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 securitydeposit)  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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