Gourinath Mohapatra vs State Of Odisha & Ors.

Chittaranjan Dash, J.

Heard learned counsel for the Parties.

By means of this application, the Petitioner, an ‘A’ Class Engineer Contractor, calls in question the order dated 06.05.2026 passed by Opposite Party No.3, whereby his bid submitted pursuant to e-Procurement Notice No. ACE, VNB-03/2025-26 for the work of “Flood Protection Work on right flood bank of river Vansadhara near village Bainaguda in Rayagada District” has been rejected. The Petitioner has also assailed the subsequent tender notice dated 06.06.2026 issued for the same work.

Since the quoted price was considered to be abnormally low, the Petitioner was called upon to furnish a detailed item-wise justification and price analysis explaining the manner in which the work could be executed at the quoted rate. The Petitioner submitted his explanation along with supporting documents relating to his machinery, manpower, supervisory personnel and other resources. Thereafter, upon being called upon to furnish further supporting documents and a detailed item-wise analysis, the Petitioner submitted the same on 16.04.2026. As the scrutiny of the price analysis could not be completed within the original bid validity period, the Petitioner also expressed his willingness to extend the validity of his bid by a further period of 60 days.

The price analysis was thereafter scrutinised by a Departmental Technical Committee constituted for the purpose. The Committee noticed, inter alia, that the rates quoted towards stones and their transportation varied substantially from the estimated rates; that the labour component quoted by the Petitioner was lower than the rate reflected in the estimate; and that the rate quoted for zinc-coated PVC hexagonal mesh wire/gabion boxes was substantially lower than the approved estimate. On the basis of such scrutiny, the bid of the Petitioner was rejected under Clause VI of the Office Memorandum dated 03.01.2026 issued by the Works Department, on the ground that the quoted price raised material concerns regarding the Petitioner’s capability to perform the contract at the offered price. The bid was thereafter cancelled and a fresh tender was invited for the same work.

Learned counsel appearing for the Petitioner submits that the impugned rejection is founded on an erroneous appreciation of the material furnished by the Petitioner. It is contended that the Petitioner had adequately explained the basis of his quoted rates, including the availability of his own machinery, vehicles and stone quarry and the use of mechanised processes which reduced the requirement of manual labour without involving any violation of the statutory minimum wages. It is further submitted that the finding regarding the stone quarry was factually incorrect and that the Committee had also proceeded on an erroneous comparison of the rate of the gabion boxes. According to learned counsel, the Office Memorandum dated 03.01.2026 had consciously done away with the earlier negative bid cap and contemplated a substantive scrutiny of an abnormally low bid on the basis of the bidder’s explanation and price analysis; the mere fact that the Petitioner had quoted 32.70% below the estimated cost could not, therefore, furnish a ground for rejection.

Per contra, learned Additional Government Advocate submits that the rejection followed a detailed scrutiny by the duly constituted Departmental Technical Committee and that the Petitioner, despite being afforded repeated opportunities, failed to satisfactorily substantiate the exceptionally low rates quoted by him in respect of various components of the work. It is submitted that the concerns relating to the availability and cost of construction materials, the labour component and the rate quoted for gabion boxes were sufficient to raise doubts regarding the feasibility of execution at the offered price. It is further contended that the work concerns flood protection and public safety and that acceptance of an abnormally low and potentially unworkable bid could expose the project to the risk of compromised quality, incomplete execution or delay. The Opposite Parties, accordingly, seek dismissal of the writ petition, contending that the decision was taken in accordance with the Office Memorandum dated 03.01.2026 and within the domain of the Tendering Authority.

Before proceeding to examine the rival submissions on the merits, it would be apposite to bear in mind the settled principles governing judicial review in matters relating to tenders and award of contracts. In Tata Motors Limited vs. The Brihan Mumbai Electric Supply & Transport Undertaking (BEST) and Others, reported in 2023 SCC OnLine SC 671, the Hon’ble Supreme Court has reiterated that a writ Court should ordinarily refrain from substituting its own decision for that of the Tendering Authority unless something gross or palpable is shown. The relevant paragraphs are reproduced below:

Keeping the aforesaid parameters in view, we may first advert to the Office Memorandum No.07764600022025/173/W. dated 03.01.2026 issued by the Works Department, Government of Odisha, which governs the scrutiny of low bids in the present case. The said Office Memorandum is significant inasmuch as it consciously abolished the earlier provision prescribing a threshold negative bid cap of 14.99% under Appendix-IX, Clause 36 of the OPWD Code, Volume-II. In its place, an incremental system of Additional Performance Security was introduced for low bids. The Office Memorandum further makes it clear that it would not be advisable to prescribe any normative percentage below the estimated cost which would, by itself, result in a bid being treated as an abnormally low bid.

