Karnataka High Court
M/S Jindal Water Infra Ltd (Jwil) vs The State Of Karnataka on 16 March, 2023
Bench: M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MARCH, 2023
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
WRIT PETITION No.4209 OF 2023 (GM-TEN)
BETWEEN:
M/S. JINDAL WATER INFRA LTD (JWIL)
AND UHSA KIRAN CONSTRUCTION (UKC)
JOINT VENTURE,
REG/, OFFICE AT JINDAL ITF CENTRE,
#28, SHIVAJI MARG, NEW DELHI,
PIN -110 015.
BY ITS ASST./ MANAGER AND
SIGNATORY MR. DEEPYA SEN.
...PETITIONER
(BY SRI P.P.HEGDE, SENIOR ADVOCATE A/W.,
SRI H.MALATESH, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY ITS SECRETARY,
DEPARTMENT OF
MINOR IRRIGATION AND
GROUND WATER DEVELOPMENT,
VIKAS SOUDHA,
BENGALURU - 01.
2. THE EXECUTIVE ENGINEER,
DEPARTMENT OF MINOR IRRIGATION,
AND GROUND WATER DEVELOPMENT,
2
CHIKKABALLAPURA,
PIN-562 101.
...RESPONDENTS
(BY SRI M.VINOD KUMAR, AGA)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA PRAYING TO:
1. DIRECT THE DEPARTMENT TO PROVIDE THE INFORMATION
IN RESPECT OF TECHNICAL EVALUATION REPORT, SHOWING
THEM TO PARTICIPATE IN THE PRICE IN THE PRICE BID IN
THE TENDER DATED 02ND DECEMBER 2022 BEARING NO.
EE/MI/PQ/CBP/VVALLEY/2022-23, PRODUCED AS ANNEXURE-
A ISSUED BY THE R2 AND ALSO PROVIDE THE OPPORTUNITY
TO PROVE THE GROUNDS ON WHICH THEY ARE
DISQUALIFIED;
2. GRANT SUCH ORDER/DIRECTION WHICH THIS HONBLE
COURT DEEMS FIT IN THE INTEREST OF JUSTICE AND
EQUITY;
3. ISSUE THE WRIT OF CERTIORARI, QUASHING THE ORDER OF
DISQUALIFICATION/REJECTION OF THE PETITIONER'S
TENDER DATED 04-02-2023, AND PERMIT THE PETITIONER
TO PARTICIPATE IN THE FINANCIAL BID/PRICE BID IN THE
INTEREST OF JUSTICE.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 13.03.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner is calling in question order dated 04.02.2023,
by which the petitioner is technically disqualified to participate in
the tender any further.
2. Heard Sri P.P.Hegde, learned senior counsel appearing for
the petitioner and Sri M.Vinod Kumar, learned Additional
Government Advocate appearing for the respondents.
3. Brief facts that lead the petitioner to this Court in subject
petition, as borne out from the pleadings, are as follows:-
The Government of Karnataka notifies a tender for lifting of
243 MLD of Secondary Treated Water from Vrishabhavathi Valley
STP to feed 82 Tanks in Bengaluru Urban, Bengaluru Rural and
Tumkur Districts under Phase-I. The said notice inviting tender was
issued on 02-12-2022. The petitioner, a joint venture, finding itself
eligible to participate in the said tender applied. The petitioner was
invited for a pre-qualification assessment. The documents that the
petitioner submitted were all taken note of and proceeded for
technical assessment of petitioner's capacity to perform the work.
On such scrutiny, it was made known to the petitioner that its
technical bid is rejected and it could not participate any further in
the tender process. It is calling in question the said action, the
petitioner has knocked at the doors of this Court.
4. The learned senior counsel would submit that there is no
reason indicated as to why the petitioner's tender was rejected on
its technical scrutiny and therefore, would submit that without
divulging the reasons, rejection of technical bid could not have
come about.
5. On the other hand, the learned Additional Government
Advocate while refuting the submissions of the learned senior
counsel would take this Court through the objections filed by the
respondents and seeks to demonstrate that the petitioner (Usha
Kiran Construction only) has been blacklisted by the Karnataka
Power Corporation Limited ('KPCL'), another Government
undertaking, which information had not been divulged by the
petitioner in the application that was uploaded in the e-procurement
portal for the present tender. Owing to such suppression of fact,
the rejection has come about.
6. The learned senior counsel in reply would submit that
blacklisting of the petitioner had happened in the tender concerning
KPCL and it was to be applicable only to the tenders floated by
KPCL and not others. He would contend that this Court in a
challenge to the said blacklisting in Writ Petition No.2818 of 2023
disposed on 22-02-2023 has clearly held that it would be applicable
only to the procurement entity therein which was the KPCL. He
would further submit that the tender document, the forms that are
to be uploaded or in the tender document, did not contain any
clause of such divulgence. Therefore, he would submit that the
petitioner be permitted to participate in the tender process.
7. I have given my anxious consideration to the submissions
made by the respective learned counsel and perused the material
on record.
