IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1846 OF 2022

(ARISING OUT OF SLP (CIVIL) NO. 2103 OF 2022)

M/S. N.G. PROJECTS LIMITED .....APPELLANT(S)

VERSUS

M/S. VINOD KUMAR JAIN & ORS. .....RESPONDENT(S)

O R D E R

HEMANT GUPTA, J.

1. The challenge in the present appeal is to an order dated 6.1.2022 passed

by the Division Bench of the High Court of Jharkhand at Ranchi whereby

the appeal filed by the State against the order of the learned Single

Bench allowing the Writ Petition No. 5416 of 2019 was dismissed.

2. The Special Leave Petition came up for hearing before this Court on

7.3.2022, when the following order was passed: -

“Leave granted.

The appeal is allowed.

The appellant shall be permitted to complete the project but will

not claim escalation for the period the matter was pending before

the Court.

The writ petition before the High Court is dismissed.

Detailed Judgment/Order to follow”.

3. The Road Construction Department of Jharkhand invited tenders on

7.6.2019 for reconstruction of Nagaruntari – Dhurki – Ambakhoriya Road.

1

Respondent No. 1 participated in the tender process and also submitted

Bank Guarantee as bid security but such tender was cancelled on

20.8.2019 and fresh Notice Inviting Tender

1

was invited for reconstruc-

tion of the said Nagaruntari – Dhurki – Ambakhoriya road.

4. The Tender Evaluation Committee held a meeting for technical

evaluation of bids and 13 out of 15 bids were held to be non-responsive

in terms of Standard Bidding Document

2

, including that of respondent

No. 1. The reason for arriving at such conclusion was that respondent

No. 1 submitted a letter along with the amended Bank Guarantee to the

effect that such letter forms an integral part of Bank Guarantee. Such

Bank Guarantee was not in the format as prescribed in the SBD. It was

also found that the Bank Guarantee was valid from 8.7.2019 to 7.3.2020,

which was prior to the date on which NIT was issued on 20.8.2019, apart

from the fact that the amount mentioned in numerical and in words were

different. Still further, the bid capacity of respondent No. 1 amounting to

Rs.60.66 crores was less than the estimated cost of work of

Rs.1,05,71,13,019/-. Additionally, the affidavit and undertaking

supporting the bid were not properly notarized.

5. The technical bid of the appellant was declared to be substantially

responsive and after due evaluation of its financial bid, work contract

was issued to the appellant on 3.10.2019. The appellant started the work

on the stipulated date of commencement on 22.10.2019 and completed

earth work for 21.9 kms out of the 24 kms proposed road. As per the

1 For short, the ‘NIT’

2 For short, the ‘SBD’

2

appellant, it had completed work of approximately Rs.8.5 crores and had

mobilized the plants and machinery to Garwa.

6. Respondent No. 1 filed a Writ Petition on 11.10.2019 for quashing of the

decision of the Technical Evaluation Committee holding its bid to be non-

responsive.

7.The State in its counter affidavit has taken the following objections:

(i) State could not have accepted the amended bank

guarantee as it had conditions beyond what was stipulated in

the format.

(ii) An amendment changes the prescribed format.

(iii) By abundant caution, the Bank was asked to verify the

said Bank Guarantee but there has been no reply as on date.

(iv) NIT is of 20.8.2019 but the Bank Guarantee is from

9.7.2019 to 8.3.2020.

(v) The undertaking and affidavit has not been duly notarized.

(vi) Bid Capacity is also negative.

(vii) The other tender referred to in the writ has since been

cancelled.

(viii) Financial details of bid cannot be known till opening of

the bid.

8. After the pleadings were completed, the learned Single Bench of the

High Court passed a common order in respect of two other works and the

work in question on 14.1.2020, setting aside award of contract granted

to the appellant. The learned Single Bench of the High Court passed the

following directions:

3

“48. Under the aforesaid facts and circumstances, all the writ

petitions are disposed of by passing following orders:-

(i)xx xx xx

(ii) The decision of the Tender Committee dated 3

rd

October,

2019, for the work, namely, “Reconstruction of Nagaruntari-

Dhurki-Ambakhoriya Road (MDR-139)” in relation to W.P.(C) No.