The significance of the aforesaid amendment cannot be lost sight of. Under the revised mechanism, a bid does not become liable for rejection merely because it is quoted below a particular percentage of the estimated cost. The Office Memorandum defines an abnormally low bid as one in which the bid price, “in combination with other elements of the Bid”, appears so low as to raise material concerns regarding the capability of the bidder to perform the contract at the offered price. In such a situation, the Procuring Entity may seek written clarification from the bidder, including detailed price analysis in relation to the scope of work, schedule, resource mobilisation, allocation of risks and responsibilities and other requirements of the bid document.

More importantly, the Office Memorandum does not contemplate rejection merely upon formation of an initial apprehension regarding the viability of the bid. It provides that after evaluating the price analysis, if the Procuring Entity determines that the bidder has substantially failed to demonstrate his capability to deliver the contract at the offered price, the bid may be rejected. Thus, the scheme envisages a sequential exercise: the low quotation may trigger scrutiny; the bidder is thereafter required to substantiate the basis of his quotation; and the explanation and price analysis so furnished are required to be evaluated before a conclusion is reached as to whether the bidder has substantially failed to establish his capability to perform the contract at the quoted price.

In the present case, therefore, the mere fact that the Petitioner had quoted 32.70% below the estimated cost could not, by itself, furnish a valid basis for rejection of his bid. The relevant enquiry was whether, upon scrutiny of the material furnished by the Petitioner in response to the queries raised by the authorities, he had substantially failed to demonstrate his capability to execute the work at the quoted price. It is in the context of this specific requirement under the Office Memorandum that the reasons recorded by the Departmental Technical Committee and the consequent order dated 06.05.2026 are required to be examined.

The question, therefore, is whether the aforesaid reasons recorded by the Departmental Technical Committee withstand scrutiny when tested against the material furnished by the Petitioner and the requirement under Clause VI of the Office Memorandum dated 03.01.2026. The Committee principally found fault with the Petitioner on three aspects, namely, the cost of stones/boulders and their transportation, the labour component and the rate quoted for zinc-coated PVC hexagonal mesh gabion boxes. We may examine each of these aspects in turn.

Insofar as the cost of stones/boulders and their transportation is concerned, the Committee observed that the Petitioner had claimed to own a stone quarry but had not furnished the supporting document relating to the lease of the quarry. The Petitioner, however, had consistently relied upon the availability of his own quarry and machinery as one of the principal reasons enabling him to quote a lower rate. In his subsequent clarification, he specifically referred to the Consent to Operate in respect of his quarry and stated that his own tippers and other machinery were readily available for deployment. He has also placed the quarry lease agreement on record.

We are conscious that the Tendering Authority was entitled to verify the Petitioner’s claim regarding the availability and legal status of the quarry and other resources. However, once the Petitioner had furnished material in support of his explanation, the same was required to be considered in the context of the price analysis. The availability of one’s own source of raw material, machinery and transportation facilities is plainly capable of having a bearing upon the cost of execution. The Committee, while noticing the absence of the quarry lease document at the relevant stage, does not appear to have examined the Petitioner’s explanation regarding the Consent to Operate, his own resources and the manner in which those resources contributed to the lower quoted rate. The finding, therefore, does not by itself establish that the Petitioner had substantially failed to demonstrate his capability to execute the work at the offered price.

Further grounds of rejection relate to the labour component and the rate quoted for zinc-coated PVC hexagonal mesh gabion boxes. The Committee found that the labour rate quoted by the Petitioner was substantially below the rate approved by the Labour and ESI Department, Odisha, and that the rate quoted for the gabion boxes was approximately 35% below the approved cost.

The Petitioner, however, had furnished an explanation in respect of both these components. As regards labour, his case was that the lower labour component reflected reduced deployment of manual labour on account of the mechanised manner in which the work was proposed to be executed, while specifically undertaking to comply with the statutory requirement of payment of minimum wages. As regards the gabion boxes, he explained that the departmental rate of Rs.2,310/- related to a 2 cubic metre unit and that his quoted rate of Rs.800/- per cubic metre was based upon direct procurement from the factory outlet.