8. The afore-narrated facts are not in dispute. In furtherance
of what is contended by both the learned counsel for the petitioner
and the learned Additional Government Advocate, the issue that
requires consideration is, whether disqualification of the petitioner
at the technical stage was tenable in law or otherwise.
9. The petitioner submits its bid pursuant to the notification
inviting tender for the work of lifting of 243 MLD of Secondary
Treated Water from Vrishabhavathi Valley STP to feed 82 Tanks in
Bengaluru Urban, Bengaluru Rural and Tumkur Districts under
Phase-I and submitted all the necessary documents along with the
said tender. Certain clauses of the tender become germane to be
noticed. Clause 2 of the tender deals with fraud and corruption and
reads as follows:
"2. Fraud and Corruption.
2.1 The GOK requires that the tenderers/Contractors
observe the highest standard of ethics during the
procurement and executing of such contracts. In
pursuance of this policy, GOK:
(a) will reject a proposal for award if it
determines that the bidder recommended
for award has engaged in corrupt or
fraudulent practices in competing for the
contract in question; and
(b) will declare a firm ineligible, either
indefinitely or for a stated period of time, to
be awarded a GOK contract if at any time
determines that the firm has engaged in
corrupt or fraudulent practices in
competing for, or in executing a GOK
contract."
(Emphasis supplied)
Clause 2.1 depicts that the tenderers/contractors to observe the
highest standard of ethics during the procurement and execution of
contract, would reject a proposal for award, if it determines that the
bidder recommended for award is engaged in corrupt and
fraudulent practices in competing for the contract in question. It
also depicts that the firm would be declared ineligible either
indefinitely or for a specified period of time, to be awarded a
contract by the Government of Karnataka, if the firm has engaged
in corrupt and fraudulent practices. Clause 4.14 reads as follows:
"Litigation History
4.14. The applicant shall provide accurate information on the
related Application Form about any litigation or
arbitration resulting from contracts completed or
ongoing under its execution over the last five years. A
consistent history of awards against the applicant or
any partner of a joint venture may result in failure of
the application".
The applicant shall provide accurate information on the related
application form of any litigation or arbitration ongoing under its
execution for the last five years. Clause 4.19 reads as follows:
"Tender Capacity
4.19. Applicants meeting the above criteria, are nevertheless
subject to be disqualified if they have:
- made misleading or false representation in the
form, statements and attachments submitted;
and/or
- record of poor performance such as abandoning the
work, not properly completing the contract,
inordinate delays in completion, litigation history, or
financial failure, etc."
The applicant's meeting the criteria would nevertheless be
disqualified, if it has made misleading and false representation in
the form, statements and attachments.
10. The tender of the petitioner was scrutinized by the Tender
Scrutiny Committee after uploading of the documents. The Tender
Scrutiny Committee found that the petitioner was blacklisted and
debarred from participating in the tender floated by the Karnataka
Power Corporation Limited for a period of three years. The said
blacklisting of the petitioner in some other tender was under
Section 14A and Rule 26A of the Karnataka Transparency in Public
Procurement Act, 1999 and the Rules framed thereunder,
respectively. The issue there was submission of a fake Bank
guarantee by the petitioner. The petitioner (Usha Kiran
Construction) had challenged the said act of it getting debarred or
blacklisting by the KPCL before this Court in Writ Petition
No.2818/2023. This Court in terms of its order dated 22.02.2023,
has affirmed the said blacklisting and held it restrictable only to
tenders floated by the KPCL and has further observed that in the
event the tender conditions would require the petitioner to divulge
the information about blacklisting, it is required to do so. This
Court has held as follows:
"14. The other submission is that, the petitioner though
is debarred from participating in any tender that would be
floated by the KPCL, it should not be made applicable to every
other tender that is issued by the Government or any other
Corporation / entity is concerned, needs consideration, for
which, it is necessary to notice Section 14-A of the Act and Rule
26A of the Rules. Section 14-A of the Act reads as follows:
"14-A. Debarment of tenderers.-(1) The
procurement entity may debar tenderers, for a period not
exceeding three years, from participation in its tenders,
following such procedure as may be prescribed on the ground
that tenderer is engaged in corrupt or fraudulent
practices in competing or executing the contract
including misleading the procuring entity at any stage of
procurement activity with a fraudulent intention:
Provided that, no tenderer shall be debarred without
giving opportunity of being heard.
(2) The State Government may debar
tenderers for a period not exceeding three years, from
participating in any procurement activity within the
State, following such procedure as may be prescribed, on
grounds of, but not restricted to, criminal offence,
corruption, integrity, honesty and work ethics:
Provided that, no tenderer shall be debarred without
giving opportunity of being heard.
(3) The State Government shall publish the list of
so debarred tenderers under sub-section (2) from participating
in any procurement activity on the Karnataka Public
Procurement portal.
(4) The tenderer so debarred under sub-
section (2) shall not be entitled to apply to participate in
tenders called by any procurement entity under this Act
during the period so debarred.]
