The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.15596 of 2024 1. M/s. Sri Durga Condev Pvt. Ltd., A company incorporated under the Companies Act, 1956 having its registered office, At.- Kairapari, Kotasahi, Tangi, Dist.- Cuttack, Odisha-754 022 represented through its Director, Sri Pradeepta Chandra Rath, aged about 60 years, S/o. Late Dhaneswar Rath. 2. Pradeepta Chandra Rath, aged about 60 years, S/o. Late Dhaneswar Rath, presently Director of M/s. Sri Durga Condev Pvt. Ltd., At.- Kairaparim Kotasahi, Tangi, Dist.- Cuttack-754 022, Odisha …Petitioners -Versus- 1. Union of India represented through the General Manager, East Coast Railway, Rail Sadan, Samanta Vihar, Bhubaneswar- 751017, Dist.- Khurda. 2. The Chief Administrative Officer (Construction), 2nd Floor, North Block, Rail Sadan, Samanta Vihar, Bhubaneswar-751017, Dist.- Khurda. 3. The Chief Engineer (Construction-II), Bhubaneswar, Office of Chief Administrative Officer (Construction), 2nd Floor, North Block, Rail Sadan, Samanta Vihar, Bhubaneswar-751017, Dist.- Khurda. …Opposite Parties W.P.(C) No.15596 of 2024 Page 1 of 20 Advocates appeared in the case: For the Petitioners :
Legal Reasoning
Mr. Asok Mohanty, Senior Advocate, Mr. Gouri Mohan Rath, Advocate For Opposite Parties : Mr. S.S. Kashyap, Central Government Advocate CORAM: HON’BLE THE CHIEF JUSTICE HON’BLE MISS JUSTICE SAVITRI RATHO JUDGMENT 05.11.2024 Chakradhari Sharan Singh, CJ. 1. A Request for Proposal (RFP) dated 27.07.2023 was issued by the Chief Engineer (Construction-II), Bhubaneswar (opposite party No.3) for execution of work of “Talcher-Bimalagarhnew B.G Raillink project: Execution of Earthwork information, minor bridges, major bridges, drains, retaining walls, protection works, RUBs/ROBs including approaches, construction of station building, staff quarters, offices and other service buildings at Pallahara Road station, supply oftrack ballast, P. way linking and other allied works between Srirampur (CSB: Km.67.425-ExcludingYard) & Pallahra Road (CSB:76.90-includingyard) Stations on Engineering, Procurement and W.P.(C) No.15596 of 2024 Page 2 of 20 Construction (EPC) Mode”. The RFP spelt out the detailed terms and conditions for award of the project. Relevant portion of the said RFP
Decision
has been brought on record by way of annexure to the writ petition. 2. The dispute in the present writ petition relates to payment of Additional Performance Security in accordance with Clause-2.21.1 under the heading bidding security of RFP. The heading “Performance Security” (2.21) finds place in the RFP document at two pages i.e. page-32 and page-33. Clause 2.21 at Page-32 reads thus: “2.21 Performance Security 2.21.1 Within 30 (thirty) days of issue of LOA, the selected Bidder shall furnish to the Authority an irrevocable and unconditional guarantee from a Bank in the form set forth in draft EPC agreement (the "Performance Security") for an amount equal to 5% (five percent) of its Bid Price. 2.21.2 For detailed provisions of Performance Security refer Article 7 of draft EPC agreement” 2.1. Same Clause at page-33 reads as under: “2.21 Performance Security 2.21.1 Within 30 (thirty) days of issue of LOA, the selected Bidder shall furnish to the Authority an irrevocable and unconditional guarantee from a Bank in the form set forth in draft EPC agreement (the "Performance Security'') for an amount equal to 5% (five percent) of its Bid Price. In case of W.P.(C) No.15596 of 2024 Page 3 of 20 accepted Bid value is less than 90% of Estimated Project Cost, the Selected Bidder, along with the Performance Security, shall also furnish to the Authority an irrevocable and unconditional guarantee from a Bank in the same form given in draft EPC agreement towards an Additional Performance “Additional Performance Security") for an amount calculated as under: Security (the (i) lf the Bid Price value offered by the Selected Bidder is less than 90% but upto80% of the estimated Project Cost, the Additional Performance Security shall be calculated @20% of the difference between 90% of Estimated Project Cost and the Bid Price offered by the selected Bidder. then (ii) lf the Bid Price value offered by the Selected Bidder is less than 80% of the Estimated Project Cost, then the Additional Performance Security shall be calculated @ 30% of the difference between 90% of Estimated Project Cost and the Bid Price offered by the selected Bidder. (iii) This Additional Performance Security shall be treated as part of the Performance Security. 2.21.2 For detailed provisions of Performance Security and Additional Performance Security refer Article 7 of draft EPC agreement.” 