5416 of 2019 is hereby quashed. All the consequential action of

the State respondents taken in relation to the said tender

including the award of the tender in favour of the private

respondent – M/s. N.G. Projects Limited is also quashed. The

State respondents are directed to issue fresh tender for the said

work and to proceed accordingly.

(iii)xx xx xx”

9. The Division Bench of the High Court dismissed two appeals against two

other tenders on 7.10.2021. However, in appeal against the work in

question, the Division Bench of the High Court noticed the fact that the

appellant had already started the execution of the work and that part of

the work had already completed but held that there was no valid

distinction with the case of other two works against which Letters Patent

Appeal was dismissed on 7.10.2021. The Division Bench of the High

Court returned the following findings:

“22. On a comprehensive comparison of the bid security

document submitted by the writ petitioner and the appellant, we

gather that the bid security document submitted by both the

tenderers failed to adhere to the specifications professed by the

employer. While the appellant in the final paragraph of the bid

security document made the bank guarantee extendable at the

bank’s sole discretion contrary to the requirement of the format

and the bid document whereunder the employer had the right

reserved to get the bank guarantee extended and notice for

such extensions to the bank waived, the writ petitioner had also

deviated on this count by introducing a notwithstanding clause

4

which was not part of the format…

23. The principles of law as enunciated by the Apex Court and

profusely relied upon by this Court in the judgment dated 7

th

October, 2021 therefore do squarely apply to the facts of the

present case as well. If the opinion of the learned Single Judge

on those counts do not suffer from any perversity, there is no

reason for the appellate court to take a different view of the

matter and substitute its opinion.

xx xx xx

25. Having analyzed the reasonings rendered by the learned

single Judge in the conspicuous facts of the case, we are of the

view that the decision of the tender evaluation committee in

accepting the technical bid of the successful tenderer M/s. N.G.

Projects Limited while rejecting the technical bid of the petitioner

did not conform to uniform standards as professed by it. The

selection of one and rejection of another was neither in

consonance with the specific terms of the NIT and SBD read with

the addendum, nor was on uniform yardstick.”

10.We find that the interference in contract awarded to the appellant is

wholly unwarranted and has caused loss to public interest. Construction

of roads is an essential part of development of infrastructure in any

State. The learned Single Bench and the Division Bench of the High

Court were exercising power of judicial review to find out whether the

decision of the State was manifestly arbitrary or unjust as laid down by

this Court in Tata Cellular v. Union of India

3

and to act as appellate

authority over the decision of the State. This Court in Tata Cellular held

as under:

“70. It cannot be denied that the principles of judicial review

would apply to the exercise of contractual powers by

Government bodies in order to prevent arbitrariness or

3 (1994) 6 SCC 651

5

favouritism. However, it must be clearly stated that there are

inherent limitations in exercise of that power of judicial

review. Government is the guardian of the finances of the State.

It is expected to protect the financial interest of the State. The

right to refuse the lowest or any other tender is always available

to the Government. But, the principles laid down in Article 14 of

the Constitution have to be kept in view while accepting or

refusing a tender. There can be no question of infringement of

Article 14 if the Government tries to get the best person or the

best quotation. The right to choose cannot be considered to be

an arbitrary power. Of course, if the said power is exercised for

any collateral purpose the exercise of that power will be struck

down.

xx xx xx

77. The duty of the court is to confine itself to the question of

legality. Its concern should be:

1. Whether a decision-making authority exceeded its powers?

2. Committed an error of law,

3. committed a breach of the rules of natural justice,

4. reached a decision which no reasonable tribunal would have

reached or,

5. abused its powers.

Therefore, it is not for the court to determine whether a

particular policy or particular decision taken in the fulfilment of

that policy is fair. It is only concerned with the manner in which

those decisions have been taken. The extent of the duty to act

fairly will vary from case to case. Shortly put, the grounds upon

which an administrative action is subject to control by judicial

review can be classified as under:

(i) Illegality : This means the decision-maker must understand

correctly the law that regulates his decision-making power and

must give effect to it.