(Emphasis supplied)
Rule 26A reads as follows:
"26A. Debarment of Tenderers by Procurement
Entity.- (1) The Procurement Entity may proceed with
debarring such tenderer or contractor or supplier or any
of the successor of the tenderer or contractor or supplier
who has engaged directly or through an agent in a
corrupt or fraudulent practices in participating or
competing or executing the contract including misleading
the Procurement Entity at any stage of procurement and
executing activity.
(2) The Procurement Entity may, by order, appoint a
Committee consisting of such officers not below the rank of
Tender Inviting Authority to be the Debarment Committee to
consider the proposals for debarring bidder or contractor or
supplier and to take a decision thereof.
(3) On the receipt of information, Debarment Committee
shall provide a reasonable opportunity, including an oral
hearing, to the concerned for making representations before
taking a decision.
(4) For consideration of debarment, Tender Inviting
Authority or any other officer authorized by Tender Accepting
Authority shall furnish the details of such bidders or contractors
or suppliers who have engaged in corrupt practice and
fraudulent practices to the Debarment Committee constituted
under sub rule (2) above.
(5) The Debarment Committee may make recommendations
with reasoning in writing, within thirty days from date of receipt
of information. Provided that, the said period may be extended
by another fifteen days by Procurement Entity for the reasons
to be recorded in writing.
(6) On the recommendations of the Debarment Committee,
the Procurement Entity shall by notification debar any of
tenderer or contractor or supplier and publish the same on its
website and Karnataka Public Procurement Portal and also
maintain the list of such tenderer or contractor or the supplier
or any of its successors.
(7) The order of debarment shall be deemed to have been
automatically revoked on the expiry of the period specified in
the debarment order."
(Emphasis supplied)
Section 14-A of the Act and Rule 26A of the Rules permit
debarment of tenderers by the procurement entity. The
procurement entity in the case at hand is respondent No.1 -
KPCL. Therefore, the KPCL has invoked its power under Sub-
section 1 of Section 14-A of the Act and has passed the order of
debarment. Sub-section 2 of Section 14-A of the Act, empowers
the State to debar the tenderers for a period of 3 years. The
State Government has not passed any order of such debarment,
after following the procedure as is required in law. Therefore,
the debarment of the petitioner would become restrictable, only
to Sub-section 1 of Section 14-A of the Act, which would be only
to the procurement entity. The procurement entity in the case
at hand is the KPCL. Therefore, debarment of the petitioner will
be only to the tenders notified by the KPCL.
15. The petitioner cannot be debarred on the strength
of the impugned order in any other tender, except in cases
where the petitioner, has to divulge the fact that he has been
debarred/blacklisted by any other procurement entity in the
past. If such be tender condition in any other tender, it is for the
petitioner to act, in accordance with such tender condition.
Unless the State Government passes any order under Section
14-A(2) of the Act, debarring the petitioner from participating in
any other tender, would be contrary to law, the impugned action
cannot be made applicable, as a sweeping direction, to all
tenders, of any other entity in which, the petitioner would seek
to participate."
The afore-quoted clauses of the tender are the only clauses
which deal with fraud and corruption of a tenderer. It is admitted
fact that there is no clause in the tender document, which would
necessitate a tenderer to divulge that he has been blacklisted in
some other tender floated by some other entity, nor any of its
Directors being convicted or the firm has suffered conviction or
criminal proceedings are pending against the firm or its Directors.
If disqualification has to be done on suppression of certain facts, it
can be done only if such a clause in the format of a tender
document which seeks information is present, failing which, such
exercise of disqualifying a tenderer would be arbitrary. The only
clauses of tender document in the present tender that perhaps
would touch upon the issue which are the ones that are quoted
hereinabove. Clauses 4.14 and 4.19 (supra) would not become
applicable to the facts of the case on hand. It is, therefore, the
learned Additional Government Advocate has laid much emphasis
upon clause 2, which deals with fraud and corruption and clause 2.1
in particular, which depicts that the tenderers have to act in good
faith/ethics.
11. Therefore, it is an admitted fact that there is no clause in
the tender document that requires any tenderer to divulge, if any
cases are pending against them or they have been blacklisted by
any other entity. Nothing prevented the Government from
including the said clause in the tender document as, if, the tenderer
has to be non-suited, it can only be in terms of the conditions
stipulated in the tender document. The view of mine in this regard
is fortified by the judgment rendered by the Apex Court in the case
of CARETEL INFOTECH LIMITED v. HINDUSTAN PETROLEUM
CORPORATION LIMITED AND OTHERS1. The Apex Court was
considering the purport of a particular clause in the tender. The
Apex Court holds as follows:
"4. The appellant submitted the bid in respect of the e-
tender on 19-12-2017. In terms of Clause 20 extracted
aforesaid, a format had been provided for the declaration to be
made, which is as under:
"DECLARATION NON BLACKLISTED/NON BANNED/
NON HOLIDAY LISTED PARTY
WE CONFIRM THAT WE HAVE NOT BEEN BANNED OR
BLACKLISTED OR DELISTED OR HOLIDAY LISTED BY ANY
GOVERNMENT OR QUASI-GOVERNMENT AGENCIES OR PUBLIC
SECTOR UNDERTAKINGS
Date: _________
Name of Tenderer: _______________
Place: __________
Signature & Seal of Tenderer: _____________
Note: If a bidder has been banned by any
government or quasi-government agencies or public
sector undertakings, this fact must be clearly stated with
details. If this declaration is not given along with
the UNPRICED bid, the tender will be rejected as non-
responsive."