3. It is precisely the case of the petitioners that no Additional Performance Security is required to be furnished in terms of Clause- 2.21 at page-32 and the petitioners cannot be compelled to furnish Additional Performance Security relying on Clause-2.21.1 page-33 of the RFP document EPC. It is also the petitioners’ case that as stipulated W.P.(C) No.15596 of 2024 Page 4 of 20 under Clause-2.21.2, for detailed provisions of Performance Security and Additional Performance Security, reference is to be made to Article 7 of the draft EPC agreement. Article 7 of the Draft EPC agreement, however, does not contain any provision for Additional Performance Security, according to the petitioners. 4. With the aforesaid reasoning, the present writ petition has been filed challenging the communications dated 26.06.2024 and 14.06.2024 issued by opposite party No.3 in demanding Additional Performance Security, which, according to the petitioners, is dehors the terms of the RFP. 5. The short facts of the case are that petitioner No.1 is a limited company incorporated under the Companies Act and petitioner No.2 is Director/shareholder of petitioner No.1. Pursuant to the RFP, the petitioners had participated in the bid process. The petitioners were declared qualified in the technical evaluation process and upon evaluation of the financial bids, the petitioners’ bid was selected at a sum of Rs.197,54,26,640/- which was 24.98% below the estimated price. A Letter of Acceptance (LoA) was issued on 03.06.2024. The petitioners are said to have received the letter of acceptance under W.P.(C) No.15596 of 2024 Page 5 of 20 protest regarding the requirement to furnish Additional Performance Security beyond the terms of the RFP and draft EPC agreement. 6. It is manifest on perusal of page-32 of the RFP document that the said page is substantially blank except for the Performance Security Clause-2.21 as noted above. The same Clause i.e. Clause-2.21 concerning Performance Security is at page-33 also, which clearly stipulates payment of Additional Performance Security, if the stipulated condition(s) exist(s). 7. In the LoA dated 03.06.2024 it is mentioned that Performance Security is to be provided within 30 days of the issue of LoA in accordance with Clause-7.1.1 of the standard EPC agreement. In addition to the above, the bidder is required to furnish Additional Performance Security for an amount worth Rs.11,83,36,008/- only, which is 30% of the difference between 90% of the estimated project cost and the bid price offered by the selected bidders. The petitioners furnished Performance Security on 07.06.2024. The petitioners have however questioned the demand of Additional Performance Security on the ground that such demand is beyond the terms and conditions of the RFP. The petitioners had approached opposite party No.3 against W.P.(C) No.15596 of 2024 Page 6 of 20 the demand of furnishing Additional Performance Security in the absence of any stipulation in Clause-2.21.2 of the RFP of page-32 and requested for execution of agreement by accepting the Performance Security only. 8. The petitioners had earlier approached this Court by filing writ petition giving rise to W.P.(C) No.14689 of 2024 seeking quashing of the orders/instructions issued by the opposite parties dated 17.06.2024, demanding Additional Performance Security. The said writ petition was disposed of by an order dated 21.06.2024 requiring opposite party No.3 to consider and dispose of the petitioners’ representation and pass appropriate order within three weeks. Accordingly, a speaking order has been passed on 26.06.2024. The petitioners’ plea against the submission of Additional Performance Security has been turned down by the said speaking order dated 26.06.2024 which has been challenged in the present writ petition. 9. The facts disclosed in the writ petition have not been disputed in the counter affidavit filed on behalf of the opposite parties. There is a candid admission in the counter affidavit that the clause concerning submission of Performance Security appeared twice in the RFP, one at W.P.(C) No.15596 of 2024 Page 7 of 20 page-32 and another at page-33. It has, however, been stated that Clause-2.21.1 appearing at page-33 provides complete sub-Clauses i.e. Clause-2.21.1 (i), (ii), (iii) and Clause-2.21.2 and that all the sub- Clauses have to be read for correct interpretation of the tender documents. It has been stated that the petitioners are trying to derive undue advantage of an inadvertent uploading of a part of Clause-2.21 at page-32 of the RFP to escape the obligation of furnishing the Additional Performance Security as per the complete Clause at page-33 of the RFP. 10. Mr. Asok Mohanty, learned Senior Counsel appearing on behalf of the petitioners has submitted that in Clause-2.21 (at page-32 of the RFP), there is no stipulation of furnishing Additional Performance Security. He has further submitted, taking us to Clause- 2.21.2 which is at page-33 of the RFP, that it requires to be read with Article-7 of the draft EPC agreement which contains detailed provisions for Performance Security and Additional Performance Security. Referring to Article-7 of the draft EPC agreement, he has submitted that the said Article does not contemplate furnishing of any Additional Performance Security. He has submitted that the W.P.