(ii) Irrationality, namely, Wednesbury unreasonableness.

6

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule out

addition of further grounds in course of time. As a matter of fact,

in R. v. Secretary of State for the Home Department, ex

Brind [(1991) 1 AC 696] , Lord Diplock refers specifically to one

development, namely, the possible recognition of the principle of

proportionality. In all these cases the test to be adopted is that

the court should, “consider whether something has gone wrong

of a nature and degree which requires its intervention”.

xx xx xx

94. The principles deducible from the above are:

(1) The modern trend points to judicial restraint in administra-

tive action.

(2) The court does not sit as a court of appeal but merely re-

views the manner in which the decision was made.

(3) The court does not have the expertise to correct the ad-

ministrative decision. If a review of the administrative de-

cision is permitted it will be substituting its own decision,

without the necessary expertise which itself may be falli-

ble.

(4) The terms of the invitation to tender cannot be open to ju-

dicial scrutiny because the invitation to tender is in the

realm of contract. Normally speaking, the decision to ac-

cept the tender or award the contract is reached by

process of negotiations through several tiers. More often

than not, such decisions are made qualitatively by ex -

perts.

(5) The Government must have freedom of contract. In other

words, a fair play in the joints is a necessary concomitant

for an administrative body functioning in an administra-

tive sphere or quasi-administrative sphere. However, the

decision must not only be tested by the application of

Wednesbury principle of reasonableness (including its

other facts pointed out above) but must be free from arbi-

trariness not affected by bias or actuated by mala fides.

7

(6) Quashing decisions may impose heavy administrative bur -

den on the administration and lead to increased and un -

budgeted expenditure.

Based on these principles we will examine the facts of this case

since they commend to us as the correct principles.”

11.Learned counsel for the appellant also referred to a judgment reported

as Central Coalfields Limited & Anr. v. SLL-SML (Joint Venture

Consortium) & Ors.

4

wherein it was held that it was not for the Court to

substitute its opinion in respect of acceptance of bank guarantee. It was

held that when a particular format for a bank guarantee is prescribed,

then the bidder is required to stick to that particular format alone with

the caveat that the State reserves the right to deviate from the terms of

the bid document within the acceptable parameters. This Court held as

under:

“32. The core issue in these appeals is not of judicial review of

the administrative action of CCL in adhering to the terms of NIT

and the GTC prescribed by it while dealing with bids furnished by

participants in the bidding process. The core issue is whether

CCL acted perversely enough in rejecting the bank guarantee of

JVC on the ground that it was not in the prescribed format,

thereby calling for judicial review by a constitutional court and

interfering with CCL's decision.

xx xx xx

37. For JVC to say that its bank guarantee was in terms stricter

than the prescribed format is neither here nor there. It is not for

the employer or this Court to scrutinise every bank guarantee to

determine whether it is stricter than the prescribed format or

less rigorous. The fact is that a format was prescribed and there

was no reason not to adhere to it. The goalposts cannot be rear-

4 (2016) 8 SCC 622

8

ranged or asked to be rearranged during the bidding process to

affect the right of some or deny a privilege to some.

xx xx xx

47. The result of this discussion is that the issue of the accep-

tance or rejection of a bid or a bidder should be looked at not

only from the point of view of the unsuccessful party but also

from the point of view of the employer. As held in Ramana Da-

yaram Shetty [Ramana Dayaram Shetty v. International Airport

Authority of India, (1979) 3 SCC 489] the terms of NIT cannot be

ignored as being redundant or superfluous. They must be given

a meaning and the necessary significance. As pointed out in Tata

Cellular [Tata Cellular v. Union of India, (1994) 6 SCC 651] there

must be judicial restraint in interfering with administrative ac-

tion. Ordinarily, the soundness of the decision taken by the em-

ployer ought not to be questioned but the decision-making

process can certainly be subject to judicial review. The sound-

ness of the decision may be questioned if it is irrational or mala

fide or intended to favour someone or a decision “that no re -

sponsible authority acting reasonably and in accordance with rel-

evant law could have reached” as held in Jagdish Man-

dal [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517] fol-

lowed in Michigan Rubber [Michigan Rubber (India) Ltd. v. State

of Karnataka, (2012) 8 SCC 216] .

