REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1049 OF 2019

(ARISING OUT OF SLP (C) NO. 26811 OF 2018)

VIDARBHA IRRIGATION DEVELOPMENT CORPORATION ...APPELLANT

Versus

M/S ANOJ KUMAR GARWALA ...RESPONDENT

WITH

CIVIL APPEAL NO. 1050 OF 2019

(ARISING OUT OF SLP (C) NO. 27818 OF 2018)

J U D G M E N T

ROHINTON F. NARIMAN, J.

1) Leave granted.

2) A Tender was called by the appellant before us on

06.01.2018 for balance earthwork to be done in a canal. The

Tender was ultimately replied to by three persons whose bids,

respectively, were - Rs.39.53 crores by Respondent No.1,

Rs.39.15 crores by Respondent No.2, and Rs.46.81 crores by

Respondent No.3. There is no dispute that the bid of

Respondent No. 2 was the lowest bid. At this stage, it is a

little important to advert to some of the tender conditions:-

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“Contract” is defined by the e-tender in question as follows:-

“1.3.9 CONTRACT :-

It shall mean and include following

documents.

Tender Documents.

Specifications.

Drawings.

Tender document & information/data

submitted by contractor

Common set of conditions/ Minutes of pre-

Tender conference.”

Clause 2.15 speaks of “Pre-tender Conference” as follows:-

“1)Pre-tenders conference open to all

prospective tenderer will be held in the

office as stated in this Section, wherein

the prospective tenderer will have an

opportunity to obtain clarifications

regarding the work and the tender

conditions.

2) The prospective tenderers are free to

ask for any additional clarification either

in writing or orally and the reply to the

same will be given by the Chief

Engineer/Superintending Engineer in writing

and these clarifications referred to as

common set of conditions, shall form part

of tender documents and which will also be

common and applicable to all tenderer.

3) The e-tender submitted by the tenderer

shall be based on the clarification,

additional facility issued (if any) by the

Corporation and this tender shall be

unconditional. Conditional tenders will

summarily be rejected as non-responsive.

4) All tenderers are cautioned that the

tenders containing any deviation from the

contractual terms and conditions,

specifications or other requirements and

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conditional Tenders will be rejected as

non-responsive.”

Clause 2.22 speaks of “Performance Security” as follows:-

“PERFORMANCE SECURITY in case of offer

below the cost put to tender as per PWD

Circular BDG-2016/BLD-2/Dt.:12/02/2016) &

corrigendum on date 17/03/2016/ WRD

Corrigendum No. Tender 0316/(189/16) Major

Projects-1 dated 14.7.16

Condition Regarding payment of performance

security (in place of condition for

payment of additional security deposit) if

offer quoted by the tenderer is below the

cost put to tender.

i) If the tenderer quote upto

1% below the cost put to tender, no

additional performance security

is required. However, if the

tenderer quote his offer more than

1% below the cost put to tender

to 10% below the cost put to

tender, tenderer shall submit the

demand draft or FDR or BG of the

amount equal to 1% of cost put to

tender towards performance

security in Envelope No.2 of

tender.

ii) If the tenderer quote his

offer more than 10% below (offer

below than 10%) the cost put to

tender, tenderer shall submit the

demand draft or FDR or BG of the

cumulative amount which is equal to

the amount by which offer is more

than 10 % below plus the amount as

per (i) above in the Envelop No.2

of tender. (For example, for 14%

below rate, 1% + (14%-10%) i.e.

4%, then total 5% of the cost put

to tender.

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iii)The amount of performance

security shall be calculated on

rounding of contractors offer upto

two decimal places. The offer in

envelop No.2 without demand draft

or FDR or BG of appropriate

amount of performance security

shall be treated as invalid offer.

iv) Demand draft/BG/FDR shall be

drawn in the name of Executive

Engineer, Ghodazari Canal Division

Nagbhid.

v) Demand draft/BG/FDR/shall be

drawn from Nationalised or

scheduled banks.

vi) The BG/FDR shall be valid

upto one month after defect

liability period . Validity of

demand draft shall be minimum 3

months from the date of submission

of tender.

vii)Scanned copy of

BG/FDR/demand draft shall be

uploaded by the contractor at the

time of e-tendering.

viii)Contractor shall submit the

demand draft/FDR/BG in sealed

envelope in the office of the

Executive Engineer, Ghodazari Canal

Division Nagbhid within 5 working

days from the date of submission

of tender. Name of work and e-

tender number shall be written on

the envelope.

ix) On opening the tender, if

papers in Envelop No.1 don’t

fulfill the essential

qualification/ documents

requirements, the Executive

Engineer shall return the envelope

of Demand Draft/BG/FDR to concerned

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Contractor within 7 days from the

date of opening of tender.

x) The Executive Engineer shall

refund the amount of performance

security after completion of work

successfully.

xi) Demand draft BG/FDR of the

second lowest tender shall be

returned within 3 days after

issuing works order to the lowest

tender.

xii)EMD of the contractors

submitting false documents/demand

draft/BG/FDR in above process shall

be forfeited and the contractor

shall be Black listed.

xiii)Executive Engineer shall

issue the work order only after

encashing the demand draft of the

lowest tenderer.”

