Expert evaluation of Tender to be carried out only if wrong alleged on part of Tendering Authority: Supreme Court

IN THE CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO._____________ OF 2020 SPECIAL LEAVE PETITIONNO. 12766 OF 2020) M S GALAXY TRANSPORT AGENCIES CONTRACTORS TRADERS TRANSPORTS AND SUPPLIERS M S NEW J.K. ROADWAYS FLEET OWNERS AND TRANSPORT CONTRACTORS & ORS. JUDGMENT R.F. Nariman J 1. Leave granted. In this appeal the Inspector General of Police Kashmir Zone Zonal Police HQR’s Kashmir Srinagarbeing Respondent No. 4 before us invited online tendersvide e N.I.T. No. 020 dated 18.02.2020 from reputed transporters registered firms associations for the supply of various types of commercial vehicles for the carriage of troops and equipment for the Financial Year 2020 2021. Pursuant to the N.I.T. 4 parties namely M s Associated Contractors M s Quareshi Transport Co. M s Galaxy Transport Agencies Contractors Traders Transports and Suppliers and M s New J.K Roadways Fleet Owners and Transport Contractors submitted their bids for consideration and the same were uploaded through an e tendering system. The tender process consisted of a technical bid and a financial bid. The Tender Opening Committee met on 11.03.2020 and found that JK Roadways Respondent No. 1 herein and Associated Contractors did not meet the qualifying requirements of the technical bid leaving Quareshi Transport Co. and the Appellant who were considered technically eligible for the allotment of the contract. The Appellant’s financial bid being the lowest vide an order dated 30.03.2020 the Appellant was allotted the contract for the supply of commercial vehicles for the Financial Year 2020 2021. 3. A writ petition was filed by JK Roadways seeking the quashing of the allotment of the contract in favour of the Appellant. Before the learned Single Judge of the High Court of Jammu and Kashmir at 2 Srinagar three contentions qua the Appellant’s technical eligibility were made by JK Roadways which were decided in the following manner by a judgment dated 30.06.2020: 3a.Firstly the learned Single Judge found that though the service licence of the Appellant was only valid upto 31.03.2020 it had sought an extension of its service licence prior to its expiry. Since a lockdown was imposed on account of the outbreak of COVID 19 a General Order dated 30.03.2020 was issued through which the validity of all documents relating to transportation services were deemed to be extended till 30.06.2020. This being the case this contention was decided against JK Roadways and it was held that the Appellant fulfilled the eligibility condition of holding a valid service licence Secondly it was found that the Appellant did in fact own 30 vehicles including heavy motor vehiclesand light motor vehiclesas a list of 36 vehicles was furnished to ZPHS the tendering authority. Since a complaint in this regard had been made by the unsuccessful bidders the same was forwarded to the Senior Superintendent of Police Srinagar “SSP”] to ascertain the veracity of the documents furnished. The SSP submitted a report finding that though 5 vehicles were found 3 to be owned by individuals other than the Appellant 31 vehicles were still owned by the Appellant as a result of which the eligibility condition was satisfied. It was also found that insofar as 1 vehicle was concerned it was indeed owned by the Appellant as there existed a typographical error in the registration number of the vehicle. 3c.Thirdly as far as the eligibility criteria of having work experience of at least 5 years not being less than Rs. 2 crores was concerned the learned Single Judge found that work experience certificates from 2014 to 2018 were submitted and since the tendering authority was the best judge as to whether such eligibility condition had in fact been satisfied a judicial hands off Finally the learned Single Judge concluded “16. Considering the submissions of the parties and in view of the law laid down by the Supreme Court and also the fact that the contract is for the year 2020 21 which has already commenced w.e.f. 1st April 2020 public interest would be severely jeopardized if the respondents are not allowed to execute the contract because the bid of respondent No. 5 was the lowest. It is therefore in public interest not to interfere in the allotment of contract in favour of respondent No. 5 who satisfied the criteria as laid down in technical bid as he had furnished list of HMV & LMV vehicles which was the most essential condition of the tender. Thus the petitioner having been found ineligible cannot now 4 question allotment of contract to respondent No. 5 because the petitioner is not similarly situated.” 