xx xx xx

49. Again, looked at from the point of view of the employer if the

courts take over the decision-making function of the employer

and make a distinction between essential and non-essential

terms contrary to the intention of the employer and thereby re-

write the arrangement, it could lead to all sorts of problems in-

cluding the one that we are grappling with. For example, the GTC

that we are concerned with specifically states in Clause 15.2 that

“Any bid not accompanied by an acceptable Bid Security/EMD

shall be rejected by the employer as non-responsive”. Surely,

CCL ex facie intended this term to be mandatory, yet the High

Court held that the bank guarantee in a format not prescribed by

it ought to be accepted since that requirement was a non-essen-

tial term of the GTC. From the point of view of CCL, the GTC has

been impermissibly rewritten by the High Court.”

9

12.In Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation

Limited & Anr.

5

, this Court held that the owner or the employer of a

project, having authored the tender documents, is the best person to un-

derstand and appreciate its requirements and interpret its documents. It

was held as under:

“13. In other words, a mere disagreement with the decision-mak-

ing process or the decision of the administrative authority is no

reason for a constitutional court to interfere. The threshold of

mala fides, intention to favour someone or arbitrariness, irra-

tionality or perversity must be met before the constitutional

court interferes with the decision-making process or the deci -

sion.

xx xx xx

15. We may add that the owner or the employer of a project,

having authored the tender documents, is the best person to un-

derstand and appreciate its requirements and interpret its docu-

ments. The constitutional courts must defer to this understand-

ing 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 possi-

ble that the owner or employer of a project may give an interpre-

tation to the tender documents that is not acceptable to the con-

stitutional courts but that by itself is not a reason for interfering

with the interpretation given.”

13.This Court sounded a word of caution in another judgment reported as

Silppi Constructions Contractors v. Union of India and Ors.

6

,

wherein it was held that the Courts must realize their limitations and the

havoc which needless interference in commercial matters could cause. In

contracts involving technical issues, the Courts should be even more

5 (2016) 16 SCC 818

6 2019 SCC OnLine SC 1133

10

reluctant because most of us in judges' robes do not have the necessary

expertise to adjudicate upon technical issues beyond our domain. As laid

down in the judgments cited above, the Courts should not use a

magnifying glass while scanning the tenders and make every small

mistake appear like a big blunder. In fact, the courts must give "fair play

in the joints" to the government and public sector undertakings in

matters of contract. Courts must also not interfere where such

interference would cause unnecessary loss to the public exchequer. It

was held as under:-

“19. This Court being the guardian of fundamental rights is duty

bound to interfere when there is arbitrariness, irrationality, mala

fides and bias. However, this Court in all the aforesaid decisions

has cautioned time and again that courts should exercise a lot of

restraint while exercising their powers of judicial review in

contractual or commercial matters. This Court is normally loathe

to interfere in contractual matters unless a clear-cut case of

arbitrariness or mala fides or bias or irrationality is made out.

One must remember that today many public sector undertakings

compete with the private industry. The contracts entered into

between private parties are not subject to scrutiny under writ

jurisdiction. No doubt, the bodies which are State within the

meaning of Article 12 of the Constitution are bound to act fairly

and are amenable to the writ jurisdiction of superior courts, but

this discretionary power must be exercised with a great deal of

restraint and caution. The Courts must realize their limitations

and the havoc which needless interference in commercial

matters can cause. In contracts involving technical issues the

courts should be even more reluctant because most of us in

judges' robes do not have the necessary expertise to adjudicate

upon technical issues beyond our domain. As laid down in the

judgments cited above the courts should not use a magnifying

glass while scanning the tenders and make every small mistake

appear like a big blunder. In fact, the courts must give "fair play

in the joints" to the government and public sector undertakings

in matters of contract. Courts must also not interfere where such

interference will cause unnecessary loss to the public exchequer.

