Tender Process By Public Undertaking Must Be Transparent To Ensure Best Competitor Is Chosen: Calcutta High Court

The Calcutta High Court has observed that to ensure that the best competitor is chosen, the process of selection adopted by a public undertaking is required to be transparent.

A single-judge bench of Justice Sabyasachi Bhattacharya observed thus set aside the rejection of tender submitted by petitioners Texmaco Rail & Engineering Ltd., on the grounds that such a rejection by the respondent-Railway authorities, was arbitrary and mala fide.

In directing the respondents to accept the petitioner's bid, and conduct the tendering process afresh, from the reverse-auction stage, the Court observed,

“There was no basis for such rejection, as apparent ex facie from the materials furnished by the petitioner. The same was arbitrary and de hors the tender terms. More importantly, the impugned rejection would imply that the reverse auction contemplated under the tender would be avoided altogether, which bodes ill for the tender process, by curtailing wider participation, fair competition and transparency. In order to ensure that the best competitor is chosen, the process of selection adopted by a public undertaking is required to be transparent. As such, the impugned rejection cannot be sustained.”

The petitioners had petitioner-company had amalgamated with Kalindee Rail Nirman (Engineers) Limited and participated in respect of a tender related to Automatic Block Signalling System. At the stage of apprising techno-commercial bids, the bid of the petitioners was rejected on the grounds of ‘technical and financial ineligibility, bid capacity and improper information.’

It was alleged by the petitioners that immediately thereafter, financial bids were opened, and two of the financial bids by competitors were accepted.

The petitioners submitted that the tender agreement had provided for a reverse-auction at the techno-commercial stage, only if there were three successful participants and that, in order to avoid such a reverse auction, and to restrict the tender to ‘chosen competitors’, the respondents rejected the petitioners bid on technicalities, in an arbitrary and mala fide manner.

The petitioners further submitted, that even on the ground of technicalities, their bid was not infirm and could not have been rejected. It was submitted that one of the tender criterions was substantial competition of three categories of works, as stipulated in the tender document, which were similar to the work in terms of value, being floated by the present tender. It was submitted that the petitioners in response to a clause on possessing previous work experience for a value of up to 60% of the present tender, had shown various instances of participation, in similar projects undertaken by ‘Kalindee’ in the Railways sector.

On the other hand, it was submitted by the counsel for the respondents, that the tender notice, which contained eligibility conditions of previous work experience being at 60% of the advertised value of the tender, envisaged that such a condition would be fulfilled by the petitioner individually. Since, the petitioners present previous experience in fulfilling the aforesaid criterion, involved a joint-venture, the respondents submitted that the petitioner was only a minority stakeholder and controlled 29% as opposed to the stipulated 60%.

The successful tenderers/private respondents also submitted that the writ court may not interfere with the lawful exercise of discretion by the Railways/Tender Issuing Authority, since the discretion vests exclusively with the respondents to decide as to the nature of eligibility criteria.

Decision of the Court:

On perusing the arguments of both parties, the Court looked into the nature of the clarification clause in the tender document. It was held that such a clause was indeed discretionary, and that the respondents could have exercised their own discretion in seeking clarifications from the bidders in a tender process, and that such a process was not and could not be mandated upon them.

However, when looking at the question on the rejection of the tender bid of the petitioners, the Court was of the opinion that since no questions of fact had been argued, requiring adjudication, a Writ court may be competent to ascertain whether there was any arbitrariness or mala fides in the rejection of the petitioners bid. It was held:

“However, insofar as the rejection of the technical bid of the petitioners is concerned, the same is an arguable question, to be decided on the basis of the materials-on-record. In the present case, since no facts have been argued which require adjudication upon taking detailed evidence, the writ court is competent enough to decide whether there was any patent arbitrariness in such rejection.”

On perusing the documents furnished by the petitioners, the Court was satisfied that the value of the previous work undertaken by the petitioner was indeed well above the 60% value which had been stipulated in the present tender, as well as greatly similar in nature to the work being advertised under the disputed tender.

It was further held that the Joint-venture nature of the petitioner’s participation in the previous project would not have any bearing on the work-experience of the petitioner, since the relevant factors when adjudicating on previous work experience would not include the profit-share of the petitioner in the joint venture.

Instead, the Court held that what was relevant was whether the work done by the petitioner as a member of the said Joint Venture measured up to the eligibility criteria in the tender document. In setting aside the rejection of the petitioners tender on the grounds that such rejection was incorrect due to the petitioner being eligible in terms of the tender document, it was held:

“There is no doubt that the present work is similar in nature to the work done by the Joint Venture for RVNL. The petitioner was one of the members of the joint venture. The scope of the present work is design, supply, installation, testing and commissioning of Automatic Block Signalling System, which is exactly similar to the S&T (Signalling and Telecommunication) Work done for the RVNL.

It is ex facie clear that the [earlier] Indoor S&T Work for the whole section was done exclusively by M/s. Kalindee Rail Nirman, which has amalgamated with the petitioner no.1. Hence, there can be no manner of doubt regarding the petitioner individually, albeit as one of the members of a joint venture, having completed the previous work of a value more than 60 per cent of the total advertised value for the present contract. The work was also of a similar nature. Hence, there cannot be any shade of doubt regarding the petitioner having complied with the eligibility condition. The rejection, it is relevant to mention, was on the ground that the technical and financial eligibility criteria and bid capacity were not met and the information furnished by the petitioner was improper…More importantly, the impugned rejection would imply that the reverse auction contemplated under the tender would be avoided altogether, which bodes ill for the tender process, by curtailing wider participation, fair competition and transparency.”

Coram: Justice Sabyasachi Bhattacharya

Case: Texmaco Rail and Engineering Limited & anr v Union of India and ors

Citation: 2023 LiveLaw (Cal) 183

Appearances:

For the petitioners : Mr. Jishnu Saha, Mr. Rajarshi Dutta, Mr. Soorjya Ganguli, Mr. Somdutta Bhattacharyya, Mr. Shaunak Mukhopadhyay, Ms. Devanshi Prasad

For the respondent nos.1, 2 & 4 : Mr. Atarup Banerjee, Ms. Sarada Sha

For the respondent no.3 : Ms. Rajshree Kajaria, Mr. Sarvapriya Mukherjee, Mr. Uttam Sharma

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