Bombay High Court Quashes Fresh Tenders For Loha-Kharwandi Highway

"…going for a fresh tender merely because of this technical defect which can be easily cured by accepting the petitioners' fresh offer to complete the project even in 18 months at the same cost offered by them is nothing but an arbitrary and capricious decision and would lead to a loss to the public exchequer. Besides, as mentioned herein above, as it is the offer of the petitioners is less than the estimated costs by 30% to 25% which would save another 70 to 80 crores for each project," the court observed.

The petitioner companies were the lowest bidders for the rehabilitation and upgradation of two different stretches of the NH 361F. Their respective bids were about 30% and 25% less than the cost estimated by the government. The tender stipulated that the work has to be completed within 24 months. The government cancelled the process in September 2022 and fresh tender was floated. 

During the course of the present petitions challenging the decision of noting accepting their bids, it came to light that contrary to the guidelines issued by the MoRTH the period for construction of the project was stipulated as 24 months instead of 18 months.

Senior Advocate R. N. Dhorde for the petitioners said that this reason is impermissible as both petitioners are ready to complete the work within 18 months at the same cost. He said that the petitioners' willingness to complete the project within 18 months does not amount to post bid negotiations. The time limit was not a material condition. He added that the petitioners bid was lower than the estimated cost and it would be in public interest to grant them the contracts.

Deputy Solicitor General of India A. G. Talhar stated that there is no concluded contract between the petitioners and the authorities. It was an invitation to offer and the government has the prerogative to refuse, he said.

It was also argued that the petitions are not maintainable as the tender document restricted the jurisdiction to decide any dispute to the Delhi High Court. He said that a post-negotiation change altering the condition to complete the project would constitute a material alteration.

According to the guidelines applicable to Central P.W.D. projects, a road up to 50 km should be completed within 18 months if two-laned and 24 months if four-laned. In the present case, around 60% to 65% of the road is two lane and the rest is four lane.

The court noted that the guidelines do not contemplate a situation where part of the project can be completed within 18 months and remainder can be completed in 24 months. Further, avoiding a loss to the public exchequer is a decisive factor in this case even if no mala fides on part of the respondents have been alleged, the court said.

"We do not intend to and are not sitting in to judge the propriety of the decision of the respondents to go for a fresh bid but at the same time we cannot turn a blind eye when the facts and circumstances discussed herein above are so peculiar and the decision of the respondents has the potential of burdening the public exchequer", the court stated.

Post-bid negotiations are not justifiable when the government is to receive the money. However, in this case the government has to pay the money for the work and the negotiation is with the lowest bidder for performing the work in less time, the court said. 

"The submission of the learned DSGI and the decision cited by him regarding the rule being to desist from any post-bid negotiation would not came into play when the Government is to pay the money for the work to be performed when the negotiation is with the lowest bidder. Such negotiations are not justifiable when the Government is to receive the money. It is in this sense that the decisions quoted herein above by the learned DSGI will have to be appreciated. The negotiation in the facts and circumstances is only for performing the work in a lesser period and not for increasing the period of performance which would have been impermissible."

The court rejected Talhar's submission that there is no privity of contract. "When these are the matters involving public authorities, any decision of theirs can be examined to ascertain if the decision being taken is arbitrary or otherwise more so when it has the tendency of burdening the public exchequer," the court held.

The court also held that the parties could not have excluded the High Court's jurisdiction under Article 226 of the Constitution via an agreement.

Therefore, the court quashed the fresh tenders and directed the authorities to complete the original tender process with a rider that the petitioners shall complete the work within 18 months.

Case no. – Writ Petition Nos. 9620 and 11026 of 2022

Case Title – M/s. Saket – RPS JV and Ors. v. Union of India and Ors.

Citation: 2022 LiveLaw (Bom) 503