Orissa High Court
M/S. Sri Durga Condev Pvt. Ltd vs Union Of India Represented Through The ... on 5 November, 2024
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.15596 of 2024
1. M/s. Sri Durga Condev Pvt. Ltd., A company incorporated
under the Companies Act, 1956 having its registered office, At.-
Kairapari, Kotasahi, Tangi, Dist.- Cuttack, Odisha-754 022 represented
through its Director, Sri Pradeepta Chandra Rath, aged about 60 years,
S/o. Late Dhaneswar Rath.
2. Pradeepta Chandra Rath, aged about 60 years, S/o. Late
Dhaneswar Rath, presently Director of M/s. Sri Durga Condev Pvt.
Ltd., At.- Kairaparim Kotasahi, Tangi, Dist.- Cuttack-754 022, Odisha
...Petitioners
-Versus-
1. Union of India represented through the General Manager, East
Coast Railway, Rail Sadan, Samanta Vihar, Bhubaneswar- 751017,
Dist.- Khurda.
2. The Chief Administrative Officer (Construction), 2nd Floor,
North Block, Rail Sadan, Samanta Vihar, Bhubaneswar-751017, Dist.-
Khurda.
3. The Chief Engineer (Construction-II), Bhubaneswar, Office
of Chief Administrative Officer (Construction), 2nd Floor, North Block,
Rail Sadan, Samanta Vihar, Bhubaneswar-751017, Dist.- Khurda.
...Opposite Parties
W.P.(C) No.15596 of 2024 Page 1 of 20
Advocates appeared in the case:
For the Petitioners : Mr. Asok Mohanty,
Senior Advocate,
Mr. Gouri Mohan Rath,
Advocate
For Opposite Parties : Mr. S.S. Kashyap,
Central Government Advocate
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MISS JUSTICE SAVITRI RATHO
JUDGMENT
05.11.2024
Chakradhari Sharan Singh, CJ.
1. A Request for Proposal (RFP) dated 27.07.2023 was issued by
the Chief Engineer (Construction-II), Bhubaneswar (opposite party
No.3) for execution of work of "Talcher-Bimalagarhnew B.G Raillink
project: Execution of Earthwork information, minor bridges, major
bridges, drains, retaining walls, protection works, RUBs/ROBs
including approaches, construction of station building, staff quarters,
offices and other service buildings at Pallahara Road station, supply
oftrack ballast, P. way linking and other allied works between
Srirampur (CSB: Km.67.425-ExcludingYard) & Pallahra Road
(CSB:76.90-includingyard) Stations on Engineering, Procurement and
Construction (EPC) Mode". The RFP spelt out the detailed terms and
conditions for award of the project. Relevant portion of the said RFP
has been brought on record by way of annexure to the writ petition.
2. The dispute in the present writ petition relates to payment of
Additional Performance Security in accordance with Clause-2.21.1
under the heading bidding security of RFP. The heading "Performance
Security" (2.21) finds place in the RFP document at two pages i.e.
page-32 and page-33. Clause 2.21 at Page-32 reads thus:
"2.21 Performance Security
2.21.1 Within 30 (thirty) days of issue of LOA,
the selected Bidder shall furnish to the Authority
an irrevocable and unconditional guarantee from a
Bank in the form set forth in draft EPC agreement
(the "Performance Security") for an amount equal
to 5% (five percent) of its Bid Price.
2.21.2 For detailed provisions of Performance
Security refer Article 7 of draft EPC agreement"
2.1. Same Clause at page-33 reads as under:
"2.21 Performance Security
2.21.1 Within 30 (thirty) days of issue of LOA,
the selected Bidder shall furnish to the Authority
an irrevocable and unconditional guarantee from a
Bank in the form set forth in draft EPC agreement
(the "Performance Security'') for an amount equal
to 5% (five percent) of its Bid Price. In case of
accepted Bid value is less than 90% of Estimated
Project Cost, the Selected Bidder, along with the
Performance Security, shall also furnish to the
Authority an irrevocable and unconditional
guarantee from a Bank in the same form given in
draft EPC agreement towards an Additional
Performance Security (the "Additional
Performance Security") for an amount calculated
as under:
(i) lf the Bid Price value offered by the Selected
Bidder is less than 90% but upto80% of the
estimated Project Cost, then the Additional
Performance Security shall be calculated @20%
of the difference between 90% of Estimated
Project Cost and the Bid Price offered by the
selected Bidder.
