Facts of the Case

The appellant, P. Shyam Raju, proprietor of Skilderz Developers, participated in a tender floated by Kerala Minerals and Metals Limited (“KMML”) for work similar to an ongoing work already being executed by him. Under the tender conditions, the bidder was required to satisfy the prescribed solvency requirement and submit the requisite solvency certificate within the stipulated time.

According to the appellant, while submitting his tender, he produced a solvency certificate for Rs. 1.50 crore instead of the required amount, which he claimed occurred due to an inadvertent omission. After detecting the mistake, he subsequently furnished a solvency certificate for Rs. 2 crore through a separate letter. However, KMML declined to consider the subsequently furnished certificate.

The appellant contended that his quoted rate was Rs. 314 per MT plus GST, whereas the competing bidder, M/s Deepthi Transport Service, quoted Rs. 369 per MT plus GST. He alleged that rejection of his bid and acceptance of the remaining bid would cause substantial financial loss to KMML.

The appellant further challenged the tender process on the basis of the CVC Guidelines relating to single bids, alleging that the tender conditions were stringent and restrictive, that insufficient time had been granted for submission of bids, and that acceptance of the higher bid would cause substantial financial loss.

The writ petitions challenging the tender process were dismissed by the learned Single Judge. Aggrieved by those judgments, the appellant filed W.A. Nos. 1380 and 1396 of 2022 before the Division Bench.

Issues Involved

The principal issues before the High Court were:

  1. Whether the appellant’s belated submission of the requisite solvency certificate could be accepted after expiry of the deadline prescribed under the tender conditions.
  2. Whether KMML was justified in disqualifying the appellant for failure to submit the required solvency certificate within the prescribed period.
  3. Whether the tender conditions could be relaxed or altered in favour of the appellant when the prescribed eligibility document was submitted late.
  4. Whether the alleged higher price of the remaining bid and the appellant’s reliance on Clause 5.6.7 of the CVC Guidelines concerning single bids justified cancellation and re-tendering.
  5. Whether the tender process was vitiated by alleged arbitrariness, restrictive conditions, mala fides, bias, or violation of CVC Guidelines.
  6. Whether the Division Bench should interfere with the judgments of the learned Single Judge dismissing the writ petitions.

Petitioner’s / Appellant’s Arguments

The appellant argued that the initial submission of a lower-value solvency certificate was an inadvertent mistake and that, immediately after discovering the error, he furnished a Rs. 2 crore solvency certificate. According to him, KMML ought to have considered the substituted certificate instead of rejecting his bid on a technical ground.

It was contended that the appellant had quoted Rs. 314/MT plus GST, whereas M/s Deepthi Transport Service had quoted Rs. 369/MT plus GST. The appellant asserted that acceptance of the higher bid would result in an estimated loss of approximately Rs. 55 lakh to KMML and that the loss could increase depending upon the additional quantity of material to be removed.

The appellant relied upon the CVC Guidelines concerning single bids, particularly the contention based on Clause 5.6.7, to argue that where the price in a single bid is unreasonable compared with market value, cancellation and re-tendering may be resorted to.

He further argued that:

  • only 7 days were granted for submission of bids, whereas an earlier tender had allegedly allowed 21 days;
  • the solvency requirement was unduly stringent and restrictive;
  • the higher solvency requirement had the effect of restricting competition;
  • in earlier tenders, shortfall notices had allegedly been issued to bidders for submission of insufficient or defective documents, including solvency certificates;
  • refusal to provide a similar opportunity in the present tender demonstrated alleged mala fides and bias;
  • rejection of his lower bid on a technical ground and continuation with the remaining higher bid violated the CVC Guidelines and caused avoidable financial loss.

The appellant also alleged that the tender process had been manipulated to accommodate the remaining bidder by excluding other bidders on technical grounds.

Respondents’ Arguments

On behalf of the successful/remaining bidder, M/s Deepthi Transport Service, it was submitted that the work had already commenced and that a substantial portion of the sand had already been removed. It was therefore contended that the contract had already been executed in accordance with the tender conditions and performance had begun.

The respondents’ position, as reflected in the proceedings and accepted by the Court, was that compliance with the prescribed tender conditions was mandatory. The appellant’s own Senior Counsel fairly acknowledged that the last date fixed for submission of the solvency certificate was 12 August 2022, whereas the appellant submitted the requisite certificate only on 17 August 2022.

Accordingly, the central question was whether a solvency certificate submitted after the stipulated deadline could be accepted despite the express tender conditions.

Court Order / Findings

The Division Bench found that the required solvency certificate had admittedly been submitted beyond the period prescribed in the tender.

The High Court laid down the crucial principle that:

Tender conditions cannot be altered unless and until they are per se illegal.

The Court observed that, prima facie, there was no reason to hold the relevant tender condition illegal. Since the tender conditions required the solvency certificate to be submitted before the last date fixed, failure to comply with that requirement justified disqualification.

The Court therefore sustained the decision on the aspect of disqualification.

Consequently:

  • W.A. No. 1396 of 2022 was dismissed;
  • W.A. No. 1380 of 2022 was also dismissed;
  • the Division Bench declined to interfere with the impugned judgments of the learned Single Judge.

Thus, despite the appellant’s arguments regarding a lower quoted price, alleged financial loss, single-bid concerns, restrictive conditions, and CVC Guidelines, the decisive factor remained the appellant’s admitted failure to submit the prescribed solvency certificate within the tender deadline.

Important Clarification

The judgment is important because it distinguishes between:

(a) a challenge to an allegedly illegal tender condition, and
(b) a request to relax a valid tender condition after a bidder has failed to comply with it.

The Court did not hold that tender conditions can never be judicially examined. Rather, it held that tender conditions cannot be altered unless they are shown to be per se illegal. In the present case, the Court found no prima facie basis to invalidate the requirement that the solvency certificate be submitted before the prescribed last date.

Another important clarification is that a bidder’s lower financial quotation does not automatically cure non-compliance with a mandatory tender requirement. The appellant’s claim that his bid was financially more advantageous did not override his admitted late submission of the requisite solvency certificate.

Further, although the appellant relied upon the CVC Guidelines on single bids and argued that acceptance of the remaining higher bid would cause financial loss, the Court sustained the disqualification because the appellant had failed to satisfy the tender requirement within time.

The judgment therefore reinforces that courts ordinarily will not rewrite tender conditions merely to accommodate a bidder who submits a mandatory eligibility document after the deadline, unless the condition itself is shown to be legally unsustainable.

Sections / Provisions / Clauses Involved

Article 226 of the Constitution of India — writ jurisdiction invoked in challenging the tender process and seeking writs including mandamus and certiorari.

Clause 4.3 of the Tender Notice — prescribed the minimum solvency requirement and stipulated that the solvency certificate must comply with the stated conditions, including its validity/date and issuance requirements.

Clause 5.6.7 of the CVC Guidelines — relied upon by the appellant in relation to treatment of a single bid and the contention that re-tendering could be considered where prices were allegedly unreasonable compared with market value.

Central Vigilance Commission Guidelines / Central Vigilance Manual — relied upon by the appellant to challenge continuation of the tender process with the remaining bid.

General principles of judicial review in public tenders — particularly the principle that tender conditions should not be altered unless shown to be per se illegal and that compliance with prescribed tender requirements is material to bidder eligibility.

Link to download the order - https://mytaxexpert.co.in/uploads/1783333702_1134compressed.pdf

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