rs.29.07 crore is incorrect. This we say so because original record

produced by the Railways reveals that evaluation has been made by the experts on the basis of documents and certificates submitted by

Respondent No.4. The finding of the Tender Committee is apparently well founded and unassailable.

And, after Respondent No.4 was found ineligible for more than one tender, the Railways naturally invited the appellant for negotiation vide

impugned letter dated 9.12.2016 in respect of Tender No.1(b) because the appellant was L-2 for this tender. The Respondent No.4 having found

to be ineligible for Tender No.1(b), the work of same cannot be allotted irrespective of it being L-1. In the fact situation of the case, the learned

Single Judge is apparently not correct in holding that Railways could not have invited the appellant for negotiation. The learned Single Judge, in our

considered view, is also not correct in concluding that special note would apply only if a tender was L-1 in all the four sub-sections. The learned

Single Judge lost sight of the fact that this requirement is an exception to the general rule of the same special note that one tender will be allotted to

one firm.

In DLF Universal Limited vs. Director, Town and Country Planning Department, Haryana, (2010) 14 SCC 1, the Supreme Court has held

that contract is interpreted according to its purpose and the purpose of a contract is the interests, objectives, values, policy that the contract is

designed to actualise. And in Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited, (2016) 16 SCC 818, the Supreme Court

has held that the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirement and

interpret its documents. In the same case, the Supreme Court has also held that the constitutional courts must defer to this understanding and

appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms

of the tender conditions. Not only this, the Supreme Court has even said that the employer of a project may possibly give an interpretation to the

tender documents which may not be acceptable to the constitutional courts, but that by itself, is not a reason for interfering with the interpretation

given. The Tender Committee was, thus, well within its jurisdiction to give purposive interpretation of special note, which we find to be just, proper

and fair. Therefore, in our considered view, the learned Single Judge committed an illegality in interfering with the interpretation given by the Tender

Committee because it is neither perverse nor mala fide nor admittedly to favour the appellant.

There is yet another reason which has impelled us to interfere with the order of the learned Single Judge. As seen above, the learned Single

Judge has erroneously held that special note is not applicable because none of the tenderer is L-1 in all the four tenders. The learned Single has

then directed the Railways to consider the case of tenderers separately in respect of each individual tender by keeping in mind eligibility criteria

mentioned in Note (v) quoted above in paragraph 9 of this order. This direction completely defeats the very object sought to be achieved by sub-

sectioning of total contract work to ensure early completion of project work and condition that only one tender will be awarded to one firm.

For these reasons, we have no hesitation in holding that Respondent No.4, having executed a single work of similar nature with a maximum

value of Rs. 29.07 crore, cannot be allotted the works of all the three tender Nos. 1(a), 1(b) and 1(c) only because it is L-1 for these tenders. We,

accordingly, set aside the impugned order passed by the learned Single Judge.

The appeal is allowed, but with no order as to cost.