(ii) lf the Bid Price value offered by the Selected
Bidder is less than 80% of the Estimated Project
Cost, then the Additional Performance Security
shall be calculated @ 30% of the difference
between 90% of Estimated Project Cost and the
Bid Price offered by the selected Bidder.
(iii) This Additional Performance Security shall
be treated as part of the Performance Security.
2.21.2 For detailed provisions of Performance
Security and Additional Performance Security
refer Article 7 of draft EPC agreement."
3. It is precisely the case of the petitioners that no Additional
Performance Security is required to be furnished in terms of Clause-
2.21 at page-32 and the petitioners cannot be compelled to furnish
Additional Performance Security relying on Clause-2.21.1 page-33 of
the RFP document EPC. It is also the petitioners' case that as stipulated
under Clause-2.21.2, for detailed provisions of Performance Security
and Additional Performance Security, reference is to be made to
Article 7 of the draft EPC agreement. Article 7 of the Draft EPC
agreement, however, does not contain any provision for Additional
Performance Security, according to the petitioners.
4. With the aforesaid reasoning, the present writ petition has
been filed challenging the communications dated 26.06.2024 and
14.06.2024 issued by opposite party No.3 in demanding Additional
Performance Security, which, according to the petitioners, is dehors the
terms of the RFP.
5. The short facts of the case are that petitioner No.1 is a limited
company incorporated under the Companies Act and petitioner No.2 is
Director/shareholder of petitioner No.1. Pursuant to the RFP, the
petitioners had participated in the bid process. The petitioners were
declared qualified in the technical evaluation process and upon
evaluation of the financial bids, the petitioners' bid was selected at a
sum of Rs.197,54,26,640/- which was 24.98% below the estimated
price. A Letter of Acceptance (LoA) was issued on 03.06.2024. The
petitioners are said to have received the letter of acceptance under
protest regarding the requirement to furnish Additional Performance
Security beyond the terms of the RFP and draft EPC agreement.
6. It is manifest on perusal of page-32 of the RFP document that
the said page is substantially blank except for the Performance Security
Clause-2.21 as noted above. The same Clause i.e. Clause-2.21
concerning Performance Security is at page-33 also, which clearly
stipulates payment of Additional Performance Security, if the
stipulated condition(s) exist(s).
7. In the LoA dated 03.06.2024 it is mentioned that Performance
Security is to be provided within 30 days of the issue of LoA in
accordance with Clause-7.1.1 of the standard EPC agreement. In
addition to the above, the bidder is required to furnish Additional
Performance Security for an amount worth Rs.11,83,36,008/- only,
which is 30% of the difference between 90% of the estimated project
cost and the bid price offered by the selected bidders. The petitioners
furnished Performance Security on 07.06.2024. The petitioners have
however questioned the demand of Additional Performance Security
on the ground that such demand is beyond the terms and conditions of
the RFP. The petitioners had approached opposite party No.3 against
the demand of furnishing Additional Performance Security in the
absence of any stipulation in Clause-2.21.2 of the RFP of page-32 and
requested for execution of agreement by accepting the Performance
Security only.
8. The petitioners had earlier approached this Court by filing writ
petition giving rise to W.P.(C) No.14689 of 2024 seeking quashing of
the orders/instructions issued by the opposite parties dated 17.06.2024,
demanding Additional Performance Security. The said writ petition
was disposed of by an order dated 21.06.2024 requiring opposite party
No.3 to consider and dispose of the petitioners' representation and pass
appropriate order within three weeks. Accordingly, a speaking order
has been passed on 26.06.2024. The petitioners' plea against the
submission of Additional Performance Security has been turned down
by the said speaking order dated 26.06.2024 which has been challenged
in the present writ petition.
