Bid Rejection for Unstated NIT Conditions Held Invalid

Factual Background and Procedural History

The dispute originated from a Notice Inviting Tender (NIT) issued by Respondent No. 1, Madhya Pradesh Power Generating Co. Ltd. (MPPGCL), for run-of-mine (ROM) coal beneficiation and logistics. The appellant, Maha Mineral Mining & Benefication Pvt. Ltd., submitted its bid.

The Tender Evaluation Committee rejected the appellant’s technical bid. The sole reason provided was non-compliance with Clause 5(D) of the NIT, which related to “Past experience criteria”. The appellant had used the past experience of a previous Joint Venture (JV). The Committee held that while the appellant used these credentials, the JV agreement itself was not submitted to substantiate the appellant’s proportionate share in that consortium, thus disqualifying the bid.

The appellant challenged this rejection before the High Court of Madhya Pradesh. The appellant argued that Clause 5(D) did not mandate submission of the JV agreement; it only required a “work execution certificate,” which they had provided. This certificate, issued by the Maharashtra State Mining Corporation (MSMC), clearly stated the appellant held a 45% share in the previous JV.

During the pendency of the writ petition, Respondent No. 2, Rukhmai Infrastructure Pvt. Ltd., was declared the successful bidder.

The High Court dismissed the appellant’s writ petition. It upheld the Committee’s finding regarding Clause 5(D). Furthermore, the High Court “went a step further” and introduced a new ground for disqualification based on written submissions by Respondent No. 2. The High Court held that even if the JV agreement had been submitted, the appellant would be disqualified under Clause 5(B) (Details of Washery), as the JV agreement allegedly committed the appellant’s washeries exclusively to MSMC.

Aggrieved by this decision, the appellant appealed to the Supreme Court.

Identification of Legal Issues

The Supreme Court’s judgment centered on two primary legal issues:

1. Issue 1 (Clause 5(D)): Whether the tender authority’s rejection of the appellant’s bid for non-submission of the JV agreement was valid, especially when the NIT did not explicitly mandate its submission as proof of proportionate share.
2. Issue 2 (Clause 5(B)): Whether the High Court, while exercising its power of judicial review, was justified in “traversing beyond the reasons given by the Committee” and disqualifying the appellant on a new ground (Clause 5(B)) not considered by the Tender Evaluation Committee.

Arguments of the Parties

Appellant (Maha Mineral Mining):

• Clause 5(D) of the NIT never expressly required the submission of the JV agreement itself.
• The required document, as per Clause 5(D)(1), was the “work execution certificate,” which was duly submitted. This certificate clearly specified the appellant’s 45% proportionate share.
• The rejection of the bid as “incomplete” under Clause 8.1 was arbitrary, as the required document had been submitted.
• If the authority had any doubt, it had the power under Clause 8.8 (a non-obstante clause) to seek clarification, which it failed to do.
• The High Court erred by introducing a new ground for disqualification (Clause 5(B)) during the hearing, which the appellant did not have a proper opportunity to controvert.

Respondents (MPPGCL & Rukhmai Infrastructure):

• The requirement to submit the JV agreement was implicit in Clause 5(D) to substantiate the proportionate share.
• Clause 8.1 of the NIT, along with a government circular, explicitly prohibited the submission of any “shortfall documents” after the bid submission, and the bid was rightly rejected as incomplete.
• The appellant acted with mala fide intention by “suppressing” the JV agreement, evidenced by an attempt to submit a different JV agreement via email after the closing date.
• (As argued by Respondent No. 2 and accepted by the High Court): The appellant was, in any case, disqualified under Clause 5(B) because its washeries were exclusively committed to MSMC under the terms of the previous JV agreement.

Court’s Analysis and Reasoning

The Supreme Court provided a detailed, two-part analysis.

Part I: Analysis of Disqualification under Clause 5(D) (The JV Agreement)

The Court found the rejection based on Clause 5(D) to be unjust and contrary to the NIT’s own terms.