“Important Note”

“If any of the documents required as per

Technical-Envelope-1 is not submitted on-

line or/and Financial Bid: in Envelope-II

(Commercial) is not properly uploaded,

or/and information given in various

Undertakings, Proform’s, Forms, Formats,

Appendices etc, in various Sections-II,

III, IV, VI is missing,

incomplete/misleading/false tender of the

bidder shall be liable for out-right

rejection and shall not be considered for

further process.”

Clause 2.35 speaks of “Acceptance of Tender” as follows:-

“2.35 x x x

2.35.1 A substantially responsive Bid is

one which conforms to all the terms,

conditions, and specifications of the

Bidding documents, without material

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deviation or reservation. A material

deviation or reservation is one (a) which

affects in any substantial way the scope,

quality, or performance of the Works, (b)

which limits in any substantial way,

inconsistent with the Bidding documents,

the employer’s rights or the Bidder’s

obligations under the Contract ; or (c)

whose rectification would affect unfairly

the competitive position of other Bidders

presenting substantially responsive Bids.

2.35.2 If a Bid is not substantially

responsive, it will be rejected by the

Employer, and may not subsequently be made

responsive by correction or withdrawal of

the non-conforming deviation or

reservation.”

3) On the facts in this case, it is undisputed that the bank

guarantee that was furnished for Rs. 42.14 lakhs by Respondent

No. 2 before us was initially furnished only for a period of

six months on 12.03.2018, in response to the tender. It is

common ground between the parties that the period ought to have

been 40 (forty) months. The bids were opened on 06.04.2018, and

on 07.04.2018, one day later, Respondent No. 2, sought to make

up this deficiency by adding a period of 34 months to the bank

guarantee which was valid for 6 months only. The aforesaid bid

made by Respondent No. 2 was accepted initially on 03.05.2018.

A Tender Evaluation Committee then evaluated all the bids on

07.07.2018, and finally, the bid of the Respondent No. 2 was

accepted as it was the lowest bidder among the three bids that

had been received. The bone of contention between the parties

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is whether it is possible for the appellant before us to

condone the initial bank guarantee being given for an

admittedly incorrect period of 6 months.

4) Mr. Shekhar Naphade, learned senior counsel appearing on

behalf of the appellant, has taken us through the Government

Resolution (GR) dated 12.4.2017 in order to contend that the

term of bank guarantee, if originally wrongly given, and which

makes a tenderer ineligible, does not disqualify him as a

clarification can be sought from the bidder after which the

term may be extended in conformity with the tender conditions.

Apart from the above, he argued that, ultimately, the moment

the deficiency was pointed out, this deficiency was made good

by Respondent No. 2 and it is only thereafter that the bid of

the Respondent No. 2 was accepted, being the lowest bid. He

also added that the difference between the bid of Respondent

No. 1 and Respondent No. 2 would amount to roughly Rs. 37 lakhs

which again would be a saving to the public exchequer. He went

on to add that given the parameters of judicial review and that

a bona fide decision has been taken by the authority, this

could not have been interfered with and was wrongly interfered

with by the judgment under appeal. Mr. Raju Ramachandran,

learned senior counsel appearing on behalf of Respondent No. 2,

broadly adopted these submissions.

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5) Mr. R. Basant, learned senior counsel appearing on behalf

of Respondent No. 1 has taken us through the tender conditions

and has argued that a period of six months for a bank

guarantee, which admittedly should have been 40 months, is a

material deviation which cannot be condoned later. He further

pointed out that in point of fact, objections were taken at a

pre-tender stage by certain would be tenderers, and after

considering those objections, the authority made it clear that

the PWD Circular dated 12.02.2016, together with corrigenda

issued thereafter, would make it clear that this is a material

condition which cannot be changed. He, therefore, argued that

it was known to the Respondent No. 2, right from the beginning,

that this particular condition was both material and has to be

satisfied, and, admittedly, on the facts, it was not satisfied.

He very fairly stated that the impugned judgment could not

stand on its own legs but could be supported with the arguments

that had been made by him.

6) At this stage, it is important to analyse the tender

conditions. As was correctly pointed out by Mr. Basant, Clause

2.15, as set out hereinabove, makes it clear that it is only at

a pre-tender stage that a clarification may be obtained

regarding tender conditions. Sub-clause 4 of Clause 2.15 is

important because all tenderers are cautioned by this Clause

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that tenders containing any deviation from the contractual

terms and conditions, specifications or other requirements,

will be rejected as non-responsive.