9. The facts disclosed in the writ petition have not been disputed
in the counter affidavit filed on behalf of the opposite parties. There is
a candid admission in the counter affidavit that the clause concerning
submission of Performance Security appeared twice in the RFP, one at
page-32 and another at page-33. It has, however, been stated that
Clause-2.21.1 appearing at page-33 provides complete sub-Clauses i.e.
Clause-2.21.1 (i), (ii), (iii) and Clause-2.21.2 and that all the sub-
Clauses have to be read for correct interpretation of the tender
documents. It has been stated that the petitioners are trying to derive
undue advantage of an inadvertent uploading of a part of Clause-2.21
at page-32 of the RFP to escape the obligation of furnishing the
Additional Performance Security as per the complete Clause at page-33
of the RFP.
10. Mr. Asok Mohanty, learned Senior Counsel appearing on
behalf of the petitioners has submitted that in Clause-2.21 (at page-32
of the RFP), there is no stipulation of furnishing Additional
Performance Security. He has further submitted, taking us to Clause-
2.21.2 which is at page-33 of the RFP, that it requires to be read with
Article-7 of the draft EPC agreement which contains detailed
provisions for Performance Security and Additional Performance
Security. Referring to Article-7 of the draft EPC agreement, he has
submitted that the said Article does not contemplate furnishing of any
Additional Performance Security. He has submitted that the
requirement of furnishing an Additional Performance Security will
have to be considered in the light of the stipulation at page-32 of the
RFP and Clause-2.21.2 at page-33 of the RFP read with Article-7 of
the EPC agreement. He has argued that in the background of clear
stipulation in the RFP and draft EPC agreement, demand made by the
opposite parties for submission of Additional Performance Security as
a condition precedent for execution of the agreement is wholly
arbitrary, which requires interference of this Court. He has also argued
that there is admitted discrepancy/error in view of Clause-2.21.1 of the
RFP appearing twice, one at page-32 and other at page-33, which are
differently worded, and therefore, it ought to be resolved in accordance
with Clause-2.1.3 of the RFP which requires that notwithstanding
anything to the contrary contained in the RFP, detailed terms specified
in draft EPC agreement shall have overriding effect. He has
accordingly submitted that the draft provisions under the draft EPC
agreement shall have an overriding effect, notwithstanding anything
contained in the RFP and since there is no stipulation of furnishing
Additional Performance Security in the draft EPC agreement, the
opposite parties are not justified in requiring the petitioners to furnish
Additional Performance Security.
11. Per contra, Mr. S.S. Kashyap, learned Central Government
Counsel appearing on behalf of the opposite parties has submitted that
apparently the petitioners are trying to derive undue advantage of an
inadvertent mistake of uploading page-32 of the RFP. He has
submitted that Clause-2.21.1 is at page-33 of the RFP and not at page-
32 which is evident on comparison of the two pages. He has submitted
that the stipulation of furnishing Additional Performance Security in
Clause-2.21.1 is unequivocal and requires furnishing Additional
Performance Security in addition to Performance Security, in case the
accepted bid value is less than 90% of the estimated project cost as
specified under sub-Clause- (i) (ii) (iii). He further submits that the
Performance Security for the purpose of Article-7 of the draft EPC
agreement includes Additional Performance Security as the Additional
Performance Security is part of Performance Security under Clause
2.21 of the RFP. Referring to the averments made in the counter
affidavit, he has argued that there is rationale behind requirement of
submission of Additional Performance Security in case the accepted
bid value is less than 90% of the estimated project cost.
12. We have carefully gone through the pleadings and documents
on record. The existence of two pages i.e. page-32 and page-33 in the
RFP concerning Performance Security is at the core of the controversy.