11

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 realize 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.”

(Emphasis supplied)

14.In National High Speed Rail Corpn. Ltd. v. Montecarlo Ltd.

7

, this

Court sounded a word of caution while entertaining the writ petition

and/or granting stay which ultimately may delay the execution of the

Mega projects. It was held as under:

“95. Even while entertaining the writ petition and/or granting the

stay which ultimately may delay the execution of the Mega

projects, it must be remembered that it may seriously impede

the execution of the projects of public importance and disables

the State and/or its agencies/instrumentalities from discharging

the constitutional and legal obligation towards the citizens.

Therefore, the High Courts should be extremely careful and

circumspect in exercise of its discretion while entertaining such

petitions and/or while granting stay in such matters. Even in a

case where the High Court is of the prima facie opinion that the

decision is as such perverse and/or arbitrary and/or suffers from

mala fides and/or favouritism, while entertaining such writ

petition and/or pass any appropriate interim order, High Court

may put to the writ petitioner's notice that in case the petitioner

loses and there is a delay in execution of the project due to such

7 2022 SCC OnLine SC 111

12

proceedings initiated by him/it, he/they may be saddled with the

damages caused for delay in execution of such projects, which

may be due to such frivolous litigations initiated by him/it. With

these words of caution and advise, we rest the matter there and

leave it to the wisdom of the concerned Court(s), which

ultimately may look to the larger public interest and the national

interest involved.”

15.In Uflex Ltd. v. Government of T.N.

8

, this Court stated that the enlarged

role of the Government in economic activity and its corresponding ability

to give economic “largesse” was the bedrock of creating what is

commonly called the “tender jurisdiction”. The objective was to have

greater transparency and the consequent right of an aggrieved party to

invoke the jurisdiction of the High Court under Article 226 of the

Constitution of India beyond the issue of strict enforcement of

contractual rights under the civil jurisdiction. However, the ground reality

today is that almost no tender remains unchallenged. Unsuccessful

parties or parties not even participating in the tender seek to invoke the

jurisdiction of the High Court under Article 226 of the Constitution. The

Court held as under:-

“2. The judicial review of such contractual matters has its own

limitations. It is in this context of judicial review of administrative

actions that this Court has opined that it is intended to prevent

arbitrariness, irrationality, unreasonableness, bias and mala

fides. The purpose is to check whether the choice of decision is

made lawfully and not to check whether the choice of decision is

sound. In evaluating tenders and awarding contracts, the parties

are to be governed by principles of commercial prudence. To that

extent, principles of equity and natural justice have to stay at a

distance. [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517]

8 (2022) 1 SCC 165

13

3. We cannot lose sight of the fact that a tenderer or contractor

with a grievance can always seek damages in a civil court and

thus, “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”. [Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517]

xx xx xx

42. We must begin by noticing that we are examining the case,

as already stated above, on the parameters discussed at the

inception. In commercial tender matters there is obviously an

aspect of commercial competitiveness. For every succeeding

party who gets a tender there may be a couple or more parties

who are not awarded the tender as there can be only one L-1.

The question is should the judicial process be resorted to for

downplaying the freedom which a tendering party has, merely

because it is a State or a public authority, making the said

process even more cumbersome. We have already noted that

element of transparency is always required in such tenders

because of the nature of economic activity carried on by the

State, but the contours under which they are to be examined are

restricted as set out in Tata Cellular [Tata Cellular v. Union of

India, (1994) 6 SCC 651] and other cases. The objective is not to

make the Court an appellate authority for scrutinising as to

whom the tender should be awarded. Economics must be

permitted to play its role for which the tendering authority knows

best as to what is suited in terms of technology and price for

them.”

(Emphasis supplied)

16.In Galaxy Transport Agencies v. New J.K. Roadways

9

, a three-judge

bench again reiterated 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. It was observed as thus:

9 2020 SCC OnLine SC 1035

14

“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 N.I.T. For this reason, the Division Bench's conclusion

that JK Roadways was wrongly declared to be ineligible, is set

aside.

