Central Coalfields Limited & Anr V. SLL-SML(Joint venture Consortium) & Ors(2016): The party issuing the tender has the right to punctiliously and rigidly enforce the terms of the tender.

Case Central Coalfields Limited and Another V. SLL-SML(Joint venture Consortium) and Others.
CourtBefore the Supreme Court of India
BenchJustice Madan B. Lokur, Justice R.K. Agarwal
Author of the JudgementJustice Madan B Lokur.
Decided onAugust 17, 2016.
AbstractIn the present case, the appellants invited tenders and prescribed that the bank guarantee should be given in the specified format. The respondent SLL-SML had not adhered to the format specified and thus their bid was rejected. It was contended by the respondent SLL-SML that the format was ambiguous and vague. The division bench of the High Court allowed the appeal, which was subsequently set aside by the Supreme Court of India. According to the Supreme Court if the employer specifies a certain format then the submission should be made in that format only and no other format should be adhered to.
Author of briefAditya Gor
KeywordsBank Guarantee, Professional Responsibility, Tender, Joint Venture, Digital Signature Certificate.

Brief Facts and Procedural History:

In the present case, there are two appeals filed before the Supreme Court of India. A notice inviting tender was issued by Central Coalfields Limited. The first respondent i.e. SLL-SML Joint Venture Consortium’s (JVC) bid in response to the said notice was rejected while the bid of PLR-RPL-SMASL (joint venture) which was lowest was accepted.

A petition was filed before the learned single bench of Jharkhand High Court where the learned single bench concluded that furnishing a bank guarantee in a different format other than the one prescribed would cause multiple problems and thus rejected the petition. Against this, a letters patent appeal was filed by JVC before the division bench.

The division bench of Jharkhand High Court on 26th October 2015 passed a judgement whereby the rejection of a bid by SLL-SML was set aside. According to the division bench, the submission of the bank guarantee in the prescribed format was a non-essential term of the NIT, the bid of JVC was ought to be entertained. Aggrieved by this, the appellants have preferred an appeal before the Supreme Court of India.

Issues before the Supreme Court:

  1. Whether furnishing a bank guarantee in the format prescribed in the bid document is an essential requirement in the bidding process of the Central Coalfields Limited? (General Question)
  2. Whether a bid not accompanied by a bank guarantee in the format prescribed in the bid documents of the central coalfield limited can be treated as non-responsive in view of clause 15.2 of the general terms and conditions governing the bidding process? (Specific Question)

Ratio:

JVC had a digital signature certificate which indicated that it had some form of comfort with e-tenders and the use of computers for bidding in an e-tender. Under these circumstances, it is extremely odd that JVC was not able to access the correct and prescribed format of the bank guarantee.

The heading of both the GTCs was different. There was a substantial difference between both the GTCs and anyone bidding could immediately see which GTC is relevant and which is not. Plus, if JVC has any doubt with regard to format, it could have sought clarification from the concerned authority as mentioned in the NIT. But JVC had not done so.

Referring to various case-laws the court held that the issue of acceptance or rejection of a bid or bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. Ordinarily, the soundness of the decision taken by the employer ought not to be questioned but the decision-making process can certainly be subject to judicial review.

The lawfulness of that decision can be questioned on very limited grounds but the soundness of the decision cannot be questioned, otherwise, the court would be taking over the function of the tender issuing authority, which it cannot.

There is a wholesome principle that the courts have been following for a very long time and which is articulated as “Where a  power is given to do certain things in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden.” This principle deserves to be applied in contractual disputes, particularly in commercial contracts or bids leading up to commercial contracts, where there is stiff competition.

Held: The answer to both the general and specific question before the Supreme Court is in affirmative. In the present appeals, since CCL had not relaxed or deviated from the requirement of furnishing a bank guarantee in the prescribed format, every bidder was obliged to adhere to the prescribed format of the bank guarantee. The judgement passed by the division bench o the high court is set aside and the appeal is allowed.

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