Whereas, the petitioners are relying on page-32 of the RFP and taking
a plea that there being contradiction between the condition for
furnishing Performance Security, the benefit should go to the
successful bidder as the successful bidder was under the bona fide
impression that there was no requirement of submission of Additional
Performance Security.
13. After having gone through the contents of page-32 and page-
33 of the RFP, we find that the conditions of furnishing Performance
Security are at page-33. Clauses present at page-33 clearly lay down
the condition for furnishing Additional Performance Security in a case
where the accepted bid value is less than 90% of the estimated project
cost. Firstly, we are of the view that the submission made on behalf of
the petitioners that there is no requirement of furnishing additional
performance guarantee, cannot be accepted without completely
ignoring the stipulations under Clause-2.21 available at page-33 of the
RFP. Secondly, we find substance in the stand taken by the opposite
parties in the counter affidavit that uploading of page-32, which does
not contain complete Clause-2.21, is an inadvertent error. We are
thirdly of the view that the Performance Security, within the meaning
of Article-7 of the draft EPC agreement includes Additional
Performance Security which is part of Performance Security within the
meaning of complete Clause-2.21 of the Performance Security.
14. Accordingly, in our considered view, the petitioners'
representation has been rightly rejected by the impugned reasoned
order dated 26.06.2024, based on interpretation of the stipulations
under the RFP which cannot be said to be completely unjustified.
15. The Supreme Court in its various decisions has enunciated, in
no uncertain terms, that the authority which authors the tender
document is the best person to understand and appreciate its
requirement and a different interpretation should not be attached by the
Courts exercising the power of judicial review. The Supreme Court
while reiterating the said legal position has recently held in case of
Agmatel India Private Limited v. Resoursys Telecom and others,
(2022) 5 SCC 362 that the scope of judicial review in contractual
matters, in particularly in relation to the process of interpretation of
tender documents, is limited. In paragraph-25 of the said decision, the
Supreme Court has noticed various earlier decisions, which reads as
under:
"25. This Court referred to various decisions on the
subject and stated the legal principles as follows :
(Galaxy Transport Agencies case [Galaxy Transport
Agencies v. New J.K. Roadways, Fleet Owners &
Transport Contractors, (2021) 16 SCC 808 : 2020
SCC OnLine SC 1035] , SCC paras 14-20)
"14. In a series of judgments, this Court has held that
the authority that authors the tender document is the
best person to understand and appreciate its
requirements, and thus, its interpretation should not
be second-guessed by a court in judicial review
proceedings. In Afcons Infrastructure Ltd. v. Nagpur
Metro Rail Corpn. Ltd. [Afcons Infrastructure
Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC
818] , this Court held : (SCC p. 825, para 15)
'15. We may add 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 or
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.'
15. In the judgment in Bharat Coking Coal
Ltd. v. AMR Dev Prabha [Bharat Coking Coal
Ltd. v. AMR Dev Prabha, (2020) 16 SCC 759] , under
the heading "Deference to authority's interpretation",
this Court stated : (SCC p. 776, paras 50-52)
'50. Lastly, we deem it necessary to deal with another
fundamental problem. It is obvious that Respondent 1
seeks to only enforce terms of NIT. Inherent in such
exercise is interpretation of contractual terms.
However, it must be noted that judicial interpretation
of contracts in the sphere of commerce stands on a
distinct footing than while interpreting statutes.
51. In the present facts, it is clear that BCCL and C1-
India have laid recourse to clauses of NIT, whether it
be to justify condonation of delay of Respondent 6 in
submitting performance bank guarantees or their
decision to resume auction on grounds of technical
failure. BCCL having authored these documents, is
better placed to appreciate their requirements and
interpret them. [Afcons Infrastructure Ltd. v. Nagpur
Metro Rail Corpn. Ltd., (2016) 16 SCC 818]
52. The High Court ought to have deferred to this
understanding, unless it was patently perverse or mala
fide. Given how BCCL's interpretation of these clauses
was plausible and not absurd, solely differences in
opinion of contractual interpretation ought not to have
been grounds for the High Court to come to a finding
that the appellant committed illegality.'