We need not undertake a detailed re-calculation of either component. Suffice it to observe that the explanations furnished by the Petitioner raised matters which required consideration while evaluating whether his bid was, in fact, workable. A lower labour component in the overall price analysis does not, by itself, establish a violation of minimum wage requirements unless it is demonstrated that the labour actually proposed to be deployed would necessarily have to be paid below the statutorily prescribed rate. Similarly, the comparison of the rate of gabion boxes required consideration of the unit of measurement and the basis on which the Petitioner claimed to be able to procure the material at the quoted rate. The impugned decision does not disclose adequate consideration of these explanations before drawing the conclusion that the Petitioner had substantially failed to establish his capability to execute the work at the offered price.

What, therefore, emerges from the aforesaid discussion is that the concern expressed by the Department regarding the substantially low quotation was not, in itself, misplaced. The difficulty lies in the manner in which that concern was ultimately converted into a conclusion of non-viability. Clause VI of the Office Memorandum dated 03.01.2026 requires an evaluation of the price analysis furnished by the bidder and contemplates rejection only where, upon such evaluation, the bidder has substantially failed to demonstrate his capability to perform the contract at the offered price.

In the present case, the Petitioner had furnished explanations with regard to the very aspects which subsequently formed the basis of rejection. The reasons recorded by the Committee, however, do not satisfactorily disclose why those explanations were found inadequate or how they demonstrated that the Petitioner would be unable to execute the work in accordance with the prescribed specifications at the quoted price. The conclusion thus appears to proceed substantially from the disparity between the Petitioner’s rates and the departmental estimates, rather than from a demonstrable failure on his part to establish the feasibility of his bid.

We make it clear that this Court is not undertaking its own commercial assessment of the Petitioner’s quotation. Whether the price offered by a bidder is commercially advantageous or whether the Tendering Authority should ultimately accept the bid are matters within the domain of the competent authority. Our interference is warranted only because the material on record does not disclose a sufficiently reasoned evaluation of the Petitioner’s explanation in terms of the specific test prescribed under Clause VI of the Office Memorandum. The decision, therefore, cannot be sustained merely on the ground that the Petitioner’s quotation was substantially below the departmental estimate.

We may also notice that Opposite Party No.3, who chaired the Departmental Technical Committee which scrutinised the Petitioner’s price analysis, thereafter proceeded to reject the Petitioner’s bid on the basis of the said evaluation. We need not examine this aspect independently, since the infirmities already noticed in the evaluation are sufficient to vitiate the impugned decision. The circumstance, however, lends further significance to the requirement of an objective and demonstrably reasoned consideration of the Petitioner’s explanation.

For the reasons aforesaid, we are of the considered view that the rejection of the Petitioner’s bid by order dated 06.05.2026 cannot be sustained. The decision does not demonstrate the requisite evaluation contemplated under Clause VI of the Office Memorandum dated 03.01.2026 and, consequently, the conclusion that the Petitioner had substantially failed to establish his capability to execute the work at the quoted price is not borne out from the material on record. We, however, make it clear that merely because the Petitioner was found to be L-1, he does not acquire an indefeasible right to the award of the contract. The competent authority is required to take its decision in accordance with the governing tender conditions and the Office Memorandum dated 03.01.2026. Our conclusion is confined to the legality of the process by which the Petitioner’s bid came to be rejected.

Accordingly, the order dated 06.05.2026 passed by Opposite Party No.3 rejecting the Petitioner’s bid is hereby quashed. Consequently, the subsequent tender notice dated 06.06.2026, issued for the same work on the basis of the aforesaid rejection, cannot also be sustained and is accordingly set aside. The matter is remitted to the competent authority for fresh consideration of the Petitioner’s bid in accordance with Clause VI of the Office Memorandum dated 03.01.2026, after taking into consideration the price analysis and supporting material furnished by the Petitioner. Such exercise shall be undertaken by an authority/committee other than one chaired by Opposite Party No.3 and shall be completed as expeditiously as possible, preferably within four weeks from the date of communication of this order.

It is clarified that we have expressed no opinion on the ultimate commercial viability of the Petitioner’s bid, and the competent authority shall be free to take an appropriate decision in accordance with law and the applicable tender conditions.

The Writ Petition is accordingly allowed.