(2019) 14 SCC 81
The appellant submitted the declaration in terms aforesaid i.e.
stating that the appellant had not been blacklisted by any
government or quasi-government agency or public sector
undertakings.
... ... ....
22. It is no doubt true that Clause 20 does provide
for four eventualities, as submitted by the learned
counsel for Respondent 3. The present case is not one
where on the date of submission of the tender the
appellant had been banned, blacklisted or put on holiday
list. The question before us, thus, would be the effect of
an action for blacklisting and holiday listing being
initiated. The declaration to be given by the bidder is
specified in Clause 20(ii), which deals with the first
three aspects. The format enclosed with the tender
documents also refers only to these three eventualities.
It is not a case where no specific format is provided,
where possibly it could have been contended that the
disclosure has to be in respect of all the four aspects.
The format having been provided, if initiation of
blacklisting was to be specified, then that ought to have
been included in the format. It cannot be said that the
undertaking by the appellant made it the bounden duty
of the appellant to disclose the aspect of a show-cause
notice for blacklisting. We say so as there is a specific
clause with the specific format provided for, requiring
disclosures, as per the same.
23. It may be possible to contend that the format is not
correctly made. But then, that is the problem of the framing of
the format by Respondent 1. It appears that Respondent 1
also, faced with the factual situation, took a considered view
that since Clause 20(i) provided for the four eventualities, while
the format did not provide for it, the appellant could not be
penalised. May be, for future the format would require an
appropriate modification!
24. If we refer to the undertaking submitted by the
appellant all that it states is that the information furnished in
the bid and attachments are true to the best of the knowledge
and belief of the bidder. In case any false or incorrect
information is submitted, the bid can be rejected. It cannot be
said that there is any false information given by the appellant
as to violate the stated Condition 4 of Clause 20(i). We may
look at another angle of the same issue i.e. the integrity pact
provided for in Clause 20(iii) with the format thereof, a detailed
one. The integrity pack provided that the "parties shall make
certain commitments to each other in regard to ensuring
transparency and fair dealing in the procurement activities of
the Corporation". The duly signed integrity pact is an essential
condition for a valid bid. This clause, thus, deals with the
transparency and fair dealing of the activities carried out under
the tender were it to be awarded insofar as the procurement
activities are concerned. Once again, this would not have any
relevance to the stated fourth part of Clause 20(i).
25. We may also look at this aspect from another
perspective. Blacklisting has very serious consequences. A
show-cause notice may result in blacklisting or may not result
in blacklisting. The mere show-cause notice being issued, to
visit such a severe consequence on a bidder, may be difficult to
sustain.
26. The case of the appellant is further fortified by
even the language used in the show-cause notice. The
show-cause notice itself, in the last paragraph, calls
upon the appellant to show cause as to why suitable
action for blacklisting "should not be initiated". Pursuant
to the response of the appellant, the next stage would
have been the initiation of the blacklisting process, if the
explanation was not found satisfactory. The term used in
the blacklisting Clause 20(i), on the other hand, talks
about a situation where blacklisting has already been
initiated. Plain English words used must be given their
ordinary grammatical meaning, an aspect discussed in a
little more detail hereinafter."
A Division Bench of the High Court of Gujarat at Ahmedabad in the
case of M/s BARODA SURGICAL (INDIA) PVT. LTD. v. STATE
OF GUJARAT2, has held as follows:
"9. In the light of the above scrutiny report, two questions
arise for consideration:-
(i) Whether there was any non-disclosure on
the part of the petitioner-company as
contemplated in the tender conditions, so
as to entail disqualification?
(ii) Whether condition B-10 of the tender
document could have been invoked in the
facts of the present case?
10. Insofar as the first question is concerned, it is the
case of the second respondent that every bidder is
required to submit on oath a declaration in terms of
Annexure-IV to the tender documents, whereby the
bidder has to inter alia declare on oath that "there is no
court matter filed by State Government and its Board
Corporation, is pending against our company". That
during the course of scrutiny of the bid documents, it
came to the notice of the second respondent that
Criminal Case No.419 of 2014, wherein the petitioner-
company is arrayed as accused No.11 is pending before
the Court of the Chief Judicial Magistrate, Virudhunagar,
District Srivilliputtur, (Tamilnadu). That the second
respondent received a scrutiny report inter alia stating
the reasons recorded in paragraph 8 hereinabove, for
rejection of the petitioner - company's tender.