7) At this stage, it is important to advert to the pre-tender

meetings that took place between the Chief Engineer and

prospective parties on 30.01.2018. Entry 46 of the document

that is produced by the appellant reads as follows:-

S.No. Provisions of

Tender

Modification/clarifications

sought by contractor

Modification/

Clarification sought by

the Department

46 2.22 Performance

Security:

vi) The

B.G./F.D.R.

shall be valid

upto one month

after defect

liability

period.

2.22 Performance Security:

The B.G./F.D.R’s validity

is upto 3 months at the

time of tender submission

&if work is awarded this

B.G./F.D.R’s validity

extended according to the

tender condition. It

should be taken after the

award of work as general

procedure in other

departments.

The clause of performance

security is included

based on G.R. dt.

12.02.2016 &Corrigendum

on date 17.03.2016 and

14.07.2016. As policy

decision, modification in

this Clause cannot be

made.

What is important to note is that questions were raised as to

the period of bank guarantee, and the Department specifically

relied upon a GR dated 12.02.2016, together with the corrigenda

thereto, and stated that as a policy decision, modification in

this Clause cannot be made. It is clear, therefore, that a

modification to this very tender condition was suggested at the

pre-tender stage, and was rejected to the knowledge of all

prospective tenderers. Sub-clause 4 of Clause 2.15, therefore,

becomes important in this context as the Respondent No. 2 was

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put on notice from the beginning itself that if there is any

deviation in terms of the period of bank guarantee, its bid

would be treated as non-responsive.

8) Clause 2.22, extracted herein above, also makes reference

to the self-same PWD Circular dated 12.02.2016 with the

corrigenda. A reading of this Clause would also show that a

bank guarantee that is to be furnished has to be valid up to

one month after the defect liability period which, admittedly,

is for a period of 40 months.

9) Mr. Naphade’s argument that had a demand draft been drawn

instead of a bank guarantee, its validity would only be a

minimum of three months from the date of submission of tender,

which would show that a deviation from the 40 months period

would certainly be permissible, (had a demand draft given

instead of a bank guarantee), cannot be countenanced. On the

facts of this case, no demand draft was given. Only a bank

guarantee was given, and clearly for a much lesser period then

that mandated by this Clause.

10)We may now come to Clause 2.35 which makes it clear that a

substantially responsive bid is one which conforms to all

terms, conditions and specifications without any material

deviation. Inter alia, a material deviation is one which

limits, in any substantial way, or is inconsistent with the

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bidding documents or the employer’s rights or bidder's

obligations under the Contract. It cannot be gainsaid that a

bank guarantee, which is for a period of six months and not for

a period of 40 months, would not only be directly inconsistent

with the bidding documents but would also be contrary to the

employers’ right to a bank guarantee for a longer period. This

being the case, since a material deviation from the terms and

conditions of the tender document was made by Respondent No. 2,

when it furnished a bank guarantee for only six months

initially, it would be clear that such bid would have to be

considered as not substantially responsive and ought to have

been rejected by the employer. Clause 2.35.2 also makes it

clear that such a bid would have to be rejected outrightly and

may not be subsequently made responsive by correction.

11)It is important to note that the Government Resolution

dated 12.04.2017, which applies to the PWD Department, has

superseded the PWD Circular dated 12.02.2016 and corrigenda

dated 17.03.2016 and 14.07.2016. However, so far as the tender

conditions of the tender in question are concerned, Clause 2.18

is material and is set out hereunder:-

“Earnest Money:

All tenderers shall pay entire E.M.D. & the

mode of payment is indicated as specified

at Sr. No. 4, 6, 4 of Section IV.

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As per GR PWD 12.04.2017 – E.M.D. shall be

paid online through bank account of own by

contracts, contractor shall submit the

undertaking that the EMD has been paid

through his bank account and he will be

responsible for any legal action under IPC

if it is found false.”

As against this, when it comes to performance security, the PWD

Circular of 12.02.2016 and its corrigeneda have alone to be

followed in the case of performance security. This being the

case, it is not possible to advert to the GR dated 12.04.2017

for the purpose of performance security as it applies only in

respect of earnest money, as is clear from Clause 2.18 of the

Tender.

12)The fact that a superseded Government Resolution continues

to be utilised for the purpose of performance security may

raise eyebrows. However, insofar as the tendering public is

concerned, they have been put on notice that the performance

security that is to be furnished, will only be as per the GR

dated 12.2.2016 and corrigenda and not as per the GR dated

12.04.2017.

13)The law on the subject is well settled. In Bakshi Security

and Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt.

Ltd. and Ors., (2016) 8 SCC 446, this Court held:

“14. The law is settled that an essential

condition of a tender has to be strictly

complied with. In Poddar Steel Corpn. v.

