The Meghalaya High Court observed that a spousal relationship cannot lead to any disqualification in a tender process unless there exists a specific restriction incorporated in the related terms and conditions. While adjudicating upon a tender dispute case, the Court held that wrongfully banning and debarring the petitioner from entering into business dealings with the respondent, on grounds of a married couple taking part in the tender process in the name of their individual business identities, cannot be sustained in law.
Brief Facts of the Case:
An application was filed under Article 226 of the Indian Constitution in an attempt to challenge the impugned order, issued by Respondent No.2, which terminated the contract awarded to the petitioner, while debarring them from entering into any business dealings with the respondent. The order also directed for filing of a criminal complaint against the petitioner upon allegations of committing fraud against the respondent. An open tender was floated by the respondent authority for purchase of the store of Composite Indore Shooting Range (CISR). The petitioner, along with other firms, had participated in the tender process. After conducting the required technical and financial evaluations, the contract was awarded to the petitioner. The formalities were subsequently complied with, and the work started immediately. Shortly thereafter, the respondent issued a notice for termination of contract for violation of the Code of Integrity for Public Procurement (‘CIPP’), upon learning about the spousal relationship of the petitioner with the proprietor of one of the bidding firms in the tender process. The grounds for the same were alleged to be Anti- Competitive Practice and Conflict of Interest.
Contentions of the Petitioner:
The petitioner argued that the tender document's CIPP did not specify disqualification criteria for spouses, family members, or related parties participating in the process. Terms and conditions also did not require disclosure of spousal or family relationships between bidders. No evidence suggested the petitioner engaged in Anti-Competitive Practices or had conflicts of interest with tendering authority officials. Section 3 of the Competition Act, 2002 doesn't prohibit close relatives with separate business identities from participating in tenders. The respondent authority lacks the power to indefinitely ban the petitioner from business dealings.
Contentions of the Respondents:
The respondents argued that the existence of the spousal relationship is sufficient to draw adverse inference of existence of collusion, bid rigging and anti-competitive arrangement against the petitioner. Reliance was placed on Rule 175 (1) (ii) of the General Financial Rules, 2017 and Clause 5.1.4 (ix) (d) of the Manual for Procurement of Good, 2017 for contending that the petitioner had contravened the disclosure clause of Conflict of Interest and Anti- Competitive Practice, by not furnishing the details of their relationship. It was fairly submitted that by virtue of Rule 151 (iii) of the General Financial Rules, 2017, the respondent authority could not debar a bidder for a period exceeding two years. Thus, the impugned order is incorrect only to the extent it refers to the period of debarment or blacklisting of the petitioner.
Observations by the Court:
The Meghalaya High Court noted that non-disclosure of the petitioner's spousal relationship with the bidding firm's proprietor isn't a violation of the code, as it lacks stipulated indication. Code clause (v) requires disclosure of relationships, business, or financial transactions with procuring entity officials, but in this case, no such relationships existed. The court found no prohibition in the tender process terms against the participation of close relatives, including spouses. The petitioner's disqualification on code violation grounds was deemed incorrect.
It was clarified that the Competition Act, 2002 does not bar family members from participating in a tender process for business advancement. The term "relationship" in Clause 5.1.4 (ix) (d) of the Manual for Procurement of Goods, 2017 was interpreted as a 'business relationship,' not a personal or social one. Mere personal or social connections between bidders were deemed insufficient to constitute a "relationship" in a commercial context, thus not violating the Integrity Code regarding "Conflict of Interest" and "Anti-Competitive Practice."
The Court observed, “husband and wife are two different identities in law and the same relationship cannot lead to any disqualification in a tender process until and unless there exist a specific restriction incorporated in the related terms and conditions. No law has been placed before this Court which can permit any restriction on two separate business establishments irrespective of the fact of being they relate to each other as husband and wife”.
The impugned order insofar as it related to banning and debarring the petitioner from entering into any business dealings with the respondent were held to be unsustainable in law.
The Decision of the Court:
The High Court disposed of the Writ Petition in the aforesaid terms, as the petitioner did not have any unjust agreement with the proprietor of the bidding firm, nor did they form a cartel to create non-competitive levels in the bidding process. There was no order as to costs.
Case Title: M/S La Monte Enterprise vs. Union of India & Ors.
Coram: Hon’ble Mr. Justice B. Bhattacharjee
Case no.: WP(C) No.123 of 2020
Advocate for the Petitioner: Mr. S. Dey, Adv.
Advocates for the Respondents: Dr. N. Mozika, DSGI, Ms. A. Pradhan, Adv.
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