4. JK Roadways filed a letters patent appeal before the Division Bench of the High Court of Jammu and Kashmir at Srinagar Though the appellant has raised a number of grounds in the appeal yet during the course of arguments the main thrust of arguments advanced by the learned counsel for the appellant was on the following grounds: I) That the official respondents were not justified in rejecting bid of the appellant on the ground that it had submitted only the list of heavy motor vehicles and that the list did not contain the particulars of light motor vehicles II) That the respondent No.5 despite lacking the requisite experience in supply of vehicles was awarded the contract which action has amounted to award of contract in favour of an ineligible bidder to the exclusion of an eligible bidder.” 5. After setting out Condition No. 31 of the N.I.T. the Division Bench “16) From a perusal of the aforesaid condition it is clear that the official respondents while formulating the tender notice have used the expression “HMV LMV” meaning thereby that a tenderer had the option of furnishing the particulars of either HMVs or LMVs or both types of vehicles. No other construction can be given to the expression “HMV LMV”. If the official respondents 5 desired that a tenderer must own both types of vehicles i.e. HMVs as well as LMVs they could have easily used the word “and” instead of “ ” in between HMV and LMV in the tender notice use whereof refers to “or”. This is not the case over here. Thus if the appellant has furnished the list of Heavy Motor Vehicles only he has done what a reasonable and prudent person would do upon going through the tender condition quoted hereinabove. The action of the official respondents of rejection of technical bid of the appellant on the ground of non furnishing of list of both types of vehicle is therefore irrational arbitrary and perverse. Therefore the contention of the appellant in this regard is full of substance and deserves to be 17) Mr. B. A. Dar Sr. AAG has submitted that the tender notice condition stated “both HMV LMV” which meant that the tenderers had to provide details of both HMV and LMV vehicles. Per contra learned Sr. counsel for the appellant has contended that the very appellant was found eligible in respect of the same condition and was awarded the same work for the previous five years which was satisfactorily completed. 18) We are unable to agree with the submission of Sr AAG. As already noted if the respondents required provision of details of both HMV and LMV vehicles they would have placed “and” between them. This has not 6. As a result the Division Bench found that JK Roadways having satisfied Condition No. 31 of the N.I.T. was wrongly disqualified by the tendering authority. So far as the requirement under Condition No. 27 of the N.I.T. of holding work experience of at least 5 years was concerned the Division Bench found that the Appellant had experience of supplying vehicles only for a few months in the years 6 2014 and 2015 and therefore the Appellant could at best be said to hold work experience of supplying vehicles for 1 year only. Thus Condition No. 27 of the N.I.T. being an essential condition remained unfulfilled by the Appellant. Resultantly the judgment of the Single Judge dated 30.06.2020 was set aside and the contract awarded in favour of the Appellant was quashed. The official respondents were directed to invite fresh tenders and complete the process within a period of 1 month from the date of the order of the 7. On 04.11.2020 this Court issued the following order Division Bench. “Issue notice. There shall be an ad interim stay of operation of the impugned judgment and order of the High Court. Counter affidavit within one week by Respondent No.1 Likewise counter affidavit to be filed by the State within two weeks. Rejoinder affidavit within one week 8. As a result of this Court’s order the Appellant has continued executing the awarded work till date with roughly 3 months left for the completion of the contract period 9. Shri Rana Mukherjee learned senior advocate appearing on behalf of the Appellant argued that the Division Bench was wrong on both 7 counts. According to him a plain reading of Condition No. 31 of the N.I.T. showed that “both HMV LMV” had to be supplied and as JK Roadways only supplied a list of HMVs it was obviously ineligible Further he placed reliance upon the judgments of this Court stating that the authority that floats the tender is the best judge on how a tender condition should be read. Accordingly the Division Bench overstepped its mark in construing the eligibility conditions of the N.I.T. contrary to the tendering authority’s interpretation. Insofar as the work experience condition was concerned he adverted to the work experience certificates from the Financial Years 2014 2015 to 2018 2019 which showed that the Appellant possessed the necessary work experience which had also been demonstrated to the Tender Opening Committee which had in turn reflected the same in a tender scrutiny report showing that it had applied its mind in rendering the Appellant a technically qualified bidder. With respect to the service licence Shri Mukherjee relied upon the conclusions of the Single Judge and stated that since this contention was given up before the Division Bench this Court ought not to allow this point to be re agitated. 