(C) No.15596 of 2024 Page 8 of 20 requirement of furnishing an Additional Performance Security will have to be considered in the light of the stipulation at page-32 of the RFP and Clause-2.21.2 at page-33 of the RFP read with Article-7 of the EPC agreement. He has argued that in the background of clear stipulation in the RFP and draft EPC agreement, demand made by the opposite parties for submission of Additional Performance Security as a condition precedent for execution of the agreement is wholly arbitrary, which requires interference of this Court. He has also argued that there is admitted discrepancy/error in view of Clause-2.21.1 of the RFP appearing twice, one at page-32 and other at page-33, which are differently worded, and therefore, it ought to be resolved in accordance with Clause-2.1.3 of the RFP which requires that notwithstanding anything to the contrary contained in the RFP, detailed terms specified in draft EPC agreement shall have overriding effect. He has accordingly submitted that the draft provisions under the draft EPC agreement shall have an overriding effect, notwithstanding anything contained in the RFP and since there is no stipulation of furnishing Additional Performance Security in the draft EPC agreement, the opposite parties are not justified in requiring the petitioners to furnish Additional Performance Security. W.P.(C) No.15596 of 2024 Page 9 of 20 11. Per contra, Mr. S.S. Kashyap, learned Central Government Counsel appearing on behalf of the opposite parties has submitted that apparently the petitioners are trying to derive undue advantage of an inadvertent mistake of uploading page-32 of the RFP. He has submitted that Clause-2.21.1 is at page-33 of the RFP and not at page- 32 which is evident on comparison of the two pages. He has submitted that the stipulation of furnishing Additional Performance Security in Clause-2.21.1 is unequivocal and requires furnishing Additional Performance Security in addition to Performance Security, in case the accepted bid value is less than 90% of the estimated project cost as specified under sub-Clause- (i) (ii) (iii). He further submits that the Performance Security for the purpose of Article-7 of the draft EPC agreement includes Additional Performance Security as the Additional Performance Security is part of Performance Security under Clause 2.21 of the RFP. Referring to the averments made in the counter affidavit, he has argued that there is rationale behind requirement of submission of Additional Performance Security in case the accepted bid value is less than 90% of the estimated project cost. W.P.(C) No.15596 of 2024 Page 10 of 20 12. We have carefully gone through the pleadings and documents on record. The existence of two pages i.e. page-32 and page-33 in the RFP concerning Performance Security is at the core of the controversy. Whereas, the petitioners are relying on page-32 of the RFP and taking a plea that there being contradiction between the condition for furnishing Performance Security, the benefit should go to the successful bidder as the successful bidder was under the bona fide impression that there was no requirement of submission of Additional Performance Security. 13. After having gone through the contents of page-32 and page- 33 of the RFP, we find that the conditions of furnishing Performance Security are at page-33. Clauses present at page-33 clearly lay down the condition for furnishing Additional Performance Security in a case where the accepted bid value is less than 90% of the estimated project cost. Firstly, we are of the view that the submission made on behalf of the petitioners that there is no requirement of furnishing additional performance guarantee, cannot be accepted without completely ignoring the stipulations under Clause-2.21 available at page-33 of the RFP. Secondly, we find substance in the stand taken by the opposite W.P.(C) No.15596 of 2024 Page 11 of 20 parties in the counter affidavit that uploading of page-32, which does not contain complete Clause-2.21, is an inadvertent error. We are thirdly of the view that the Performance Security, within the meaning of Article-7 of the draft EPC agreement includes Additional Performance Security which is part of Performance Security within the meaning of complete Clause-2.21 of the Performance Security. 