Tenders – Agreement between the appellant and the respondent for widening the existing two-la ne portion of National Highway No.75 to four lanes – Appellant alleged breaches on part of the respondent – Arbitral Tribunal constituted – Appellant moved application u/s.17 of the 1996 Act before the Tribunal seeking permission to complete the balance work of the project in view of loss to the public at large – Respondent also filed application u/s.17 – Arbitral Tribunal disposed of the applications by common interim order dtd. 23rd July 2016 – Appellant issued a tender for the balance work – In consonance with the tender documents, technical and financial bids were opened – Respondent moved application before the Tribunal u/s.17, seeking, inter alia, permission of the Tribunal to complete the balance work at its risk and cost– Tribunal allowed the application – Appeal filed by appellant before the High Court, dismissed – Plea of appellant that the respondent cannot be permitted to exercise Right Of First Refusal (ROFR) without participating in the bidding process – On appeal, held: Right of the respondent to match the bid of L-1 or to exercise ROFR would come into play only if the respondent was to participate in the tender process pursuant to the notice inviting tenders from the interested parties – Respondent was required to participate in the tender process by submitting its sealed bid (technical and financial) – Having failed to participate in the tender process, despite the express terms in the tender documents, validity whereof was not challenged, the respondent cannot be heard to contend that it had acquired any right whatsoever – There was nothing in the application (filed by the respondent u/s.17) to even remotely suggest that the respondent had prayed that it be exempted from participating in the proposed tender process as such, and could yet exercise ROFR before the letter of intent was to be issued to the lowest bidder – Exemption in this regard cannot be inferred and has to be express – No express exemption was granted to the respondent vide order of the Tribunal dtd. 23rd July, 2016 to exercise ROFR or match the lowest bid without participating in the bidding process – Decision of the Tribunal as confirmed by the High Court cannot be countenanced – Arbitration and Conciliation Act, 1996 – ss.9, 17 and 37(2)(b).
Allowing the appeal, the Court
HELD: 1.1 By the terms and conditions in the tender documents, the right of the respondent to match the bid of L-1 or to exercise ROFR would come into play only if the respondent was to participate in the tender process pursuant to the notice inviting tenders from the interested parties. The objective of tender process is not only to adhere to a transparent mechanism but to encourage competition and give equal opportunity to all tenderers with the end result of getting a fair offer or value for money. The plain wording of the eligibility clause in the tender documents and the incidental stipulations make it explicit that the respondent was required to participate in the tender process by submitting its sealed bid (technical and financial). The fact that a deeming clause has been provided in the tender document that if the respondent was to participate in the bidding process, it shall be deemed to fulfill all the requirements of the tender clauses
3 to 6 of the RFP, being the existing concessionaire of the Project, does not exempt the respondent from participating in the tender process; rather the tenor of the terms of the documents made it obligatory for the respondent to participate in the tender process to be considered as a responsive bidder, along with others. Having failed to participate in the tender process and, more so, despite the express terms in the tender documents, validity whereof has not been challenged, the respondent cannot be heard to contend that it had acquired any right whatsoever. Only the entities who participate in the tender process pursuant to a tender notice can be allowed to make grievances about the non-fulfillment or breach of any of the terms and conditions of the concerned tender documents. The respondent who chose to stay away from the tender process, cannot be heard to whittle down, in any manner, the rights of the eligible bidders who had participated in the tender process on the basis of the written and express terms and conditions. At the culmination of the tender process, if the respondent had not participated, in law, the offer submitted by the eligible bidders is required to be considered on the basis of the stated terms and conditions. Thus, if the claim of the respondent was to be strictly adjudged on the basis of the terms and conditions specified in the subject tender document, the respondent has no case whatsoever. [Para 18] [1046-C-H; 1047A]
1.2 There is nothing in the entire application (filed by the respondent under Section 17 of the Arbitration and Conciliation Act, 1996) to even remotely suggest that the respondent had prayed that it be exempted from participating in the proposed tender process as such, and could yet exercise ROFR before the letter of intent was to be issued to the lowest bidder. The exemption in this regard cannot be inferred. It has to be an express exemption sought and so granted and disclosed in the tender documents. Such exemption ought to have been prayed and expressly granted by the Court. In absence of such express exemption, the respondent was obliged to comply with the terms and conditions of the tender documents publicly notified by the appellant as per its understanding of the order of the High Court. Having failed to participate in the bidding process in consonance with such notified terms and conditions, the respondent lost the opportunity granted under the order dated 23rd July, 2016 to match the lowest bid or to exercise ROFR. Any other view would fall foul of the fundamental policy of the Indian law and cannot be countenanced. [Para 19] [1047-C-G]