10. Shri Altaf H. Naik learned senior advocate appearing on behalf of JK Roadways reiterated the three submissions made before the 8 Single Judge and also sought to argue that the work experience certificates supplied by the Appellant were in the name of “Galaxy Agencies” and therefore could not be counted to the credit of the Appellant. He vehemently argued that the Appellant did not possess a service licence for the relevant period the licence having expired on 31.03.2020 and not having been renewed by the General Order when properly read. Thus the eligibility conditions were not satisfied by the Appellant. Equally the Division Bench was right in saying that insofar as the work experience requirement was concerned the Appellant had only 1 year of experience which would not meet the essential requirement of the N.I.T. Finally he also advanced submissions on JK Roadways being qualified on a reading of Condition No. 27 of the N.I.T. 11. Smt. Shashi Juneja additional standing counsel appearing on behalf of the Union Territory of Jammu & Kashmir supported the grant of the contract in favour of the Appellant and said that the Division Bench was incorrect in its construction of Condition No. 27 of the N.I.T. She also submitted that the Tender Opening Committee being an expert body and having scrutinised the documents supplied by the Appellant cannot now be second guessed by the judgment of the High Court. 9 12. Having heard the learned counsel for the parties it is first necessary to set out the N.I.T.’s “Terms and Conditions Qualifying Criteria” Condition Nos. 27 and 31 of the N.I.T. which are material to this case state as follows “Terms and Conditions Qualifying Criteria 27. The firm association shall have working experience of at least Five years with documentary proof and work should notless2 Crores xxx xxx xxx xxx xxx xxx 31. The firm tenderer should have owned at least 30 nos of vehicles both HMV LMV and attached 200 vehicles with the firm alongwith documentary proof.” 13. Even a cursory glance at Condition No. 31 of the N.I.T. would show that the 30 vehicles referred to are “both HMV LMV”. The tendering authority has construed this condition to mean that both types of vehicles i.e. HMV and LMV need to be included in the list of the 30 vehicles submitted by each bidder. 14. In a series of judgments this Court has held that the authority that authors the tender document is the best person to understand and appreciate its requirements and thus its interpretation should not be second guessed by a court in judicial review proceedings. In 10 Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. 2016SCC 818 this Court held: “15. We may add that the owner or the employer of a project having authored the tender documents is the best person to understand and appreciate its requirements and interpret its documents. 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. 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.” 15. In the judgment in Bharat Coking Coal Ltd. v. AMR Dev Prabha 2020 SCC OnLine SC 335 under the heading “Deference to authority’s interpretation” this Court stated “51. Lastly we deem it necessary to deal with another fundamental problem. It is obvious that Respondent No 1 seeks to only enforce terms of the NIT. Inherent in such exercise is interpretation of contractual terms However it must be noted that judicial interpretation of contracts in the sphere of commerce stands on a distinct footing than while interpreting statutes. 52. In the present facts it is clear that BCCL and India have laid recourse to Clauses of the NIT whether it be to justify condonation of delay of Respondent No. 6 in submitting performance bank guarantees or their decision to resume auction on grounds of technical 11 failure. BCCL having authored these documents is better placed to appreciate their requirements and interpret them. 16 SCC 818 at para 53. 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.” 16. Further in the recent judgment in Silppi Constructions Contractors v. Union of India 2019 SCC OnLine SC 1133 this Court held as follows “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 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.” 12 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 N.I.T. For this reason the Division Bench’s conclusion that JK Roadways was wrongly declared to be ineligible is set aside 18. Insofar as Condition No. 27 of the N.I.T. 