Facts of the Case

The appellant, P. Shyam Raju, proprietor of Skilderz Developers, participated in a tender floated by Kerala Minerals and Metals Limited for work similar to an ongoing work already being executed by him.

According to the appellant, while submitting the tender documents, he furnished a solvency certificate for Rs.1.50 crore instead of the required amount of Rs.1.85 crore, allegedly due to an inadvertent omission. The appellant subsequently furnished a solvency certificate for Rs.2 crore after detecting the mistake and requested that the same be considered.

The respondents declined to accept the subsequently furnished certificate. The appellant alleged that this refusal effectively left only one tenderer in the field and facilitated award of the work to the remaining bidder.

The appellant asserted that his quoted rate was Rs.314 per MT plus GST, whereas M/s Deepthi Transport Service quoted Rs.369 per MT plus GST. He also contended that his ongoing similar work was being performed at Rs.324 per MT plus GST.

The appellant challenged the tender process through W.P.(C) Nos. 27223 and 28351 of 2022, seeking, among other reliefs, cancellation of the tender and a direction for re-tendering. The learned Single Judge declined relief and dismissed the writ petitions. The appellant therefore filed W.A. Nos. 1380 and 1396 of 2022.

Issues Involved

The principal issues before the Division Bench were:

  1. Whether the appellant’s belatedly submitted solvency certificate could be accepted despite expiry of the deadline fixed under the tender conditions.
  2. Whether the tender authority was justified in disqualifying the appellant for failure to furnish the required solvency certificate within the prescribed time.
  3. Whether the tender conditions could be relaxed or altered in favour of the appellant.
  4. Whether the alleged higher financial quote of the remaining single bidder justified cancellation and re-tendering under the CVC Guidelines.
  5. Whether the alleged financial loss to Kerala Minerals and Metals Limited warranted judicial interference with the tender process.
  6. Whether the tender conditions, particularly the solvency requirement, were illegal, arbitrary, unduly restrictive or liable to be interfered with in writ jurisdiction.
  7. Whether the learned Single Judge erred in refusing to cancel the tender and direct a re-tender.

Appellant / Petitioner’s Arguments

The appellant contended that he had participated in the tender floated by Kerala Minerals and Metals Limited and was already executing similar ongoing work.

According to him, the furnishing of a solvency certificate for Rs.1.50 crore instead of Rs.1.85 crore was merely an inadvertent omission. After discovering the mistake, he furnished a fresh solvency certificate for Rs.2 crore, but the respondents refused to consider it.

The appellant alleged that the rejection was intended to facilitate award of the tender to the remaining sole bidder.

Argument on Comparative Rates

The appellant emphasized that:

  • his quoted rate was Rs.314/MT + GST;
  • the third respondent’s quoted rate was Rs.369/MT + GST; and
  • his ongoing similar work was being executed at Rs.324/MT + GST.

According to the appellant, acceptance of the higher bid would cause substantial financial loss to Kerala Minerals and Metals Limited. He estimated a loss of approximately Rs.55 lakh, with the possibility of the financial impact increasing if additional quantities were involved.

Argument Based on CVC Guidelines

The appellant relied on the CVC Guidelines relating to a single bid. He contended that under Clause 5.6.7 of the guidelines, where the price in a single-bid situation is unreasonable compared with market value, the tender can be cancelled and the work re-tendered.

The appellant argued that re-tendering was justified because:

  • only a short period of seven days was allegedly granted for submission of bids, whereas an earlier tender had allowed 21 days;
  • the solvency condition was allegedly stringent and restrictive;
  • despite reduction in the quantity of work, the solvency requirement had allegedly been increased;
  • acceptance of the remaining higher bid would cause substantial financial loss; and
  • the tender process allegedly violated the CVC Guidelines.

Argument on Prior Tender Practice

The appellant further contended that in earlier tenders, shortfall notices had been issued to tenderers for submission of insufficient or defective documents, including solvency certificates.

According to him, refusal to follow a similar procedure in the present tender demonstrated arbitrariness, mala fides and bias.

Allegation of Manipulation

The appellant alleged that the tender process had been manipulated to exclude him and another bidder on technical grounds and to accommodate the remaining bidder.

Respondents’ Arguments

On behalf of M/s Deepthi Transport Service, the third respondent in W.A. No. 1380 of 2022, it was submitted that:

  • the work had already commenced;
  • a substantial portion of the sand had already been removed;
  • the contract had been executed in accordance with the tender conditions; and
  • interference at that stage was therefore unwarranted.

It was also recorded during the proceedings that the work had commenced from 06.09.2022.

The respondents’ position was effectively that the appellant had failed to comply with the prescribed tender condition concerning timely submission of the required solvency certificate and that the completed tender process should not be disturbed.

Court Order / Findings

The Division Bench recorded a significant factual admission by the learned Senior Counsel appearing for the appellant:

  • the last date fixed for submission of the solvency certificate was 12.08.2022; and
  • the appellant submitted the certificate only on 17.08.2022.

Therefore, the central issue became whether a solvency certificate submitted after the stipulated deadline was required to be accepted.

The High Court found that the solvency certificate required under the tender conditions had admittedly been submitted beyond the prescribed period.

The Court held that:

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

The Division Bench further observed that, prima facie, it found 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, and the appellant had admittedly submitted it after the deadline, the Court sustained the decision on disqualification.

Accordingly:

  • W.A. No. 1396 of 2022 was dismissed; and
  • W.A. No. 1380 of 2022 was also dismissed.

The Division Bench declined to interfere with the judgments of the learned Single Judge.

Important Clarification

The decisive basis of the judgment was the appellant’s admitted failure to submit the required solvency certificate within the time prescribed by the tender.

The High Court did not hold that every tender condition is immune from judicial review. Instead, the Court expressly stated that tender conditions cannot be altered unless and until they are per se illegal.

Therefore, the judgment must be understood to mean that:

  • a bidder cannot ordinarily insist upon post-deadline relaxation of a prescribed tender requirement;
  • courts will not rewrite or alter tender conditions merely because subsequent compliance is offered;
  • where a condition is shown to be per se illegal, a different question may arise; but
  • in the present case, the Court found no prima facie reason to treat the solvency requirement as illegal.

The Court also did not accept the appellant’s reliance on alleged financial loss, comparative lower pricing or the CVC single-bid guidelines as sufficient grounds to overcome the admitted belated submission of the mandatory solvency certificate.

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https://mytaxexpert.co.in/uploads/1783334640_1140compressed.pdf

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