1.3 It is not the case of the respondent that an express exemption has been granted to the respondent, from participating in the bidding process. In the matter of tender process, there can be no tacit or implied exemption from participating. In the first place, whether such direction can be issued by the Arbitral Tribunal under Section 17 of the Act itself is debatable. However, since the order dated 23rd July, 2016 has remained unchallenged, one does not wish to dilate on that aspect. Indeed, the appellant accepted the order with a sanguine hope that a proper tender process can be resorted to, wherein the respondent would also participate, for awarding the contract of unfinished and balance works of the subject Project. For effectuating that order, tender documents were issued by the appellant on 28th November, 2016 which, as aforesaid, explicitly stipulated that the respondent was expected to submit its bid within the specified time. Admittedly, the fact that tender notice was issued, came to be disclosed before the Arbitral Tribunal on 10th December, 2016. Surprisingly, the respondent neither took any clue nor bothered to follow up the tender documents which were placed in public domain (as is done in respect of any other tender process). Further, the respondent waited till the opening of technical bids on 5th January, 2017 and financial bids on 29 th March, 2017 and rushed to the Arbitral Tribunal by way of an application under Section 17 of the Act, only on 25th April, 2017 stating that on the previous day, it had come to its notice that the appellant was likely to issue letter of intent to the lowest bidder, without giving opportunity to the respondent to match the lowest bid or exercise ROFR. To oppose the said application, the appellant in the reply affidavit had asserted that the respondent was fully aware about the terms and conditions of the tender documents and yet chose not to participate in the bidding process. The respondent did not think it necessary to counter the said assertion by filing any rejoinder thereto. Notwithstanding that, the Arbitral Tribunal was impressed by the plea taken by the respondent and allowed the application of the respondent vide order dated 24th May, 2017. The Arbitral Tribunal was more impressed by the fact that the respondent had completed substantial works of the Project and it would be just and proper to allow the respondent to complete the balance work. The Arbitral Tribunal made no effort to ascertain as to whether the order dated 23rd July, 2016 was a blanket and unconditional order entitling the respondent to straightaway exercise ROFR without participating in the bidding process. The Arbitral Tribunal merely adverted to the objection of the appellant and rejected the same on the finding that involvement of a third party in the Project would create serious problems. It took the view that giving option to the respondent to match the lowest bid and to complete the balance work, with a condition to periodically submit the progress report to the Arbitral Tribunal for monitoring whether the balance work was successfully completed to the satisfaction of the NHAI, would be a proper and equitable arrangement. This approach is not in conformity with the fundamental policy of Indian law. [Para 20] [1047-G-H; 1048-A-H; 1049-A]
1.4 The approach of the High Court in the appeal preferred by the appellant was no different. The High Court did not find any error, much less manifest error, in the view taken by the Arbitral Tribunal. Further, the High Court was more eager to know as to what prejudice would be caused to the appellant if the respondent had not participated in the bidding process. This query of the High Court is begging the question. For, that cannot be the primary basis to answer the relief claimed by the respondent in the application under Section 17 of the Act. An entity who stays away from the bidding process and fails to comply with the express terms and conditions of the tender documents cannot claim any right to match the lowest bid or exercise ROFR. Only a responsive bidder could do so. The High Court overlooked the fact that the appellant is a body corporate under the 1988 Act. It has to act in a just and fair manner in the matter of allocation of contract albeit the balance and unfinished work of the Project. No express exemption has been granted to the respondent vide order of the Arbitral Tribunal dated 23rd July, 2016 – to exercise ROFR or match the lowest bid without participating in the bidding process. The respondent had the option to participate in the bidding process which was not availed of for reasons best known to the respondent. The High Court also overlooked the fact that the tender process was not an empty formality and with the initiation of the same, third parties, who participated in the bidding process, were likely to be prejudiced by allowing the respondent to match the lowest bid or exercise ROFR, without participating in the bidding process despite the express stipulation in that behalf in the tender documents. The High Court committed the same error as committed by the Arbitral Tribunal in not examining the core issues for grant or non-grant of the relief to the respondent, in conformity with the fundamental policy of Indian law. [Para 21] [1049-B-G]
1.5 The decision of the Arbitral Tribunal as confirmed by the High Court, falls foul of the fundamental policy of Indian law and cannot be countenanced. [Para 24] [1051-A] M/s. Raj West Power Limited & Anr. vs. Rajasthan Electricity Regulatory Commission & Ors. 2013 SCC Online APTEL 46 – held inapplicable.
VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd. & Anr. vs. Union of India & Ors. 2010 SCC Online Del 2687 – 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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