18. Insofar as Condition No. 27 of the N.I.T. 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, (2007) 14 SCC 517,

this Court noted:

“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 commer -

cial 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 ex-

ercise of power of judicial review, interfere even if a proce-

dural 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 dis-

putes. The tenderer or contractor with a grievance can al-

ways seek damages in a civil court. Attempts by unsuc -

cessful tenderers with imaginary grievances, wounded

pride and business rivalry, to make mountains out of

15

molehills of some technical/procedural violation or some

prejudice to self, and persuade courts to interfere by exer-

cising power of judicial review, should be resisted. Such in-

terferences, 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 contrac-

tual 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.”

xx xx xx

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.”

17.Therefore, the position of law with regard to the interpretation of terms

of the contract is that the question as to whether a term of the contract

is essential or not is to be viewed from the perspective of the employer

and by the employer. Applying the aforesaid position of law to the

16

present case, it has been the contention of respondent No. 1 that the for-

mat for bank guarantee was not followed strictly by the State and that

the relaxation given was not uniform, in that respondent No. 1 was sin-

gled out. The said contention has found favour with the Courts below.

18.In the present matter, respondent No. 1 submitted its first bank guaran-

tee on 8.7.2019 in relation to the first tender for the same project. How-

ever, this first tender was cancelled through a notice, as acknowledged

by respondent No. 1. This being the case, being fully aware of the fact

that the first tender was no more in force and given that there was

specifically a new tender in place, respondent No. 1 was required to sub-

mit a bank guarantee in the format specified as per the Agreement.

However, respondent no. 1 opted to use the same bank guarantee which

was drawn on 8.7.2019, albeit with a letter from the bank indicating that

there is now an amendment with regard to the dates and the contract

therein. It is patently clear that if the format for a bank guarantee is an

essential condition of the Contract, the format in which the respondent

has opted to submit it is a substantial variation in the terms of the con-

tract. If the variation that is done by respondent no. 1 is considered to

be an acceptable variation, then it would create an onerous burden on

the tendering authority to ensure that each underlying bank guarantee is

valid and further to consider whether the amendment letter itself was

with the full knowledge and consent of the bank. As it were, on the facts

17

of the case, the State informed the High Court that it had attempted to

verify the amendment but there was no response from the Bank. This

being the case, it is submitted that the relaxation in the format to bank

guarantee was rightly not provided to the respondent.

19.The Specific Relief Act, 1963 was amended by Central Act 18 of 2018

when clause (ha) was inserted in Section 41 of the said Act to say:

“(ha) if it would impede or delay the progress or completion of

any infrastructure project or interfere with the continued

provision of relevant facility related thereto or services being the

subject matter of such project.”

20.Such amendment was in pursuance of the report submitted on 20

th

June

2016 of the Expert Committee. The report is as under:-

“The Expert Committee set on examining Specific Relief Act, 1963

submits its Report to Union Law & Justice Minister

Recommends modifications for ensuring ease of doing business

The Expert Committee set on examining the Specific Relief Act,

1963 today Submitted its Report To Union Law & Justice Minister

Shri D.V.Sadananda Gowda here in New Delhi. In its report the

committee has recommended modifications in the Specific Relief

Act, 1963 for ensuring the ease of doing business.

In the context of tremendous developments which have taken

place since 1963 and the present changed scenario involving

contract based infrastructure developments, public private

partnerships and other public projects, involving huge

investments; and changes required in the present scheme of the

Act so that specific performance is granted as a general rule and

grant of compensation or damages for non-performance remains

as an exception, the committee decided

i. To change the approach, from damages being the rule

and specific performance being the exception, to specific

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performance being the rule, and damages being the alternate

remedy..

ii. To provide guidelines for reducing the discretion granted

to Courts and tribunals while granting performance and injunctive

reliefs.

iii. To introduce provisions for rights of third parties (other

than for Government contracts).

iv. To consider addressing unconscionable contracts, unfair

contracts, reciprocity in contracts etc., and implied terms.

