REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3588 OF 2019 [Arising out of SLP(C) No.46 of 2019]

CARETEL INFOTECH LTD. ….APPELLANT

Versus

HINDUSTAN PETROLEUM CORPORATION LIMITED & ORS. ….RESPONDENTS

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. Leave granted.

2. Hindustan  Petroleum  Corporation  Limited  (respondent  No.1)

floated an e-public tender on 4.12.2017 for  setting up call  centres for

receiving,  recording  and  replying  to  information  enquiries  and

complaints  from  LPG  customers  of  IOC/HPC/BPC.   The  appellant

participated in the tender.  Clause 20 of the tender reads as under: 1

“20. Black List/Ban/Holiday List

i.  Bids  received  from  parties  who  have  been banned/blacklisted/put on holiday list  or  parties in respect  of whom the action for blacklisting and holiday listing has been initiated  by  HPCL/any  Government/Quasi  Government Agencies or PSUs, shall not be considered for either evaluation or for award of work.  Offer of Vendor who has not submitted declaration on black listed or holiday listed shall be considered as non-responsive and offer shall be rejected.

ii.  The bidder shall  give a written declaration indicating that they are not on holiday list/banned/blacklisted as on due date of this tender.”

3. The appellant  was  issued  a  show cause  notice  on 5.12.2017 in

respect  of  another  tender,  i.e.,  after  floating  of  the  tender,  but  before

submitting of the bid, for blacklisting on the allegation of furnishing false

information  and  bid  documents,  submitted  for  providing  Kisan  Call

Centre  Services  to  the  Department  of  Agriculture,  Cooperation  &

Farmers  Welfare,  Ministry  of  Agriculture  &  Farmers  Welfare,

Government of India.

4. The show cause notice alleged that on questions being raised about

the  correctness  of  information  furnished  by  the  appellant  in  the  bid

documents  regarding running of  call  centres  at  different  locations,  an

inquiry was made through officers and despite further information being

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sought, the same was not forthcoming.  The operative portion of the show

cause notice reads as under:

“Accordingly,  in  the  above circumstances  a  situation  has, prima  facie,  emerged  that  M/s  Caretel  Infotech  Pvt.  Ltd.  has endeavoured  to  procure  the  above  tender  by  providing  false, misleading  and  wrong  information.   Therefore,  the  Department hereby  issues  notice  to  M/s  Caretel  Infotech  Pvt.  Ltd.  to  show cause  as  to  why  suitable  action  for  blacklisting  the  firm  (M/s. Caretel  Infotech  Pvt.  Ltd.)  should  not  be  initiated.   You  are requested to clarify your position within 7 (seven) days from the date of issue of this letter.  Response received after expiry of the provided time limit will not be entertained.”

(emphasis supplied)

5. The  appellant  submitted  the  bid  in  respect  of  the  e-tender  on

19.12.2017.  In terms of clause 20 extracted aforesaid, a format had been

provided for the declaration to be made, which is as under:

“DECLARATION NON BLACKLISTED/NON BANNED/NON HOLIDAY LISTED PARTY

WE CONFIRM THAT WE HAVE NOT BEEN BANNED OR BLACK  LISTED  OR  DELISTED  OR  HOLIDAY LISTED BY  ANY  GOVERNMENT  OR  QUASI  GOVERNMENT AGENCIES OR PUBLIC SECTOR UNDERTAKINGS

Date: __________ Name of Tenderer: _____________

Place: _________ Signature & Seal of Tenderer : _____________

Note:  If  a  bidder has  been  banned by any  Government  or Quasi Government Agencies or Public  Sector Undertakings,

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this fact must be clearly stated with details.  If this declaration is not given along with the UNPRICED Bid, the tender will be rejected as non-responsive.”

The appellant submitted the declaration in terms aforesaid,

i.e.,  stating  that  the  appellant  had  not  been  blacklisted  by  any

Government  or  Quasi  Government  Agency  or  Public  Sector

Undertakings.

6. The appellant  also submitted an undertaking,  once again,  in the

prescribed form.  The format of undertaking is as under:

“ON LETTER HEAD

Undertaking by the bidder

I/we hereby undertake that the entire information furnished/given to  you  in  our  bid  and  attachments  are  true  to  the  best  of  our knowledge and belief and nothing therein is false.