14. Accordingly, in our considered view, the petitioners’ representation has been rightly rejected by the impugned reasoned order dated 26.06.2024, based on interpretation of the stipulations under the RFP which cannot be said to be completely unjustified. 15. The Supreme Court in its various decisions has enunciated, in no uncertain terms, that the authority which authors the tender document is the best person to understand and appreciate its requirement and a different interpretation should not be attached by the Courts exercising the power of judicial review. The Supreme Court while reiterating the said legal position has recently held in case of Agmatel India Private Limited v. Resoursys Telecom and others, (2022) 5 SCC 362 that the scope of judicial review in contractual matters, in particularly in relation to the process of interpretation of W.P.(C) No.15596 of 2024 Page 12 of 20 tender documents, is limited. In paragraph-25 of the said decision, the Supreme Court has noticed various earlier decisions, which reads as under: “25. This Court referred to various decisions on the subject and stated the legal principles as follows : (Galaxy Transport Agencies case [Galaxy Transport Agencies v. New J.K. Roadways, Fleet Owners & Transport Contractors, (2021) 16 SCC 808 : 2020 SCC OnLine SC 1035] , SCC paras 14-20) to understand and appreciate “14. In a series of judgments, this Court has held that the authority that authors the tender document is the best person its requirements, and thus, its interpretation should not be second-guessed by a court in judicial review proceedings. In Afcons Infrastructure Ltd. v. Nagpur Infrastructure Metro Rail Corpn. Ltd. [Afcons Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818] , this Court held : (SCC p. 825, para 15) interpret to understand and appreciate ‘15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person its its documents. The requirements and 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. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given.’ In 15. in Bharat Coking Coal Ltd. v. AMR Dev Prabha [Bharat Coking Coal judgment the W.P.(C) No.15596 of 2024 Page 13 of 20 Ltd. v. AMR Dev Prabha, (2020) 16 SCC 759] , under the heading “Deference to authority's interpretation”, this Court stated : (SCC p. 776, paras 50-52) ‘50. Lastly, we deem it necessary to deal with another fundamental problem. It is obvious that Respondent 1 seeks to only enforce terms of NIT. Inherent in such terms. exercise However, it must be noted that judicial interpretation of contracts in the sphere of commerce stands on a distinct footing than while interpreting statutes. interpretation of contractual is 51. In the present facts, it is clear that BCCL and C1- India have laid recourse to clauses of NIT, whether it be to justify condonation of delay of Respondent 6 in submitting performance bank guarantees or their decision to resume auction on grounds of technical failure. BCCL having authored these documents, is better placed to appreciate their requirements and interpret them. [Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818] 52. The High Court ought to have deferred to this understanding, unless it was patently perverse or mala fide. Given how BCCL's interpretation of these clauses was plausible and not absurd, solely differences in opinion of contractual interpretation ought not to have been grounds for the High Court to come to a finding that the appellant committed illegality.’ in the recent 16. Further, in Silppi Constructions Contractors v. Union of India [Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489] , this Court held as follows : (SCC pp. 501- 02, para 20) judgment ‘20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the state instrumentalities; the courts should W.P.(C) No.15596 of 2024 Page 14 of 20 give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case.’ 17. In accordance with these judgments and noting that the interpretation of the tendering authority in this case cannot be said to be a perverse one, the Division Bench ought not to have interfered with it by giving its own interpretation and not giving proper credence to the word “both” appearing in Condition No. 31 of the NIT For this reason, the Division Bench's conclusion [New JK Roadways v. State (UT of J&K), 2020 SCC OnLine J&K 733] that JK Roadways was wrongly declared to be ineligible, is set aside. 