11. Thus, while it is the case of the second respondent
that by failing to submit the information regarding the
pending criminal proceedings, the petitioner - company
has not complied with the tender conditions, more
R/SPECIAL CIVIL APPLICATION NO.23050 OF 2019 decided on 10-02-2020
particularly, Condition 14 of Annexure-IV to the tender
document, it is the case of the petitioners that the terms
and conditions of the tender document, and more
particularly, the disclosures required in Annexure-IV
have been complied with inasmuch as, Condition 14 of
Annexure-IV only requires disclosure of pendency of
court matter initiated by the State Government or its
Board Corporation, and not otherwise, and therefore, the
rejection of the petitioner - company's bid on this
ground is misconceived on facts and law.
12. In this regard, a perusal of the tender document
shows that Serial No.D thereof contains the "General
Terms and Conditions of Tender". Clause 4 thereof bears
the heading "Technical Supporting Documents for
Tenders" and provides that the legible and certified
copies of the documents enumerated thereunder must
be attached/annexed to Technical Supporting
Documents. The document required to be attached in
terms of sub-clause (i) thereof is "Affidavit regarding
format of certificates. (As per format Annexure-IV)".
Annexure-IV is the format of affidavit, and to the extent
the same is relevant for the present purpose, reads thus:
"4. It is clearly and distinctly understood by me that
the tender is liable to be rejected if on scrutiny at any
time, any of the required Certificates/ Permissions/
Documents/Permits/Affidavits is/are found to be
invalid/wrong/ incorrect/misleading/ fabricated /expired
or having any defect.
7. My/Our firm has not been banned / debarred black
listed at least for three years (excluding the current
financial year) by any Government Department / State
Government / Government of India / Board/ Corporation
/ Government Financial Institution "Not fail in any supply
of Quality drugs and also not debarred/blacklisted during
the tender period for the non-supply of quality drugs"
procedure through tender.
14. My/Our company has not filed any Writ Petition,
Court matter and there is no court matter filed by State
Government and its Board Corporation, is pending
against our company."
13. In the light of the clauses contained in the format
of affidavit as provided at Annexure-IV, the question
that arises for consideration is whether the same
contemplate disclosure of pendency of any criminal
proceeding filed by some other State Government and its
Board or Corporation.
14. Clause 14 of Annexure-IV requires the tenderer to
inter alia state that there is no court matter filed by
State Government and its Board or Corporation is
pending against their company. Thus, what clause 14
requires is disclosure of any court matter filed by State
Government and its Board Corporation, which is pending
against the company. The clause, therefore,
contemplates disclosure of criminal proceedings filed
only by the State Government which would mean the
respondent No.1 State of Gujarat and its Board
Corporation. In the opinion of this court, there in
nothing in the clause to read into it an intention that the
bidder should disclose pendency of any criminal
proceeding filed by any other State Government or its
Board Corporation. This is all the more clear on a
reading of clause 7 of Annexure-IV, wherein a statement
has to be made that the firm has not been banned/
debarred/ black-listed at least for three years
(excluding the current financial year) by any
Government Department /State Government /
Government of India / Board/ Corporation/ Government
Financial Institution. Thus, where the respondents
wanted the bidder to disclose that he has not been
banned/ debarred/black-listed by any Government
Department/State Government, it has specifically
provided so by prefixing the words "Government
Department/State Government" with the word "any",
which is not so in case of clause 14, which merely says
State Government which would mean the State of
Gujarat. Under the circumstances, it is not possible to
state that by not disclosing the pendency of a criminal
case in another State filed by an authority other than the
State Government or its Board Corporation, the
petitioner - company has failed to make disclosure as
required under clause 14 of Annexure IV to the tender
document.
15. The Supreme Court, in Silppi Constructions
Contractors (supra) has held that 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. Thus, if two interpretations are possible on
reading the tender conditions, the interpretation of the author
must be accepted. However, in the facts of the present case,
on a reading of clause 14 of Annexure-IV, it is not possible to
read into it a condition for disclosing pendency of criminal
proceedings filed by any other State or its Board Corporation
as is sought to be suggested on behalf of the second
respondent. When the clause restricts such disclosure to court
matter filed by State Government and its Board Corporation,
the ambit of the clause cannot be extended to include all
criminal proceedings filed by any other State Government or its
Board Corporation. In the opinion of this court, from the plain
language of the clause, it is not possible to accept the
interpretation put forth by the second respondent. Therefore,
the first condition for rejection of the petitioner - company's
tender viz. that the firm had submitted wrong/false affidavit by
not disclosing details in Annexure-IV about pending criminal
cases before the court of the chief judicial Magistrate
Virudhunagar District Sriviliputtur (Tamilnadu), does not
appear to be satisfied. The respondents are, therefore, not
justified on rejecting the petitioner's bid on this ground.
16. The next ground for rejecting the petitioner - company's
bid is under tender condition B-10, which reads as under:
"B. ELIGIBILITY CRITERIA
10. If concern/firm/company whose product has
been declared as of spurious or adulterated quality and
any criminal case is filed and pending in any court shall
not be eligible to participate for that particular product,
in the Bid. Similarly convicted firm/company shall also
not be eligible to participate in the Bid.