I/We further undertake, that if it is found during the tender stage (before accepting our bid/placement of Purchase Order by HPCL) that  any  information  or  document  furnished/submitted  by  us  is false or incorrect, then we agree that HPCL shall be free to reject our tender/bid.  If the same is found to be false or incorrect during any stage after accepting of our bid/placement of Purchase Order, then HPCL shall have the right to summarily cancel our tender and procure the balance  quantity  from any alternate  source.   HPCL shall have the right to recover the differential amount between the rates of our contract and the rates at which HPCL is compelled to procure from the alternate source, if the latter rate is higher.  To

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this effect, the recovery can be made by HPCL by encashing any bank guarantee that we may have submitted or from any pending bills under this contract or any other contract with HPCL.  Further HPCL shall be at liberty to take any appropriate action as deemed fit in such an eventuality.

I/we  further  undertake  as  and  when  called  upon  by  Hindustan Petroleum  Corporation  Limited,  to  produce,  for  its  inspection, original(s) of the document(s) of which copies have been annexed hereto.

Date: __________ Name of Bidder: _____________

Place: _________ Signature & Seal of Bidder : _____________”

7. Respondent  No.1 evaluated the technical  and financial  bids and

declared the appellant as L-1 and respondent No.3 as L-2 on 16.1.2018.

The letter of acceptance of the tender awarded to the appellant was issued

on 12.2.2018 for a value of Rs.791 lakh basic for services to be rendered

for a period of two years.

8. Respondent No.3 filed a writ petition in the Bombay High Court

on  17.2.2018,  assailing  the  declaration  of  the  appellant  as  L-1.   The

purchase order in favour of the appellant confirming the terms of contract

and  mode  of  payment  was  issued  on  21.2.2018.   One  day  later,  on

22.2.2018, the Ministry of Agriculture and Farmers Welfare passed an

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order blacklisting and debarring the appellant from participating in any

tender process of the Government of India, Ministry of Agriculture and

Farmers’ Welfare for two years with effect from the date of issue of the

order.  This order was assailed by the appellant by filing a writ petition

before  the  Delhi  High  Court,  which  was  pleased  to  issue  notice  on

9.3.2018,  and  we  are  informed  that  subsequently,  on  12.3.2019,  that

petition was dismissed and a Letters Patent Appeal filed against the same

is pending.

9. Respondent  No.3,  having  become  aware  of  the  factum  of

blacklisting of the appellant amended the petition to incorporate the said

fact.   The  writ  petition  was  allowed  by  the  impugned  order  of  the

Division Bench dated 21.12.2018.

10. The decision of the High Court is predicated on two facts – firstly

the non-disclosure of the factum of the show cause notice issued to the

appellant amounted to violation of the undertaking.  Linked to this issue

is that clause 20(iii) of the tender provided for an integrity pact “ensuring

transparency  and  fair  dealing”  and  that  integrity  pact  had  been  duly

signed and submitted by the appellant.   Secondly,  the Division Bench

doubted the compliance, by the appellant, of clause 8 read with clause

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10(g) of Section 4 of the tender.  This controversy pertains to the clause

dealing with the business continuity and the requirement of submitting a

valid ISO certificate for the purpose of securing the tender.  The relevant

clauses read as under: “8. Business Continuity

OMCs  currently  have  an  agreement  for  inbound  calls  with  a service provider based in different Regions.  The successful bidder has to submit the transition plan to migrate to new platform and facility  with  “ZERO”  disruption  of  services  with  respect  to following areas:

a) Toll-free services. b) IVRS based call handling. c) Diversion of call traffic at the successful bidder’s premises. d) Trained Operators at the time of Go-Live date.”

.... .... .... .... ....

“10. Other Mandatory Requirements:

xxxx xxxx xxxx xxxx xxxx

g) Valid ISO Certification 27001 for security and ISO 2301 for Business Continuity.”

It is not disputed that the certificate of registration submitted

by  the  appellant  was  issued  by  Elite  Certifications  Pvt.  Ltd.,

respondent  No.2.   However,  respondent  No.3  sought  to  throw

doubts  on  the  certificate  and  the  High  Court  found  reason  to

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believe  the  same  even  though  in  the  counter  affidavit  filed  by

respondent No.1 a stand was taken to the contrary.

11. On 7.1.2019, notice was issued on the present appeal filed against

the impugned order and an interim order was passed in the following

terms:

“In  the  meantime,  Respondent  No.1  (HPCL)  may  take  a decision but not implement it.  The petitioner may continue under the contract until further orders.”