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 therefore going into 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 in Jagdish Mandal v. State of Orissa Whether the process adopted or decision made by the authority is mala fide or intended to favour 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” 14 Whether public interest is affected If the answers are in the negative there should be no interference under Article 226. Cases involving 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.” pages 531 532 19. Similarly in Montecarlo Ltd. v. NTPC Ltd. 2016SCC 272 this Court stated as follows “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 third party assistance from 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 ascertain that technical ability and the financial feasibility have sanguinity and are workable and realistic. There is a multi prong complex approach 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 15 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 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. 21. As was correctly pointed out by Shri Mukherjee learned senior counsel appearing on behalf of the Appellant the contention as to the invalidity of the Appellant’s service licence for the requisite period does not appear to have been argued before the Division Bench though argued before and rejected by the learned Single 16 Judge. This being the case we do not think that the scope of this appeal be enlarged to include any such point which appears to have been given up before the Division Bench. 22. Also the argument that the Appellant has submitted work experience certificates in the name of “Galaxy Agencies” which is a separate entity from “Galaxy Transport Agency” has not been argued either before the Single Judge or before the Division Bench In this circumstance we reject this point also 23. The Division Bench’s judgment dated 16.10.2020 is therefore set aside and the learned Single Judge’s judgment dated 30.06.2020 is restored. The appeal is disposed of in the aforesaid terms. ROHINTON FALI NARIMAN 17 New Delhi December 18 2020 18

Summary: “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.”, this remarkable stand was forwarded by Hon’ble Supreme Court, in a three judge bench chaired by Hon’ble Justice Mr Rohinton Fali Nariman, Mr. Navin Sinha &amp; Mr. K.M. Joseph in the Civil appeal case of Galaxy Transport Agencies, Contractors, Traders, Transports &amp; Suppliers V. New J.K. Roadways, Fleet Owners &amp; Transport Contractors &amp; Ors., [SLP (Civil) No. 12766 of 2020]. In this appeal, the Inspector General of Police, Kashmir Zone, Zonal Police HQR’s Kashmir, Srinagar [“ZPHS”], being Respondent No. 4 before us, invited online tenders (e-tenders) vide e-N.I.T. No. 01 of 2020 dated 18.02.2020 [“N.I.T.”] from reputed transporters, registered firms/associations for the supply of various types of commercial vehicles (without fuel) for the carriage of troops and equipment for the Financial Year 2020-2021. Pursuant to the N.I.T., 4 parties, namely, M/s Associated Contractors; M/s Quareshi Transport Co.; M/s Galaxy Transport Agencies, Contractors, Traders, Transports and Suppliers [“Appellant”]; and M/s New J.K. Roadways, Fleet Owners and Transport Contractors [“JK Roadways”] submitted their bids for consideration and the same were uploaded through an e-tendering system. The tender process consisted of a technical bid and a financial bid. The Tender Opening Committee met on 11.03.2020 and found that JK Roadways, Respondent No. 1 herein, and Associated Contractors did not meet the qualifying requirements of the technical bid, leaving Quareshi Transport Co. and the Appellant, who were considered technically eligible for the allotment of the contract. The Appellant’s financial bid being the lowest, vide an order dated 30.03.2020, the Appellant was allotted the contract for the supply of commercial vehicles for the Financial Year 2020-2021. A writ petition was filed by JK Roadways seeking the quashing of the allotment of the contract in favour of the Appellant. JK Roadways filed a letters patent appeal before the Division Bench of the High Court of Jammu and Kashmir at Srinagar [“Division Bench”]. By the impugned judgment dated 16.10.2020. Resultantly, the judgment of the Single Judge dated 30.06.2020 was set aside and the contract awarded in favour of the Appellant was quashed. The official respondents were directed to invite fresh tenders and complete the process within a period of 1 month from the date of the order of the Division Bench. As a result of this Court’s order, the Appellant has continued executing the awarded work till date, with roughly 3 months left for the completion of the contract period. After examining all the submissions, arguments and evidences forwarded by the councils, the Hon’ble SC observed that, “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… we do not think that the scope of this appeal be enlarged to include any such point which appears to have been given up before the Division Bench.” The bench further added that, “Also, the argument that the Appellant has submitted work experience certificates in the name of “Galaxy Agencies”, which is a separate entity from “Galaxy Transport Agency”, has not been argued either before the Single Judge or before the Division Bench. In this circumstance, we reject this point also.”