17. Thus, condition B-10 provides that a
concern/firm/company shall not be eligible to participate in the
bid for a particular product, if (i) such product has been
declared as of spurious or adulterated quality; and (ii) any
criminal case has been filed and is pending in any court. (iii) If
the firm/company has been convicted. Since this case relates
to pendency of criminal proceeding, the third ground which
relates to conviction is not relevant for the present purpose.
18. From the language employed in condition B-10, it is
clear that the intention of the author was to hold that a
concern/firm/company is not eligible to participate in the bid
for a particular product, provided both the conditions provided
therein are satisfied viz. (i) such product has been declared as
of spurious or adulterated quality; and (ii) any criminal case
has been filed and pending in any court. Both are twin
conditions and must co-exist for the purpose of invoking
condition B-10. As a necessary corollary, therefore, it follows
that if either of the two conditions is not satisfied, it would not
be permissible to invoke condition B-10 of the eligibility
criteria. It would, therefore, be necessary to examine whether
the conditions precedent for holding that the petitioner -
company is not eligible to participate in the bid in terms of
condition B-10 are satisfied in this case.
19. On behalf of the petitioners, it has been contended that
the criminal case relates only to the item at serial No.1 of the
tender notice, namely, absorbent gauze with ISI mark,
whereas the petitioner - company has bid for three items.
Therefore, assuming for the sake of argument that the
requirements for invoking condition B-10 are satisfied, even
then the petitioner - company could have been held ineligible
to bid only for item No.1 and not for all the three items.
20. The other contention raised is that on facts, the
condition of the product being declared as of spurious or
adulterated quality is not satisfied as there is no such
declaration by any competent authority. Reliance has been
placed upon the decision of the Supreme Court in B.S.N. Joshi
& Sons Ltd. v. Nair Coal Services Ltd., (supra) wherein the
court has held that the expression "declaration" has a definite
connotation. It is a statement of material facts and may
constitute a formal announcement or a deliberate statement. A
declaration must be announced solemnly or official and must
be made with a view "to make known" or to "announce".
21. In this regard, it may be pertinent to refer to the
criminal complaint filed against the petitioner - company in the
Court of the learned Chief Judicial Magistrate, Srivilluputhur,
wherein the complainant is the Drug Inspector and the
petitioner - company through the second petitioner, is
arraigned as accused No.11. The complaint has been filed for
the contravention of section 18(A)(i) read with section 17B(e)
of the Drugs and Cosmetics Act, 1940 and section 18A and 18B
of the Drugs and Cosmetics Act, 1940 (hereinafter referred to
as "the Act").
22. On reading the complaint, it appears that it has been
found that the allegation against the petitioner - company is
that it has manufactured, procured, distributed and sold the
"Absorbent Gauze Sch FII" in the guise of Handloom Cotton
Gauze Absorbent ISI (Non-Sterilised) from M/s. Guru Textiles,
Chatrapatti (T.N.) and M/s. Shri Muthumaari Textile,
Chatrapatti (T.N.) which was actually manufactured on behalf
of them at the Licensed Manufacturer M/s. Sri Sakthivel
Murugan Taxtiles situated at 245A/4,Rajapalayam Road,
Chatrapatti (T.N.) which is deemed to be "spurious" and
punishable under section 27(c) of the said Act and also section
18B of the Act for not having furnished the particulars of the
subject drug, punishable under section 28A of the said Act.
Thus, it appears that the complaint has been lodged on the
ground that the product is deemed to be spurious, and such
complaint is pending adjudication. There is an allegation that
the product is deemed to be spurious on the ground that it was
not manufactured by the petitioner but got manufactured
through another manufacturer. However, there does not
appear to be any declaration by any competent authority that
the product in question is spurious.
23. The expression "spurious drugs" has been defined under
section 9-B of the Act, and reads as under:
"9-B. Spurious drugs.-For the purposes of this
Chapter, a drug shall be deemed to be spurious-
(a) if it is imported under a name which belongs to
another drug; or
(b) if it is an imitation of, or is a substitute for,
another drug or resembles another drug in a manner
likely to deceive or bears upon it or upon its label or
container the name of another drug unless it is plainly
and conspicuously marked so as to reveal its true
character and its lack of identity with such other drug;
or
(c) if the label or container bears the name of an
individual or company purporting to be the manufacturer
of the drug, which individual or company is fictitious or
does not exist; or
(d) if it has been substituted wholly or in part by
another drug or substance; or
(e) if it purports to be the product of a manufacturer
of whom it is not truly a product."