The result of the same is that the appellant has continued to give

services  under  the  contract  now  for  almost  more  than  thirteen  (13)

months out of the contract for two years and respondent No.1, though is

stated  to  have  issued  a  notice  to  the  appellant  in  pursuance  of  the

directions  contained  in  the  impugned  order,  has  deemed  it  fit  not  to

proceed with the inquiry and to await the verdict in the present appeal.

12. We have heard Mr. Shyam Diwan, learned senior counsel for the

appellant, Mr. K.V. Vishwanathan, learned senior counsel for respondent

No.3 and Mr. Parijat Sinha, learned counsel for respondent No.1.  The

submissions  on  the  two aspects  advanced  by  learned  counsel  for  the

parties and our findings are recorded hereinafter.

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Blacklisting:

13. Mr.  Shyam  Diwan,  learned  senior  counsel  for  the  appellant

contends that  the impugned order misreads the blacklisting clause 20.

The submission was that undoubtedly, the appellant could not have been

categorised as a party who has been banned/blacklisted/put on holiday

list.   This  is  also in the context  of  the fact  that  such blacklisting has

severe consequences and the clause itself provided that non-submission

of  declaration  in  the  prescribed  format  would  make  the  bid  non-

responsive and the offer would be rejected.  In terms of clause 20(ii), the

written declaration had to be given as on the due date of the tender.  The

format in which this declaration was to be given was specified and was

not left to the own words of the bidder.  The format extracted aforesaid

clearly stated that such declaration was required to be furnished only if

the bidder had “been banned or black listed or delisted or holiday listed.”

That position was not prevalent on the date of submission of the bid, on

19.12.2017 as by that date only a show cause notice had been issued, on

5.12.2017.  The order of blacklisting was passed on 22.2.2018, after the

date of acceptance of the tender and placement of the purchase order on

the appellant, on 21.2.2018.

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14. In the aforesaid context, it is also contended that ‘Annexure 21’

lays  down  the  ‘Guidelines  for  Holiday  Listing  (Banning  of  Business

Dealing)’.  That occasion would arise if the tender awarding authority,

i.e., respondent No.1 would have initiated any process and as per clause

2.5, the banning was to be with prospective effect, i.e., for future business

dealings.  The contract in question, having already been placed on the

appellant,  there can be no question of retrospective blacklisting of the

appellant.

15. The second limb of the submission is based on clause 20(i) to the

extent  it  refers  to  “or  parties  in  respect  of  whom  the  action  for

blacklisting  and  holiday  listing  has  been  initiated  by  HPCL/any

Government/quasi Government agencies or PSUs.”  This clause, it was

submitted, had to be read with the wordings of the show cause notice.

Undisputedly, the format in which the information had to be furnished

only  provided  for  an  eventual  blacklisting  having  taken  place.   The

operative portion of  the show cause  notice,  extracted aforesaid,  states

“why suitable action for blacklisting the firm (M/s. Caretel Infotech Pvt.

Ltd.) should not be initiated.”1  The requirement of clause 20(i) was the

1 Emphasis supplied

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actual  initiation.   Thus,  it  was  pleaded that  blacklisting  had not  been

“initiated” by mere issuing of the show cause notice, as the notice was to

show cause as to why proceedings should not be initiated, i.e., a prior

stage.

16. On the other hand, Mr. Vishwanathan, learned senior counsel for

respondent No.3, contended that the format was prescribed in the context

of clause 20(ii), which was a case where blacklisting had already taken

place, as on the due date of the tender.  However, as per clause 20(i) there

were four eventualities: (a) banned; (b) blacklisted; (c) put on holiday

list; or (d) action for blacklisting or holiday listing had been initiated.  It

was his submission that the present case was one where blacklisting had

been, at least, initiated and, therefore, the appellant was duty bound to

make a disclosure of this fact along with his tender, not as per the format,

but in terms of the undertaking to be given by the bidder, which required

full  disclosure.   That  undertaking,  it  was submitted,  was breached,  as

held by the impugned order.

17. Learned counsel further contended that the plea sought to be raised

by the appellant, on the interpretation of clause 20(i), was not even the

case pleaded by the appellant in their challenge to the blacklisting order,

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in their writ petition, but what was pleaded there was only the absence of

an opportunity of hearing.

18. In  the  alternative,  learned  counsel  also  sought  to  contend  that

respondent  No.1  had not  complied  with  the  interim directions,  at  the

stage of issuing notice on 7.1.2019, and ought to have implemented the

impugned order and held an inquiry and that inquiry report ought to have

been placed before the Court.