18. Insofar as Condition No. 27 of the NIT prescribing work experience of at least 5 years of not less than the value of Rs 2 crores is concerned, suffice it to say that the expert body, being the Tender Opening Committee, consisting of four members, clearly found that this eligibility condition had been satisfied by the appellant before us. Without the assessment of the documents that have been supplied to this Court, it is well settled that unless arbitrariness or mala fide on the part of the tendering authority is alleged, the expert evaluation of a particular tender, particularly when it comes to technical evaluation, is not to be second-guessed by a writ court. Thus, of Orissa [Jagdish in Jagdish Mandal v. State therefore going into W.P.(C) No.15596 of 2024 Page 15 of 20 Mandal v. State of Orissa, (2007) 14 SCC 517] , this Court noted : (SCC pp. 531-32, para 22) tenders ‘22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a and transaction. Evaluating commercial awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. 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, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; W.P.(C) No.15596 of 2024 Page 16 of 20 OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say:“the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”; (ii) Whether public interest is affected. If the answers are in the negative, there should be no involving interference under Article 226. Cases blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.’ Similarly, in Montecarlo Ltd. v. NTPC 19. Ltd. [Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272] , this Court stated as follows : (SCC p. 288, para 26) ‘26. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting tenders are scrutinised by the technical experts and sometimes those unconnected with the owner's organisation is taken. This ensures objectivity. Bidder's expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and the financial technical ability and ascertain feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; third-party assistance from that W.P.(C) No.15596 of 2024 Page 17 of 20 highly technical in nature. The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or mala fide or procedure adopted is meant to favour one. The decision-making process should clearly show that the said maladies are kept at bay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the tender is floated, the Court should follow the principle of restraint. Technical evaluation or comparison by the Court would be impermissible. The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be allowance of free play in the joints.’ 20. This being the case, we are unable to fathom how the Division Bench, on its own appraisal, arrived at the conclusion that the appellant held work experience of only 1 year, substituting the appraisal of the expert four-member Tender Opening Committee with its own.” (italicised matter emphasised in the original; emphasis in bold italics supplied)” W.P.(C) No.15596 of 2024 Page 18 of 20 16. After having noticed the aforesaid decisions, the Supreme Court in case of Agmatel India Private Limited (supra) has ruled that if the interpretation given by the author of the tender is manifestly in consonance with the language of the tender document, the Court in a proceeding for judicial review should prefer to keep restraint. 17. We are of the view, in the present case, that the interpretation given by the tendering authority in the present case cannot be termed to be patently erroneous requiring this Court’s interference in a proceeding under Article 226 of the Constitution of India. 18. Mr. Rath, learned counsel appearing on behalf of the petitioners has made an alternative submission. It has been argued that if this Court is not inclined to interfere with the impugned reasoned order dated 26.06.2024, the Court may permit the petitioners to furnish the Additional Performance Security within 30 days from today. Learned Central Government Counsel representing the opposite parties does not have any objection to the said submission. 19. In such view of the matter, considering the circumstance in the present case that there was some error in the RFP as noted above, we W.P.(C) No.15596 of 2024 Page 19 of 20 dispose of the present writ petition with an observation and direction that if the petitioners furnish the Additional Performance Security in terms of Clause 2.21 of the RFP within 30 days from today, based on the letter of acceptance, the opposite parties shall execute necessary agreement for the work in question. 20. Accordingly, the present writ petition stands disposed of. There shall be no order as to costs. (Chakradhari Sharan Singh) Chief Justice Savitri Ratho, J. I agree. (Savitri Ratho) Judge S.K. Guin/PA Signature Not Verified Digitally Signed Signed by: SUBASH KUMAR GUIN Designation: Personal Assistant Reason: Authentication Location: High Court of Orissa, Cuttack Date: 08-Nov-2024 17:21:50 W.P.(C) No.15596 of 2024 Page 20 of 20