• Principle of Clear and Unambiguous Conditions: The Court’s reasoning was anchored in the principle that “Conditions in a NIT must be clear and unambiguous”. It held that if the tendering authority insisted on the JV agreement alone as proof, “it should have been spelt out clearly in the NIT”. The authority cannot impose conditions not expressly stated.
• Interpretation of Clause 5(D): The Court read Clause 5(D) and found it did not mandate the submission of the JV agreement. It only required that the proportionate share be defined in such an agreement. The clause did explicitly require a “work execution certificate”, which the appellant had submitted. This certificate unequivocally stated the appellant’s 45% share.
• Misapplication of Clause 8.1 (Incomplete Documents): The Court held that the reliance on Clause 8.1 (prohibiting shortfall documents) was misplaced. The bid was not “incomplete” because the appellant had submitted the document required by Clause 5(D)(1) (the certificate).
• Failure to Use Clause 8.8 (Clarification): The Court noted that Clause 8.8 of the NIT, a non-obstante clause, gave the respondent the “right to seek additional information” to satisfy itself of a bidder’s eligibility. The authority failed to exercise this discretion and instead arbitrarily rejected the bid.
• Rejection of ‘Mala Fide’ Argument: The Court dismissed the argument that the appellant had “intentionally suppressed” the agreement. Since the document was not required, there could be no suppression. The Court also noted that all versions of the JV agreement presented were consistent in reflecting the 45% share.

Based on this, the Court held the disqualification under Clause 5(D) was invalid and liable to be set aside.

Part II: Analysis of Disqualification under Clause 5(B) (The Washery Capacity)

The Supreme Court strongly disapproved of the High Court’s approach on the second issue.

• Impropriety of Judicial Overreach: The Court held that the High Court “went a step further, traversing beyond the reasons given by the Committee”. It was “impermissible for it to travel beyond the reasons given by the Committee and disqualify the appellant”.
• Denial of Natural Justice: This new ground for disqualification was raised for the first time in written submissions by Respondent No. 2. The appellant “did not get the opportunity to controvert the same”.
• Issue was Contentious: The Court noted that the appellant had strong counter-arguments, including that its Gondegaon washery had sufficient spare capacity and that it had already requested MSMC to shift operations. This demonstrated that the issue was a “contentious one” that could not be decided summarily based on written submissions without proper rebuttal.

Final Conclusion and Holding

The Supreme Court partly allowed the appeal and set aside the impugned judgment of the High Court.

The Court’s decision was twofold:

1. The disqualification of the appellant’s bid under Clause 5(D) was held to be invalid and contrary to the terms of the NIT.

The matter was remanded to the High Court for a fresh consideration only on the contentious issue of whether the appellant had the requisite spare washing capacity as per Clause 5(B) of the NIT.

FAQs:

1. What is the scope of judicial review in government tender cases?

Courts are generally reluctant to interfere in tender processes (which are administrative matters). Judicial review is typically limited to the decision-making process, not the decision itself. A court will usually only intervene if the authority’s action is found to be arbitrary, irrational, discriminatory, in bad faith (mala fide), or in clear violation of the tender’s own terms.

2. Can my tender bid be rejected for a minor, non-essential mistake?

This depends on whether the mistake is a “material” or “non-material” deviation. A material deviation (e.g., failing to submit a bid security, or not meeting a core technical requirement) is usually non-negotiable and leads to disqualification. A minor, non-material irregularity (e.g., a missing signature on an unimportant page) may be overlooked or clarified, but this is at the discretion of the tender authority, provided the NIT allows for such discretion.

3. What is the difference between a “clarification” clause and a “no shortfall” clause?

A “no shortfall” clause (like Clause 8.1 in this case ) is very strict: it means any essential document missing at the submission deadline cannot be submitted later, and the bid will be rejected as incomplete. A “clarification” clause (like Clause 8.8 ) allows the authority to ask a bidder questions to clarify information already submitted (e.g., “Please explain this calculation in your certificate”). It does not typically allow the bidder to submit new documents that were required but forgotten.

4. Why must tender conditions be “clear and unambiguous”?

 This principle is fundamental to fairness and transparency in public procurement. If tender conditions are vague, it creates an uneven playing field. Bidders may interpret the requirements differently, and the authority could use the ambiguity to act arbitrarily or show favouritism. Clear conditions ensure all bidders are competing on the same basis, which is a key requirement of Article 14 of the Constitution (Right to Equality).

5. Can a court reject my case for a different reason than the one the tender committee gave?

Generally, no. As this judgment confirms, judicial review is a review of the order or decision that is being challenged. The court must examine the legality and rationality of the reasons the authority actually gave for its decision. It is considered improper for a court to “travel beyond” those reasons and find a new, different ground to justify the authority’s action, as this would violate principles of natural justice.

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