High Courts Should Show Judicial Restraint In Interfering With Tender Process Of Foreign Funded Mega Projects: Supreme Court

A Bench comprising Justices M.R. Shah and A.S. Bopanna allowed an appeal assailing the order of Delhi High Court, inter alia, on the ground that the High Court in exercise of power under Article 226 of the Constitution of India ought not to have interfere with the ongoing tender process of a Foreign funded project in the absence of specific allegations of mala fide and/or favouritism.

Factual Background

The appellant, National High Speed Rail Corporation Limited ("NHSRCL") was incorporated with equity participation of Government of India and Governments of Gujarat and Maharashtra to finance, construct, maintain and manage the upcoming High Speed Rail Corridor in India. It floated a tender on 22.10.2020 pertaining to the project of Construction of Mumbai-Ahmedabad High Speed Rail. Five bidders including the respondents were declared unsuccessful at the first stage of Technical Evaluation vide communication dated 27.04.2021. When reasons for the same were sought, NHSRCL on 28.04.2021 informed that the bid was unresponsive and further information can be provided only after the notification of award. The communication dated 28.04.2021 and 27.04.2021 were challenged before the Delhi High Court, which set aside the two communications rejecting the bid for not being substantially responsive.

Contentions raised by the appellant

Solicitor General of India, Mr. Tushar Mehta appearing on behalf of NHSRCL argued that the said Bullet Train Project is a foreign sovereign funded project by Japan International Cooperation Agency ("JICA") and not a contract funded from the Consolidated Fund of India. It was contended that in such an arrangement all crucial aspects of decision making are with the agency of the sovereign making investment. The bidding document was based on JICA's Standard Bidding Document and JICA appointed Japanese International consultants Consortium ("JICC") as its consultant. The preparation of Bid documents; Bid evaluation was done by JICC and JICA. He submitted that NHSRCL under contractual mechanism could not have deviated from such evaluations. Relying on a catena of judgments including M/s. CRRC Corporation Ltd. v. Metro Link Express for Gandhinagar and Ahmedabad Company Limited SLP (C) Diary No. 35385 of 2017 and Siemens Public Communication Networks Private Limited and Anr. v. Union of India And Ors. (2008) 16 SCC 215, Mr. Mehta submitted that such contracts merit limited judicial interference. It was emphasised that on application of mind if it is found that there was material deviation in the bid, unless there are allegations of mala fide or favouritism, the interference of Writ Court is not warranted.

Contentions raised by the respondent

Senior Advocate, Mr. Anshin H. Desai appearing on behalf of the respondent argued that 81% of the project funded by JICA was not in the nature of aid, but loan and had to be repaid with interest from public exchequer. Moreover, the remaining 19% was paid by the Ministry of Railways from the public exchequer. Therefore, the tender process is subject to judicial review. He contended that even if Mr. Mehta's contention is accepted, NHSRCL cannot act in arbitrary and discriminatory manner. It was alleged that other bidders were given opportunity to rectify the non-conformities, but the respondent was not allowed to do so. Reliance was placed on Poddar Steel Corporation v. Ganesh Engineering Works and Others (1991) 3 SCC 273 and B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. and Ors. (2006) 11 SCC 548, to argue, non-material non conformity can be waived off even when there is no clause provided for the same.

Analysis by the Supreme Court

On perusal of the documents on record, the Court noted that the bidding documents were prepared by JICC based on JICA guidelines and their Standard Bidding Documents and the Ministry of Railways was only an implementing agency. The Court opined that a conscious decision was taken by JICC concurred by JICA in rejecting the respondent's bid on ground of material deviation. The same was merely followed by NHSRCL as it was bound by the terms of the conditions in the loan agreement signed between JICA and the President of India. The Court noted that being the funding agency JICA and JICC had the upper hand in the project. It was observed that there was no allegation of mala fides and/or favouritism either against NHSRCL or against JICC or JICA, therefore the High Court ought not to have interfered. The Court was of the view that the other bidders who were given opportunity to rectify the defects were found to be substantially responsive, whereas the respondent's bid was rejected at the very first stage. It also noted that the clause providing reasons for rejection only after the final award was justified.

"Before entertaining the writ petition with respect to such Mega projects funded by the foreign countries, one has to appreciate that funds of such Mega projects by the foreign country is followed by a detailed discussion between the Prime Ministers of both the countries and to strengthen bilateral cooperation in the rail sector. The foreign country is ready to invest/fund such a huge amount on non- negotiated terms and the Bid Documents are prepared by the foreign financial agency/country in accordance with the latest version of the Standard Bidding Documents. These investments from developed nations are made on the basis of non-negotiated terms and conditions, where the sole discretion as to what would be the conditions of the investments and on what terms the contractors would be chosen to implement the project, vests with the investor foreign developed nation. Considering the special peculiarities of such foreign sovereign funded development contracts, which can be envisaged and exist only due to the availability of the investment and willingness of the foreign sovereign country to finance such infrastructure project, the said contracts assume the different characteristics. Therefore, there shall be different considerations so far as the judicial interference is concerned between the foreign funded contracts and the ordinary public works contracts funded from public exchequer."

Case Name: National High Speed Rail Corporation Limited v. Montecarlo Limited And Anr.

Citation: 2022 LiveLaw (SC) 108

Case No. and Date: Civil Appeal No. 6466 of 2021 | 31 Jan 2022

Corum: Justice M.R. Shah and A.S. Bopanna

Counsel for the appellant: Solicitor General of India, Mr. Tushar Mehta; Advocate-on-Record, Mr. Kunal Chatterji

Counsel for the respondent: Senior Advocate, Mr. Anshin H. Desai; Advocate-on-Record, Mr. Ayush Sharma

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