24. Section 18 of Act provides for prohibition of
manufacture and sale of certain drugs and cosmetics, and to
the extent the same is relevant for the present purpose reads
as under:-
"18. Prohibition of manufacture and sale of certain
drugs and cosmetics.-From such date as may be fixed by
the State Government by notification in the Official Gazette in
this behalf, no person shall himself or by any other person on
this behalf -
(a) manufacture for sale or for distribution, or sell, or
stock or exhibit or offer for sale, or distribute -
(i) any drug which is not of a standard quality,
or is misbranded, adulterated or spurious;
25. Thus, section 18(a) of the Act prohibits the manufacture
or sale of any drug which is spurious. Under section 9B of the
said Act, a drug is inter alia deemed to be spurious if it
purports to be the product of a manufacturer of whom it is not
truly a product. However, in the facts of the present case, it is
not yet established that the drug in question (absorbent gauze)
purports to be the product of a manufacturer of whom it is not
truly a product; there is only an allegation to that effect. Thus,
as on date, there is no declaration that the product in question
purports to be the product of a manufacturer of whom it is not
truly a product.
26. In the opinion of this court, there can be a declaration of
that a drug is of spurious or adulterated quality either upon
culmination of the court proceedings by way of a judgment, or
by a competent authority like the Government Analyst to whom
a sample of any drug has been submitted under section 25 of
the Act for test or analysis and he declares such product to be
of spurious or adulterated quality in his report under sub-
section (1) of section 25, which is conclusive evidence unless
the person notifies in writing his intention to adduce evidence
in controversion of the report; or if the sample has been tested
and analysed by the Central Drugs Laboratory and a report in
writing signed by, or under the authority, of the Director of the
Central Drugs Laboratory has been submitted declaring such
product to be of spurious or adulterated quality, which is
conclusive evidence of the facts stated therein.
27. In the facts of the present case, as noted hereinabove,
there is no declaration that the product in question viz.
absorbent gauze is of spurious or adulterated quality, and
hence, only one of the conditions precedent for invoking
condition B-10 of the eligibility conditions, namely pendency of
a criminal proceeding in respect of such product is satisfied.
Therefore, one of the twin conditions which are required to be
conjointly satisfied for the purpose of invoking condition B-10
of the tender conditions is not satisfied. Consequently, the
petitioner - company could not have been held to be ineligible
by invoking condition B-10 of the tender conditions.
28. On behalf of the respondents, reliance has been placed
upon the decision of the Supreme Court in Afcons
Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd.,
(supra), for the proposition 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 the 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. In the facts of that case, the Supreme Court held that
although there did not appear to be any ambiguity or doubt
about the interpretation given by NMRCL to the tender
conditions, it was of the view that even if there was such an
ambiguity or doubt, the High Court ought to have refrained
from giving its own interpretation unless it had come to a clear
conclusion that the interpretation given by NMRCL was
perverse or mala fide or intended to favour one or the other
bidder. In Silppi Constructions Contractors (supra), the
Supreme Court has taken a similar view.
29. While there can be no quarrel with the above
proposition of law, namely, that the employer of the project,
having authored the tender documents is the best person to
understand and appreciate its requirements and interpret its
documents, such proposition would be applicable provided the
view adopted by the employer is a plausible view. However, if
the interpretation made by the employer is not discernible on a
plain reading of the condition, the bidder cannot be called upon
to interpret and understand the condition in the manner the
employer has interpreted it. The above decisions, therefore, do
not carry the case of the respondents any further."
(Emphasis supplied)
The High Court of Delhi in the case of JOHNSON AND JOHNSON
PRIVATE LIMITED v. ALL INDIA INSTITUTE OF MEDICAL
SCIENCES3, has held as follows:
"24. In the light of this position, it is necessary to
consider whether the petitioner can be said to be guilty of
having indulged in fraudulent practices, under Clause 48.1 of
the TED which reads as under:
"H. CORRUPT OR FRADULENT PRACTICES
48. Corrupt or Fraudulent Practices
48.1 It is required by all concerned namely the
Bidder/Suppliers/Purchaser/Consignee/End User etc. to
observe the highest standard of ethics during the
procurement and execution of such contracts. In pursuance of
this policy, the Purchaser:--
(a) defines, for the purposes of this provision, the terms
set forth below as follows:
(i) "corrupt practice" means the offering, giving,
receiving or soliciting of anything of value to influence
the action of a public official in the procurement
process or in contract execution; and
(ii) "fraudulent practice" means a
misrepresentation of facts in order to influence a
procurement process or the execution of a
contract to the detriment of the Purchaser, and
includes collusive practice among bidders (prior
to or after Bid submission) designed to establish
Bid prices at artificial non-competitive levels and
to deprive the Purchaser of the benefits of free
and open competition;
(b) Will reject a proposal for award if it determines that the
Bidder recommended for award has engaged in corrupt
or fraudulent practices in competing for the contract in
question;
2021 SCC OnLine Delhi 4154
(c) Will declare a firm ineligible, either indefinitely or for a
stated period of time, to be awarded a contract by the
purchaser if it at any time determines that the firm has
engaged in corrupt or fraudulent practices in competing
for, or in executing the contract."
(emphasis supplied)
25. While the entire principle behind a provision
like Clause 48 is to endorse the high standard of ethics
that is expected to be shown by all bidders, the
petitioner's plea is that, being a penalty provision, the
same needs to be strictly construed, keeping in view
the plain language of the contract. It is, therefore,
necessary to visit the facts of the present case,
especially the terms and conditions of the TED, to
ascertain whether the petitioner had violated any
contractual obligations that invited the application of
this penalty clause, at all.