19. On the other hand, learned counsel for respondent No.1 submitted

that respondent No.1 had, in its wisdom, stayed its hand after issuance of

notice in  pursuance to the impugned order  and preferred to  await  the

decision of this Court.

20. On careful consideration of the rival submissions, we are of the

view that  there  is  force  in  the  contention  of  learned  counsel  for  the

appellant.  We are, in fact, in agreement with both the aspects, i.e., the

interpretation of clause 20 read with the format, as well as with the effect

of the show cause notice.

21. It  is  no  doubt  true  that  clause  20  does  provide  for  four

eventualities, as submitted by learned counsel for respondent No.3.  The

present case is not one where on the date of submission of the tender the

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appellant  had  been  banned,  blacklisted  or  put  on  holiday  list.   The

question before us, thus, would be the effect of an action for blacklisting

and holiday listing being initiated.  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.  We say so as

there is a specific clause with the specific format provided for, requiring

disclosures, as per the same.

22. 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

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could not be penalised.  May be, for future the format would require an

appropriate modification!

23. If we refer to the undertaking submitted by the appellant all that it

states 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).  We may look at 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).

24. We  may  also  look  at  this  aspect  from  another  perspective.

Blacklisting has very serious consequences.  A show cause notice may

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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.

25. 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, an aspect

discussed in a little more detail hereinafter.

26.   Thus, it is difficult to accept the submission of learned counsel for

respondent  No.3  that  the  show  cause  notice  dated  5.12.2017  itself

amounted to the process of blacklisting having already been initiated.

27. On both these accounts it cannot be said that the appellant would

be disentitled to the contract.

28. Insofar as the effect of the blacklisting order dated 22.2.2018 is

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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.

Business Continuity Certificate:

29. The second reason which found favour with the High Court was

the  doubts  created  by  respondent  No.3  over  the  Business  Continuity

Certificate  filed  by  the  appellant.   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 hereinbefore.  In terms of clause

10(g), valid ISO Certificate 27001 for security and ISO 2301 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.

30. Respondent  No.3  has  sought  to  cast  doubts  on  this  business

certificates, and the Division Bench, in terms of the impugned order, has

also embarked on a course of inquiry into this certificate by calling upon

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parties to file their affidavits and has thereafter taken a call to express its

own doubts over the certificate.  In our view, such a course of action was

not permissible.

31. 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.  We may usefully refer to

the observations of this Court in Roshina T v. Abdul Azeez K.T. & Ors.,2

opining that the writ jurisdiction under Article 226 of the Constitution of

India is not intended to replace ordinary remedies by way of a civil suit,

and this jurisdiction should not be exercised casually or lightly on mere

asking by the litigant.

32. We may notice another important aspect  also,  i.e.,  reluctance of

respondent  No.1  to  accept  the  allegations  of  respondent  No.3.   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

2 (2019) 2 SCC 329

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respondent No.1.  In any case, at best, 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.  We may add that if respondent No.1 itself

has any doubts on these certificates, nothing prevented, nor still prevents

respondent No.1 from looking into this aspect.

33. We do not agree with the contention of learned senior 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.  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  by

learned counsel for respondent No.1, has chosen not to proceed further,

after  issuance of  notice to the appellant  and has decided to  await  the

decision of this Court.  We have already come to the conclusion that it

was not really within the domain of the High Court to have issued the

direction, as it sought to do.

34. The operative directions of the High Court, as contained in para 47

of the judgment, to take appropriate decisions, in the conspectus of the

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observations made, really amounts to directing respondent No.1 to breach

its contract with the appellant.  We are of the view that, thus, no such

direction ought to have been issued to compel a breach of the contract by

the appellant.

35. We, thus, are unable to sustain the impugned order even on this

ground.

Epilogue:

36. We consider  it  appropriate  to  make  certain  observations  in  the

context of the nature of dispute which is before us.  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  of

India.  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 of India.  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,

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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.

37. In  Afcons  Infrastructure  Limited  v.  Nagpur  Metro  Rail

Corporation Limited & Anr.3, this Court has expounded further on this

aspect, while observing that the decision making process in accepting or

rejecting  the  bid  should  not  be  interfered  with.   Interference  is

permissible only if the decision making process is arbitrary or irrational

to  an  extent  that  no  responsible  authority,  acting  reasonably  and  in

accordance with law, could have reached such a decision.  It has been

cautioned that Constitutional Courts are expected to exercise restraint in

interfering with the administrative decision and ought not to substitute

3 (2016) 16 SCC 818

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their view for that of the administrative authority.  Mere disagreement

with the decision making process would not suffice.

