Tender: Tender contracts – e-public tender floated by respondent no. 1 for setting up call centres – Declaration to be made in terms of clause 20(ii), if the bidder had been banned or black listed or delisted or holiday listed – Issuance of show cause notice to the appellant, one of the bidder, for blacklisting on allegation of furnishing false information and bid documents in respect of another tender – Notice was issued after floating of the tender by respondent no. 1 but before submission of the bid – Appellant declared L-1 and awarded letter of acceptance – Respondent No.3 declared L-2 - Writ petition by Respondent No.3 challenging declaration of appellant as L-1 – Subsequently, purchase order issued in favour of appellant – However, next day itself, order passed blacklisting and debarring the appellant from participating in any tender process for two years – Respondent No.3 having become aware of the factum of blacklisting of the appellant amended the petition to incorporate the said fact – Writ Petition allowed by the High Court – Sustainability of – Held: Not sustainable – Impugned order misread the blacklisting clause – Show cause notice itself did not amount to the process of blacklisting having already been initiated – Appellant would not be disentitled to contract – As regards, the effect of the blacklisting order, the ban would have prospective effect, for future business dealings – It would have no application to the tender awarded – As regards, the business continuity certificate doubted by respondent no. 3, the High Court in the course of inquiry expressed its doubts over the certificate – Such a course of action was not permissible – Directions of the High Court to take appropriate decisions, really amounts to directing respondent no.1 to breach its contract with the appellant – No such direction ought to have been issued to compel a breach of the contract by the appellant. Constitution of India: Art. 226 – Writ proceedings under – Scrutiny of tenders – Permissibility – Held: Normally parties would be governed by their contracts and the tender terms, and no writ would be maintainable u/Art. 226 – In view of Government and Public Sector Enterprises venturing into economic activities, the Court found it appropriate to build in certain checks and balances of fairness in procedure – This approach has given rise to scrutiny of tenders in writ proceedings – Every small or big tender sought to be challenged, affects the efficacy of commercial activities of the public sectors, in competition with the private sector – Unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government and Public Sectors a cumbersome exercise – Promptness and efficiency levels in private contracts, often tend to make tenders of public sector a non-competitive exercise.
Deeds and documents: Tender – Interpretation of – Held: Author of the document is the best person to understand and appreciate its requirements – On, facts, view of respondent No.1company which floated the tender, must prevail – Respondent No.1 itself, appreciative of the wording of clause 20 and the format, took a considered view – Respondent No.3, one of the bidder cannot compel its own interpretation of the contract to be thrust on respondent No.1, or ask the court to compel respondent No.1 to accept that interpretation – It is possible that the author of the tender may give an interpretation that is not acceptable to the court, but that itself would not be a reason for interfering with the interpretation given.
Allowing the appeal, the Court
HELD: 1.1 Both the aspects-the interpretation of clause
20 read with the format, as well as with the effect of the show cause notice is concurred with. Clause 20 does provide for four eventualities. The instant case is not one where on the date of submission of the tender the appellant had been banned, blacklisted or put on holiday list. The declaration to be given by the bidder is specified in clause 20(ii), which deals with the first three aspects. The format enclosed with the tender documents also refers only to these three eventualities. It is not a case where no specific format is provided, where possibly it could have been contended that the disclosure has to be in respect of all the four aspects. The format having been provided, if initiation of blacklisting was to be specified, then that ought to have been included in the format. It cannot be said that the undertaking by the appellant made it the bounden duty of the appellant to disclose the aspect of a show cause notice for blacklisting. It is said so as there is a specific clause with the specific format provided for, requiring disclosures, as per the same. [Paras 20, 21][963-G-H; 964-A-C]
1.2 It may be possible to contend that the format is not correctly made. But then, that is the problem of the framing of the format by respondent No.1. It appears that respondent No.1 also, faced with the factual situation, took a considered view that since clause 20(i) provided for the four eventualities, while the format did not provide for it, the appellant could not be penalised. May be, for future the format would require an appropriate modification. [Para 22][964-D-E]
1.3 In the undertaking submitted by the appellant all it is stated is that the information furnished in the bid and attachments are true to the best of the knowledge and belief of the bidder. In case any false or incorrect information is submitted, the bid can be rejected. It cannot be said that there is any false information given by the appellant as to violate the stated condition 4 of clause 20(i). Another angle of the same issue, i.e., the integrity pact provided for in clause 20(iii) with the format thereof, a detailed one. The integrity pack provided that the “parties shall make certain commitments to each other in regard to ensuring transparency and fair dealing in the procurement activities of the Corporation.” The duly signed integrity pact is an essential condition for a valid bid. This clause, thus, deals with the transparency and fair dealing of the activities carried out under the tender were it to be awarded insofar as the procurement activities are concerned. Once again, this would not have any relevance to the stated fourth part of clause 20(i). [Para 23] [964-E-H]
1.4 Blacklisting has very serious consequences. A show cause notice may result in blacklisting or may not result in blacklisting. The mere show cause notice being issued, to visit such a severe consequence on a bidder, may be difficult to sustain. [Para 24][965-A-B]