26. What emerges is that, firstly, at the time of
bid submission on 15.11.2019, the bidding process for
the NCI was still at a nascent stage and was yet to
culminate into a contract between that Hospital and the
petitioner. Thus, the petitioner is right to contend that,
when the contract with the NCI had not been executed
when the bid was submitted on 15.11.2019, there was
no question of furnishing details pertaining to it at that
time. Secondly, it is undisputed that the petitioner had
made a real and serious effort to bring the contracts
executed with the AIIMS Emergency and CRHP,
Ballabhgarh on record, by placing them for the
consideration of the respondent at the time of price
negotiations. Thirdly, the petitioner had already sent a
price disclaimer letter to the respondent on
07.11.2019, stating that in the case of other
Government Department/Institution or any other
institution, it may have quoted lower prices for the
equipment, than the prices it had quoted to the
respondent, and that such decrease in prices was in
accordance with the terms of sale and other conditions
applicable during the pendency of such contract. Given
these factors, it cannot be said that the conduct of the
petitioner was not completely transparent or that it
had failed to inform the respondent in advance about
lower prices having been quoted in different contracts.
Furthermore, the respondent has not seriously dispute
the petitioner's plea that, as per general practice,
contractors supplying sophisticated medical
technology, such as the petitioner, earn more money
from the consumables that are sold. As a result, the
price quotations made by the bidders are made by
taking the quantity of consumables, forming part of the
contract, to arrive at the optimum pricing arrangement
for themselves and the customers. To put it plainly, in
the case of orders seeking higher quantities of
consumables, such as that of the NCI, the price of
consumables would be decreased and, in cases such as
the respondent's where the number of consumables
sought were less, the price of the consumables would
see a relative increase. When this was already known
to the respondent, I am of the view that it cannot be
permitted to conduct a mere superficial comparison of
the pricing of different tenders, without taking into
consideration the different parameters contained
therein, to force a contractually unspecified obligation
upon the petitioner to reveal details of previous
contracts at the time of conducting price negotiations.
Finally, and most significantly, as already noted above,
there is absolutely no provision in the TED which
makes it mandatory for the shortlisted bidder to
disclose previous contracts at the stage of price
negotiations. Therefore, I am of the view that in the
absence of any such contractual obligation, it would be
unreasonable to stretch the applicability of a penalty
clause, being Clause 48 of the TED, to penalize the
petitioner and hold it guilty thereunder of 'corrupt and
fraudulent practice'."
(Emphasis supplied)
The afore-quoted judgments of the Apex Court and that of the
Division Bench of the High Court of Gujarat as also the order of the
learned single Judge of the High Court of Delhi would all lead to one
unmistakable conclusion that, disqualification of a tenderer or
termination of contract can happen only in tune with clauses of the
tender. Omnibus clause with regard to fraud and corrupt practices
also have been interpreted by Courts as quoted hereinabove, which
cannot be the reason for disqualification of tenderer unless, there is
a particular clause that the tenderer should reveal and that if it has
suppressed the said fact, then it would entail automatic
disqualification of a tenderer for suppression of facts. But, until and
unless the said clause is in existence, a general clause, in the
format of the tender document cannot be invoked to disqualify a
tenderer. If the submission of the learned Additional Government
Advocate that in the light of the general clause, action is taken is
unassailable, if accepted, it would lead to arbitrariness as it can
give the Tender Inviting Authority or the Tender Scrutiny
Committee to invoke the clause on any ground that is not stipulated
as a tender condition, reject the tender or cancel the contract, that
would become an unbridled power.
12. Therefore, it is for the Tender Inviting Authority to always
specify specific clauses that would disqualify a tenderer and not try
to interpret on the strength of other clauses. Since the only reason
that the petitioner to have been disqualified at the technical stage
is, blacklisting of it by another entity and not providing clauses in
the subject tender for such divulgence, rejection of petitioner's
technical bid, becomes contrary to law. Therefore, the tender of
the petitioner shall be assessed along with others and the tender of
the petitioner shall be taken to its logical conclusion only after
assessment of feasibility at this juncture. It is made clear that the
eligibility of the petitioner qua other conditions of tender is not
assessed by this Court.
13. The order directing consideration of the case of the
petitioner is only on the strength of what is decided hereinabove. It
is open to the Tender Scrutiny Committee to assess other criteria of
the petitioner and take the tender to its logical conclusion.
14. For the aforesaid reasons, I pass the following:
ORDER
(i) Writ Petition is allowed.
(ii) The disqualification/rejection of the petitioner's tender
dated 04-02-2023 stands quashed and the Tender
Scrutiny Committee shall take the tender of the
petitioner along with other tenderers to its logical
conclusion bearing in mind the observations made in
the course of the order.
I.A.No.1/2023 is disposed, as a consequence.
Sd/-
JUDGE
nvj
CT:SS