The committee observed that there is a need to classify diverse

Public utility Contracts as a distinct class recognising the inherent

public interest/importance to be addressed in the Act. Any public

work must progress without interruption. This requires

consideration whether a court’s intervention in public works

should be minimal. Smooth functioning of Public works projects

can be effectively managed through a monitoring system and

regulatory mechanism. The role of courts in this exercise is to

interfere to the minimum extent so that public works projects will

not be impeded or stalled.”

21.Since the construction of road is an infrastructure project and keeping in

view the intent of the legislature that infrastructure projects should not

be stayed, the High Court would have been well advised to hold its hand

to stay the construction of the infrastructure project. Such provision

should be kept in view even by the Writ Court while exercising its juris-

diction under Article 226 of the Constitution of India.

22.The satisfaction whether a bidder satisfies the tender condition is

primarily upon the authority inviting the bids. Such authority is aware of

expectations from the tenderers while evaluating the consequences of

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non-performance. In the tender in question, there were 15 bidders. Bids

of 13 tenderers were found to be unresponsive i.e., not satisfying the

tender conditions. The writ petitioner was one of them. It is not the

case of the writ petitioner that action of the Technical Evaluation

Committee was actuated by extraneous considerations or was malafide.

Therefore, on the same set of facts, different conclusions can be arrived

at in a bona-fide manner by the Technical Evaluation Committee. Since

the view of the Technical Evaluation Committee was not to the liking of

the writ petitioner, such decision does not warrant for interference in a

grant of contract to a successful bidder.

23.In view of the above judgments of this Court, the Writ Court should re-

frain itself from imposing its decision over the decision of the employer

as to whether or not to accept the bid of a tenderer. The Court does not

have the expertise to examine the terms and conditions of the present-

day economic activities of the State and this limitation should be kept in

view. Courts should be even more reluctant in interfering with contracts

involving technical issues as there is a requirement of the necessary ex-

pertise to adjudicate upon such issues. The approach of the Court should

be not to find fault with magnifying glass in its hands, rather the Court

should examine as to whether the decision-making process is after com -

plying with the procedure contemplated by the tender conditions. If the

Court finds that there is total arbitrariness or that the tender has been

granted in a malafide manner, still the Court should refrain from interfer-

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ing in the grant of tender but instead relegate the parties to seek dam-

ages for the wrongful exclusion rather than to injunct the execution of

the contract. The injunction or interference in the tender leads to addi-

tional costs on the State and is also against public interest. Therefore,

the State and its citizens suffer twice, firstly by paying escalation costs

and secondly, by being deprived of the infrastructure for which the

present-day Governments are expected to work.

24.The State has paid over a sum of Rs.3,98,52,396/- to the appellant till

date, though the stand of the appellant is that it had submitted bills of

work of Rs.8.5 crores. The termination of contract would cause

additional financial burden on the State and also deprive the amenity of

road for a longer period. Learned counsel for the appellant has stated

that it shall not claim escalation of costs for the period when the writ

petition before the High Court was pending and there was a stay

granted.

25.In view thereof, we find that the action of the respondent in setting aside

the letter of acceptance granted to the appellant suffers from manifest

illegality and cannot be sustained. Consequently, the appeal is disposed

of with a direction to the respondent State to allow the appellant to

resume and complete the work by excluding the period spent in the stay

of execution of the contract.

26.A word of caution ought to be mentioned herein that any contract of

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public service should not be interfered with lightly and in any case, there

should not be any interim order derailing the entire process of the

services meant for larger public good. The grant of interim injunction by

the learned Single Bench of the High Court has helped no-one except a

contractor who lost a contract bid and has only caused loss to the State

with no corresponding gain to anyone.

27.We also find that multiple layers of exercise of jurisdiction also delay the

final adjudication challenging the grant of tender. Therefore, it would be

open to the High Courts or the Hon’ble Chief Justice to entrust these

petitions to a Division Bench of the High Court, which would avoid at

least hearing by one of the forums.

.............................................J.

(HEMANT GUPTA)

.............................................J.

(V. RAMASUBRAMANIAN)

NEW DELHI;

MARCH 21, 2022.

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