16. Further, in the recent judgment in Silppi
Constructions Contractors v. Union of India [Silppi
Constructions Contractors v. Union of India, (2020) 16
SCC 489] , this Court held as follows : (SCC pp. 501-
02, para 20)
'20. The essence of the law laid down in the judgments
referred to above is the exercise of restraint and
caution; the need for overwhelming public interest to
justify judicial intervention in matters of contract
involving the state instrumentalities; the courts should
give way to the opinion of the experts unless the
decision is totally arbitrary or unreasonable; the court
does not sit like a court of appeal over the appropriate
authority; the court must realise that the authority
floating the tender is the best judge of its requirements
and, therefore, the court's interference should be
minimal. 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. With this
approach in mind we shall deal with the present case.'
17. In accordance with these judgments and noting that
the interpretation of the tendering authority in this case
cannot be said to be a perverse one, the Division Bench
ought not to have interfered with it by giving its own
interpretation and not giving proper credence to the
word "both" appearing in Condition No. 31 of the NIT
For this reason, the Division Bench's conclusion [New
JK Roadways v. State (UT of J&K), 2020 SCC OnLine
J&K 733] that JK Roadways was wrongly declared to
be ineligible, is set aside.
18. Insofar as Condition No. 27 of the NIT prescribing
work experience of at least 5 years of not less than the
value of Rs 2 crores is concerned, suffice it to say that
the expert body, being the Tender Opening Committee,
consisting of four members, clearly found that this
eligibility condition had been satisfied by the appellant
before us. Without therefore going into the
assessment of the documents that have been supplied
to this Court, it is well settled that unless arbitrariness
or mala fide on the part of the tendering authority is
alleged, the expert evaluation of a particular tender,
particularly when it comes to technical evaluation, is
not to be second-guessed by a writ court. Thus,
in Jagdish Mandal v. State of Orissa [Jagdish
Mandal v. State of Orissa, (2007) 14 SCC 517] , this
Court noted : (SCC pp. 531-32, para 22)
'22. Judicial review of administrative action is intended
to prevent arbitrariness, irrationality, unreasonableness,
bias and mala fides. Its purpose is to check whether
choice or decision is made "lawfully" and not to check
whether choice or decision is "sound". When the
power of judicial review is invoked in matters relating
to tenders or award of contracts, certain special
features should be borne in mind. A contract is a
commercial transaction. Evaluating tenders and
awarding contracts are essentially commercial
functions. Principles of equity and natural justice stay
at a distance. If the decision relating to award of
contract is bona fide and is in public interest, courts
will not, in exercise of power of judicial review,
interfere even if a procedural aberration or error in
assessment or prejudice to a tenderer, is made out. The
power of judicial review will not be permitted to be
invoked to protect private interest at the cost of public
interest, or to decide contractual disputes. The tenderer
or contractor with a grievance can always seek
damages in a civil court. Attempts by unsuccessful
tenderers with imaginary grievances, wounded pride
and business rivalry, to make mountains out of
molehills of some technical/procedural violation or
some prejudice to self, and persuade courts to interfere
by exercising power of judicial review, should be
resisted. Such interferences, either interim or final, may
hold up public works for years, or delay relief and
succour to thousands and millions and may increase the
project cost manifold. Therefore, a court before
interfering in tender or contractual matters in exercise
of power of judicial review, should pose to itself the
following questions:
(i) Whether the process adopted or decision made by
the authority is mala fide or intended to favour
someone;
OR
Whether the process adopted or decision made is so
arbitrary and irrational that the court can say:"the
decision is such that no responsible authority acting
reasonably and in accordance with relevant law could
have reached";
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no
interference under Article 226. Cases involving
blacklisting or imposition of penal consequences on a
tenderer/contractor or distribution of State largesse
(allotment of sites/shops, grant of licences, dealerships
and franchises) stand on a different footing as they may
require a higher degree of fairness in action.'
