Sea Link Toll Collection: Bombay HC Deprecates Trend Of Ineligible Bidders Approaching Court, Upholds Disqualification Of MEP Infra

However, such financial bids shouldn't even be considered and must be rejected outright if the company doesn't meet the technical criteria for the contract.

"Drawing from our judicial experience, we may unhesitatingly refer to a common trend of ineligible bidders offering a lower/higher bid than the eligible bidders and then raising a plea of how the "State" would have benefited financially if its bid were accepted to arouse judicial conscience to prevent unnecessary drainage from the public exchequer. Unmeritorious pleas such as these ought not to detain us for a moment and deserve outright rejection, which we hereby do," the court observed.

Chief Justice Dipankar Datta and Justice M. S. Karnik were dealing with a writ petition filed by MEP Infrastructure Developers Ltd. (MEP) challenging the decision of MSRDC Sea Link Ltd. to reject its bid for toll collection at the Bandra-Worli Sea Link toll plaza on grounds of ineligibility due to outstanding dues.

The court dismissed the petition stating that MSRDC had the freedom and choose a party without blemishes for the contract.

"No doubt MSRDC is duty bound to look for the best offer that would suit the interest of the "State" being the guardian of its finances. However, financial bids of only those bidders whose technical bids qualify and cross the threshold to enter the second round are required to be considered," the bench observed.

In June 2022, MSRDC floated a tender notice for toll collector at the Bandra-Worli Sea Link toll plaza. Clause 2.1 of the tender notice stated that if any bidder or its subsidiaries has defaulted in payment of outstanding dues resulting in termination of contract to MSRDC or its subsidiaries, such bidder would be ineligible and it's offer will be invalid. MEP in consortium with Ozoneland Private Limited submitted its bid. MSRDC found that the subsidiaries of the petitioner had outstanding dues of almost 409 Crore rupees. MSRDC rejected the bid on account of outstanding dues. MEP challenged this decision in the current petition.

Dr. Milind Sathe, senior counsel for MSRDC challenged the maintainability of the writ petition, contending that the petitioners have suppressed material facts by not annexing an earlier agreement between MSRDC, MEP and one of MEP's alleged subsidiaries in the petition. Further, Ozoneland cannot challenge the tender terms as it participated in the tender unconditionally.

The court did not find the challenge weighty enough to dismiss the petition on maintainability alone as the agreement was referred to in the writ petition.

On merits, MEP submitted that Clause 2.1 connotes that mere default in payment of outstanding dues would not amount to a disqualification. If only such default has resulted in termination of contract, such clause could be attracted. Mr. Dhond, senior counsel for the petitioners contended that clause 2.1 could have been invoked and a disqualification would have been incurred only if any contract was terminated due default in payment of outstanding dues. Further, if the petitioners' bid were accepted it would save the public exchequer of unnecessary drainage in excess of Rs. 20 crore per year.

Dr. Sathe submitted that the petitioners have wrongly read Clause 2.1. The object and purpose of clause 2.1 is to bar participation by a bidder even if its subsidiary is in default. Default in payment of outstanding dues is a standalone category attracting disqualification. MSRDC does not wish to enter into any relationship with a party which has not honoured its obligations under the relevant contracts.

The court stated that clause 2.1 is carelessly drafted and grammatically incorrect resulting in ambiguity. The court relied on its decision in Adani Ports and Special Economic Zone Limited v. The Board of Trustees of Jawaharlal Nehru Port Authority & Ors. that interpretation of a commercial contract stands on a footing distinct from interpreting statutes and the Courts should lean towards the interpretation of contractual terms by the tendering authority since the author of the tender is knows its requirements better. The court accepted MSRDC's submission that the intent of the clause is that MSRDC wishes to avoid any relationship with parties who have been defaulting in payment of dues.

Observing that if default in payment of outstanding dues were not a standalone category attracting disqualification, it would not have been required to be kept in clause 2.1., the court concluded, "clause 2.1 requires a bidder not to have defaulted in payment of outstanding dues to the respondents 1 and 2 notwithstanding the fact that such default has not resulted in termination of the contract."

The court applied the test for judicial review of administrative action laid down in Apex Court case Jagdish Mandal v. State of Orissa and held,

"this is not a case where the decision to reject the technical bid of the petitioners 1 and 2 is either mala fide or that the decision made is so arbitrary and irrational that an authority acting reasonably and in accordance with the relevant law could never have reached such decision or that the decision is against public interest."

The court observed that while MSRDC is duty bound to find the best offer that would suit the interest of the State, such a duty would arise when competing interests of equals are under consideration and not among unequals. Since the petitioners technical bid itself did not qualify, they didn't enter the second round for financial bid, MSRDC had no duty to consider their financial bid. "The petitioners 1 and 2 being ineligible to bid in the first place, the question of crossing the threshold to have their financial bid considered does not and cannot arise." The court added.

Case no. – Writ Petition (L) No. 23639 of 2022

Case title – MEP Infrastructure Developers Ltd. & Ors. v. MSRDC Sea Link Ltd. & Ors.

Coram – Chief Justice Dipankar Datta and Justice M. S. Karnik

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