1.5 The case of the appellant is further fortified by even the language used in the show cause notice. The show cause notice itself, in the last paragraph, calls upon the appellant to show cause as to why suitable action for blacklisting “should not be initiated.” Pursuant to the response of the appellant, the next stage would have been the initiation of the blacklisting process, if the explanation was not found satisfactory. The term used in the blacklisting clause 20(i), on the other hand, talks about a situation where blacklisting has already been initiated. Plain English words used must be given their ordinary grammatical meaning. It cannot be said that the show cause notice dated 5.12.2017 itself amounted to the process of blacklisting having already been initiated. On both these accounts it cannot be said that the appellant would be disentitled to the contract. Insofar as the effect of the blacklisting order dated 22.2.2018 is concerned, in the eventuality of respondent No.1 considering it proper to initiate certain action, that would have to be in terms of the guidelines for blacklisting of HPCL. The guidelines itself show that the ban would have prospective effect, for future business dealings. Thus, the same would have no application to the tender awarded. [Paras 25-28][965-B-F]
1.6 Clause 8, dealing with business continuity, requires the successful bidder to submit the transition plan to migrate to new platform and facility with zero disruption of services, with respect to four aspects provided. In terms of clause 10(g), valid ISO Certificate for security and for business continuity have to be provided. It is not in question that the appellant did submit a certificate of business continuity, as obtained from respondent No.2. Respondent No.3 has sought to cast doubts on this business certificates, and the Division Bench, in terms of the impugned order, also embarked on a course of inquiry into this certificate by calling upon parties to file their affidavits and has thereafter taken a call to express its own doubts over the certificate. Such a course of action was not permissible. [Paras 29-30][964-G-H; 966-A-B]
1.7 There are serious disputes relating to the allegations made by respondent No.3, which are rebutted by the appellant. Opportunity had to be afforded to cross-examine the deponents who had filed affidavits. This would really not be possible in writ proceedings and could have only been determined in suit proceedings. There cannot always be a shortcut, through a process of writ proceedings under Article 226 of the Constitution of India, when such disputes exist. [Para 31] [966-C-D]
1.8 If respondent No.1 itself had doubts on the certificate, that would have been another matter. This is not so as is apparent from the affidavit filed by respondent No.1. In any case, this aspect ought to have been left to the wisdom of respondent No.1, rather than the Court embarking on the course of action it followed, as if it was sitting in appeal over a decision of respondent No.1. If respondent No.1 itself has any doubts on these certificates, nothing prevented, nor still prevents respondent No.1 from looking into this aspect. [Para 32] [966-E-F]
1.9 The contention of the counsel for respondent No.3 that the interim order dated 7.1.2019 mandated respondent No.1 to enquire into all these aspects, in pursuance of the directions contained in the impugned order cannot be accepted. All that was observed was that respondent No.1 “may” take a decision, but the interdict was against implementing it. Respondent No.1 in its wisdom, as submitted has chosen not to proceed further, after issuance of notice to the appellant and has decided to await the decision of this Court. It was not really within the domain of the High Court to have issued the direction, as it sought to do. The operative directions of the High Court to take appropriate decisions, in the conspectus of the observations made, really amounts to directing respondent No.1 to breach its contract with the appellant. No such direction ought to have been issued to compel a breach of the contract by the appellant. Thus, the impugned order cannot be sustained even on this ground. [Paras 33-35][966-G-H; 967-A-C]
1.10 Normally parties would be governed by their contracts and the tender terms, and really no writ would be maintainable under Article 226 of the Constitution. In view of Government and Public Sector Enterprises venturing into economic activities, this Court found it appropriate to build in certain checks and balances of fairness in procedure. It is this approach which has given rise to scrutiny of tenders in writ proceedings under Article 226 of the Constitution. It, however, appears that the window has been opened too wide as almost every small or big tender is now sought to be challenged in writ proceedings almost as a matter of routine. This in turn, affects the efficacy of commercial activities of the public sectors, which may be in competition with the private sector. This could hardly have been the objective in mind. An unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government and Public Sectors a cumbersome exercise, with long drawn out litigation at the threshold. The private sector is competing often in the same field. Promptness and efficiency levels in private contracts, thus, often tend to make the tenders of the public sector a non-competitive exercise. This works to a great disadvantage to the Government and the Public Sector. [Para 36][967-D-H]
1.11 The author of the document is the best person to understand and appreciate its requirements. In the facts of the instant case, the view, on interpreting the tender documents, of respondent No.1 must prevail. Respondent No.1 itself, appreciative of the wording of clause 20 and the format, has taken a considered view. Respondent No.3 cannot compel its own interpretation of the contract to be thrust on respondent No.1, or ask the Court to compel respondent No.1 to accept that interpretation. It is possible that the author of the tender may give an interpretation that is not acceptable to the Constitutional Court, but that itself would not be a reason for interfering with the interpretation given. The endeavours of courts to give their own interpretation to contracts, more specifically tender terms, at the behest of a third party competing for the tender, rather than what is propounded by the party framing the tender is emphasised. The object cannot be that in every contract, where some parties would lose out, they should get the opportunity to somehow pick holes, to disqualify the successful parties, on grounds on which even the party floating the tender finds no merit. The observations made should be understood in the larger context, so as to avoid situations similar to the one found in the impugned order. [Paras 38, 42-43][968-C-E; 971-A-B] Roshina T v. Abdul Azeez K.T. & Ors. (2019) 2 SCC 329; Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr. (2016) 16 SCC 818 : [2016] 3 SCR 551 ; Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) & Anr. (2018) 11 SCC 508; Satya Jain (Dead) Through LRs. and Ors. v. Anis Ahmed Rushdie (Dead) Through LRs. & Ors. (2013) 8 SCC 131 : [2013] 3 SCR 319 – referred to.
Attorney General of Belize v. Belize Telecom Ltd. (2009) 1 WLR 1988 (PC) ; Moorcock (1889) LR 14 PD 64 (CA) – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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