Judicial Review Of Tenders - Interpretation Of Tendering Authority Must Prevail Unless There Malafides Alleged Or Proved : Supreme Court

The Supreme Court recently held that when it comes to tender clauses, the interpretation of a tendering authority must prevail unless there is any malafides alleged or proved.

A bench of Justice Sanjay Kishan Kaul, Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah referred to the decision of the Apex Court in Jagdish Mandal vs. State of Orissa (2007) 14 SCC 517 while making this observation. 

 According to the factual matrix of the case, a tender was floated by M/s. RITES Ltd (2nd Respondent) for transport of 34 railway coaches to Mozambique in Africa. The appellant and the 1st Respondent No. 1 submitted their bids for the tender and the appellant was awarded the work order. The bid of Respondent 1 was found to be not qualified.

R1 made a representation to R2, the tendering authority stating that the appellant was ineligible from tendering for the bid due to two existing banning orders. The 1st Respondent then approached the Delhi High Court challenging the tender awarded to the appellant.

The tenderer and Respondent No. 2 contended that the banning orders were not in force on account of the interim orders.

The High Court was of the view that the appellant would have been disqualified and directed the disgorging of the profit which would have been earned by the appellant from the award of the tender, to the extent of 10% of the expected returns on the contract. Thus the appellant approached the Supreme Court.

The Apex Court considered whether there was a requirement of disgorging of profit in such a manner.

The Apex Court referred to clause 2(d) of the contract to determine whether the appellant was not eligible for the tender or not. Interpreting the terms of the tender, the Court concluded that the intent of the clause was that if a particular ban has been imposed, but is not in force, it would not disqualify a tender.

The Court observed that the tendering authority had examined the complaint of R1 regarding the appellant and concluded that since the banning orders were not in force, the appellant was not disqualified.

The Apex Court also held that the appellant had not suppressed the fact of the banning orders while applying for the tender.

“We are thus of the view that it cannot be said that the appellant had suppressed the banning orders or the interim order, as opined by the High Court. This is so as there was no option in this regard for the appellant. To submit a valid bid, the appellant in the relevant column, could not have disclosed the aspect of two banning orders which had been stayed” the Apex Court said. 

The Apex Court thus set aside the order of the High Court holding that since there was valid disclosure by the appellant and since the bid was a qualified one, there was no question of disgorging the profits of the appellant.

Case Title: SARR FREIGHTS CORPORATION V. CJDARCL LOGISTICS LTD, CIVIL APPEAL NO. 7537/2023 

Citation:  2023 LiveLaw (SC) 1006

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