19. Similarly, in Montecarlo Ltd. v. NTPC
Ltd. [Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC
272] , this Court stated as follows : (SCC p. 288, para
26)
'26. We respectfully concur with the aforesaid
statement of law. We have reasons to do so. In the
present scenario, tenders are floated and offers are
invited for highly complex technical subjects. It
requires understanding and appreciation of the nature
of work and the purpose it is going to serve. It is
common knowledge in the competitive commercial
field that technical bids pursuant to the notice inviting
tenders are scrutinised by the technical experts and
sometimes third-party assistance from those
unconnected with the owner's organisation is taken.
This ensures objectivity. Bidder's expertise and
technical capability and capacity must be assessed by
the experts. In the matters of financial assessment,
consultants are appointed. It is because to check and
ascertain that technical ability and the financial
feasibility have sanguinity and are workable and
realistic. There is a multi-prong complex approach;
highly technical in nature. The tenders where public
largesse is put to auction stand on a different
compartment. Tender with which we are concerned, is
not comparable to any scheme for allotment. This
arena which we have referred requires technical
expertise. Parameters applied are different. Its aim is to
achieve high degree of perfection in execution and
adherence to the time schedule. But, that does not
mean, these tenders will escape scrutiny of judicial
review. Exercise of power of judicial review would be
called for if the approach is arbitrary or mala fide or
procedure adopted is meant to favour one. The
decision-making process should clearly show that the
said maladies are kept at bay. But where a decision is
taken that is manifestly in consonance with the
language of the tender document or subserves the
purpose for which the tender is floated, the Court
should follow the principle of restraint. Technical
evaluation or comparison by the Court would be
impermissible. The principle that is applied to scan and
understand an ordinary instrument relatable to contract
in other spheres has to be treated differently than
interpreting and appreciating tender documents relating
to technical works and projects requiring special skills.
The owner should be allowed to carry out the purpose
and there has to be allowance of free play in the joints.'
20. This being the case, we are unable to fathom how
the Division Bench, on its own appraisal, arrived at the
conclusion that the appellant held work experience of
only 1 year, substituting the appraisal of the expert
four-member Tender Opening Committee with its
own."
(italicised matter emphasised in the original; emphasis
in bold italics supplied)"
16. After having noticed the aforesaid decisions, the Supreme
Court in case of Agmatel India Private Limited (supra) has ruled that
if the interpretation given by the author of the tender is manifestly in
consonance with the language of the tender document, the Court in a
proceeding for judicial review should prefer to keep restraint.
17. We are of the view, in the present case, that the interpretation
given by the tendering authority in the present case cannot be termed to
be patently erroneous requiring this Court's interference in a
proceeding under Article 226 of the Constitution of India.
18. Mr. Rath, learned counsel appearing on behalf of the
petitioners has made an alternative submission. It has been argued that
if this Court is not inclined to interfere with the impugned reasoned
order dated 26.06.2024, the Court may permit the petitioners to furnish
the Additional Performance Security within 30 days from today.
Learned Central Government Counsel representing the opposite parties
does not have any objection to the said submission.
19. In such view of the matter, considering the circumstance in the
present case that there was some error in the RFP as noted above, we
dispose of the present writ petition with an observation and direction
that if the petitioners furnish the Additional Performance Security in
terms of Clause 2.21 of the RFP within 30 days from today, based on
the letter of acceptance, the opposite parties shall execute necessary
agreement for the work in question.
20. Accordingly, the present writ petition stands disposed of.
There shall be no order as to costs.
(Chakradhari Sharan Singh)
Chief Justice
Savitri Ratho, J. I agree.
(Savitri Ratho)
Judge
S.K. Guin/PA
Designation: Personal Assistant
Location: High Court of Orissa, Cuttack
Date: 08-Nov-2024 17:21:50