38. Another aspect emphasised is that the author of the document is

the best  person to  understand and appreciate  its  requirements.   In the

facts of the present 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.  In fact, the Court went on to observe

in the aforesaid judgment that 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.   We reproduce  the observations  in  this  behalf  as

under: “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

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constitutional courts but that by itself is not a reason for interfering with the interpretation given.”

39. We may also refer to the judgment of this Court in Nabha Power

Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) &

Anr.,4 authored  by  one  of  us  (Sanjay  Kishan  Kaul,  J.).   The  legal

principles for interpretation of commercial contracts have been discussed.

In the said judgment, a reference was made to the observations of the

Privy Council in  Attorney General of Belize v. Belize Telecom Ltd.5 as

under:

“16. Before discussing in greater detail the reasoning of the Court of Appeal, the Board will make some general observations about the  process  of  implication.  The court  has  no power  to  improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended…”

.... .... .... .... ....

“19.  .....In  Trollope  &  Colls  Ltd.  v.  North  West  Metropolitan Regional Hospital Board [1973] 1 WLR 601, 609 Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:

“the court does not make a contract for the parties. The court

4 (2018) 11 SCC 508 5 (2009) 1 WLR 1988 (PC)

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will not even improve the contract which the parties have made  for  themselves,  however  desirable  the  improvement might be. The court’s function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there  is  no  choice  to  be  made between different  possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if  and only if  the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if  it  had been suggested to them: it  must have been a term that went without saying, a term necessary to  give  business  efficacy  to  the  contract,  a  term  which, though tacit, formed part of the contract which the parties made for themselves.”

40. Nabha  Power  Limited  (NPL)6 also  took  note  of  the  earlier

judgment of this court in Satya Jain (Dead) Through LRs. and Ors. vs.

Anis Ahmed Rushdie (Dead) Through LRs. and Ors.7, which discussed

the  principle  of  business  efficacy  as  proposed  by  Bowen,  L.J.  in  the

Moorcock8.  It has been elucidated that this test requires that terms can be

implied only if it is necessary to give business efficacy to the contract to

avoid failure of the contract and only the bare minimum of implication is

to be there to achieve this goal.  Thus, if the contract makes business

sense  without  the  implication  of  terms,  the  courts  will  not  imply  the 6 (supra) 7 (2013) 8 SCC 131 8 (1889) LR 14 PD 64 (CA)

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same.

41. The judgment in Nabha Power Limited (NPL)9 concluded with the

following observations in para 72: “72. We may, however, in the end, extend a word of caution.  It should certainly not be an endeavour of commercial courts to look to implied terms of contract.  In the current day and age, making of contracts is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even  preceded  by  opportunities  of  seeking  clarifications  and doubts so that the parties know what they are getting into.  Thus, normally a contract should be read as it reads, as per its express terms.  The implied terms is a concept, which is necessitated only when the Penta-test referred to aforesaid comes into play.  There has to be a strict necessity for it.   In the present case, we have really only read the contract in the manner it reads.  We have not really read into it  any ‘implied term’ but from the collection of clauses, come to a conclusion as to what the contract says.  The formula for energy charges, to our mind, was quite clear.  We have only  expounded  it  in  accordance  to  its  natural  grammatical contour, keeping in mind the nature of the contract.”

42. We have considered it appropriate to, once again, emphasise the

aforesaid aspects,  especially  in the context  of  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.  The object cannot be that in

every contract, where some parties would lose out, they should get the

9 (supra)

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opportunity to somehow pick holes, to disqualify the successful parties,

on grounds on which even the party floating the tender finds no merit.

43. The  observations  made  aforesaid  should  be  understood  in  the

larger context, so as to avoid situations similar to the one we find in the

impugned order.

Conclusion:

44. The result of the aforesaid discussion is that the impugned order is

set aside and the writ petition filed by respondent No.3 is accordingly

dismissed.

45. The appeal is accordingly allowed, leaving the parties to bear their

own costs.

..….….…………………….J. [S.A. Bobde]

...……………………………J. [Sanjay Kishan Kaul]

New Delhi. April 09, 2019.

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