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Ganesh Engg. Works [Poddar Steel Corpn. v.

Ganesh Engg. Works, (1991) 3 SCC 273] this

Court held as under: (SCC p. 276, para 6)

“6. … The requirements in a tender

notice can be classified into two

categories—those which lay down the

essential conditions of eligibility

and the others which are merely

ancillary or subsidiary with the

main object to be achieved by the

condition. In the first case the

authority issuing the tender may be

required to enforce them rigidly.

In the other cases it must be open

to the authority to deviate from

and not to insist upon the strict

literal compliance of the condition

in appropriate cases.”

15. Similarly in B.S.N. Joshi & Sons Ltd.

v. Nair Coal Services Ltd. [B.S.N. Joshi &

Sons Ltd. v. Nair Coal Services Ltd.,

(2006) 11 SCC 548] this Court held as

under: (SCC pp. 571-72, para 66)

“(i) if there are essential

conditions, the same must be

adhered to;

(ii) if there is no power of

general relaxation, ordinarily the

same shall not be exercised and the

principle of strict compliance

would be applied where it is

possible for all the parties to

comply with all such conditions

fully;

(iii) if, however, a deviation is

made in relation to all the parties

in regard to any of such

conditions, ordinarily again a

power of relaxation may be held to

be existing;

(iv) the parties who have taken the

benefit of such relaxation should

not ordinarily be allowed to take a

different stand in relation to

compliance with another part of

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tender contract, particularly when

he was also not in a position to

comply with all the conditions of

tender fully, unless the court

otherwise finds relaxation of a

condition which being essential in

nature could not be relaxed and

thus the same was wholly illegal

and without jurisdiction;

(v) when a decision is taken by the

appropriate authority upon due

consideration of the tender

document submitted by all the

tenderers on their own merits and

if it is ultimately found that

successful bidders had in fact

substantially complied with the

purport and object for which

essential conditions were laid

down, the same may not ordinarily

be interfered with;…”

16. We also agree with the contention of

Shri Raval that the writ jurisdiction

cannot be utilised to make a fresh bargain

between parties.”

14)However, learned counsel appearing on behalf of the

appellant strongly relied upon Afcons Infrastructure Ltd. v.

Nagpur Metro Rail Corpn. Ltd. , (2016) 16 SCC 818, and

paragraphs 14 and 15 in particular, which state:

“14. We must reiterate the words of

caution that this Court has stated right

from the time when Ramana Dayaram Shetty

v. International Airport Authority of

India [Ramana Dayaram Shetty v.

International Airport Authority of India,

(1979) 3 SCC 489] was decided almost 40

years ago, namely, that the words used in

the tender documents cannot be ignored or

treated as redundant or superfluous — they

must be given meaning and their necessary

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significance. In this context, the use of

the word “metro” in Clause 4.2(a) of

Section III of the bid documents and its

connotation in ordinary parlance cannot be

overlooked.

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)It is clear even on a reading of this judgment that the

words used in the tender document cannot be ignored or treated

as redundant or superfluous – they must be given meaning and

their necessary significance. Given the fact that in the

present case, an essential tender condition which had to be

strictly complied with was not so complied with, the appellant

would have no power to condone lack of such strict compliance.

Any such condonation, as has been done in the present case,

would amount to perversity in the understanding or appreciation

of the terms of the tender conditions, which must be interfered

with by a constitutional court.

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16)A subsidiary contention has been raised that even the bank

guarantee subsequently furnished was for a period of 39 months

and not for 40 months. This need not be gone into in view of

our finding on the first point.

17)We may hasten to add that the judgment under appeal leaves

a great deal to be desired. It did not advert to the main point

in question, but instead focused on supposed contradictions

made in an affidavit filed by the appellant in the High Court.

Having gone through the affidavit, we find no such

contradiction. It is also necessary to advert to the final

relief given by the High Court. If, for the reason given by the

High Court, the bid of the Respondent No. 2 had to be rejected,

it cannot be understood as to how Respondent No. 2 can be

brought back in the event that Respondent No. 1 does not agree

to carry out the work for the lower bid amount of Respondent

No. 2. For all these reasons, even though the reasoning of the

Division Bench in the impugned judgment does not commend itself

to us, yet, for the reasons contained in this judgment, the

appeal will have to be dismissed.

18)We may record that Mr. Basant very fairly submitted before

us that he will match the amount of Rs. 39.15 crores that was

the bid of Respondent No. 2 before us. We record this statement

and order, therefore, that the work now be performed by the

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Respondent No. 1 at this bid amount. The judgment of the High

Court, insofar as para 8 is concerned, is set aside.

19)With these observations, the civil appeals are disposed

of.

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

(R.F. Nariman)

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

(Navin Sinha)

New Delhi,

Dated: January 23, 2019

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