M/S. GRANT THORNTON BHARAT LLP v. NATIONAL INFORMATICS CENTRE SERVICES INCORPORATED

16. The undisputed facts of the case reveal that in response to the tenders issued by the Respondent No.1 herein, there were five bidders. As per the original bid received from the Petitioner, the GTV was Rs.2,61,83,814.40 and in the corrected bid, the GTV quoted by the Petitioner was Rs.2,64,61,014.40. The bids of the other bidders are as follows:

2. Deloitte Touche Tohmatsu India LLP 2,64,97,850

3. KPMG Assurance and Consulting Services 3,11,90,305

4. Ernst and Young LLP 3,14,70,282

5. Price water House Coopers 3,22,05,770

17. At the outset, it becomes imperative for this Court to note that essential clauses of a tender should be enforced strictly and no deviation is permissible under the law. The Supreme Court in Poddar Steel Corporation v. Ganesh Engineering Works and Ors. (supra) observed that requirements in a tender notice can be classified into two categories – those which lay down the essential conditions of eligibility and those which are merely ancillary or subsidiary with the main object to be achieved by the condition. The relevant paragraph stating the same has been reproduced as under:

18. The Supreme Court in Poddar Steel Corporation v. Ganesh Engineering Works and Ors. (supra) had relied upon G.J. Fernandez v. State of Karnataka and Ors., (1990) 2 SCC 488, to observe that if the party issuing the tender is punctiliously and rigidly enforcing conditions and stipulations in a tender document, and the bidder does not strictly comply with the requirements, then it is open to the party issuing the tender to decline consideration of a part for the contract. The paragraphs of the said Judgement observing the same have been reproduced as follows:

14. Secondly, whatever may be the interpretation that a court may place on the NIT, the way in which the tender documents issued by it has been understood and implemented by the KPC is explained in its “note”, which sets out the general procedure which the KPC was following in regard to NITs issued by it from time to time. Para 2.00 of the “note” makes it clear that the KPC took the view that para I alone incorporated the “minimum pre-qualifying/eligibility conditions” and the data called for under para V was in the nature “general requirements”. It further clarifies that while tenders will be issued only to those who comply with the pre-qualifying conditions, any deficiency in the general requirements will not disqualify the applicant from receiving tender documents and that data regarding these requirements could be supplied later. Right or wrong, this was the way they had understood the standard stipulations and on the basis of which it had processed the applications for contracts all along. The minutes show that they did not deviate or want to deviate from this established procedure in regard to this contract, but, on the contrary, decided to adhere to it even in regard to this contract. They only decided, in view of the contentions raised by the appellant that para V should also be treated as part of the prequalifying conditions, that they would make it specific and clear in their future NITs that only the fulfilment of pre-qualifying conditions would be mandatory. If a party has been consistently and bona fide interpreting the standards prescribed by it in a particular manner, we do not think this Court should interfere though it may be inclined to read or construe the conditions differently. We are, therefore, of opinion that the High Court was right in declining to interfere.

15. Thirdly, the conditions and stipulations in a tender notice like this have two types of consequences. The first is that the party issuing the tender has the right to punctiliously and rigidly enforce them. Thus, if a party does not strictly comply with the requirements of para III, V or VI of the NIT, it is open to the KPC to decline to consider the party for the contract and if a party comes to court saying that the KPC should be stopped from doing so, the court will decline relief. The second consequence, indicated by this Court in earlier decisions, is not that the KPC cannot deviate from these guidelines at all in any situation but that any deviation, if made, should not result in arbitrariness or discrimination. It comes in for application where the non-conformity with, or relaxation from, the prescribed standards results in some substantial prejudice or injustice to any of the parties involved or to public interest in general. For example, in this very case, the KPC made some changes in the time frame originally prescribed. These changes affected all intending applicants alike and were not objectionable. In the same way, changes or relaxations in other directions would be unobjectionable unless the benefit of those changes or relaxations were extended to some but denied to others. The fact that a document was belatedly entertained from one of the applicants will cause substantial prejudice to another party who wanted, likewise, an extension of time for filing a similar certificate or document but was declined the benefit. It may perhaps be said to cause prejudice also to a party which can show that it had refrained from applying for the tender documents only because it thought it would not be able to produce the document by the time stipulated but would have applied had it known that the rule was likely to be relaxed. But neither of these situations is present here. Shri Vaidyanathan says that in this case one of the applicants was excluded at the preliminary stage. But it is not known on what grounds that application was rejected nor has that party come to court with any such grievance. The question, then, is whether the course adopted by the KPC has caused any real prejudice to the appellant and other parties who had already supplied all the documents in time and sought no extension at all? It is true that the relaxation of the time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramana case [(1990) 2 SCC 486] will be readily applied by courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits. The appellant had no doubt also urged that the MCC had no experience in this line of work and that the appellant was much better qualified for the contract. The comparative merits of the appellant visa-vis MCC are, however, a matter for the KPC (counselled by the TCE) to decide and not for the courts. We were, therefore, rightly not called upon to go into this question.” (emphasis supplied)

19. In Jal Mahal Resorts Private Limited v. K.P. Sharma and Ors. (supra), it had been held by the Supreme Court that minor technical irregularity and deviation from non-essential or ancillary/subsidiary requirements could be waived. However, emphasis was laid on how the term being waived had to be non-essential in nature and the waiver had to be done for bona fide reasons and in public interest. “114. In support of the submission, the learned counsel for the appellant has cited several authorities of this Court inter alia being B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. [(2006) 11 SCC 548] and the relevant portion at p. 571, paras 66(v) and (vii) states as follows: (SCC p. 572) “66.

(v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with; ***

(vii) where a decision has been taken purely on public interest, the court ordinarily should exercise judicial restraint.”

115. Similarly reliance was also placed on Poddar Steel Corpn. v. Ganesh Engg. Works [(1991) 3 SCC 273] by the appellant, wherein this Court held that: (SCC p. 276, para 6)

Thus, it was held that minor technical irregularity and deviation from non-essential or ancillary/subsidiary requirement can be waived and the Government would be justified in waiving technical compliance with a tender condition.

116. The thrust of the aforesaid case law cited is to reinforce the submission that when there is substantial compliance with the terms of tender, the Government is entitled to waive any non-essential term in the tender for the bona fide reasons and in public interest. In any case, since the Project in terms of RFP had to be executed through an SPV and the appellant being such an SPV, then the vehement insistence by the respondent that the lead member must be a company is not a violation of a substantial condition of the tender. In conclusion, therefore, it had to be held that there were no mala fides in the decision-making process and the finding given by the High Court is perverse and cannot be sustained and deserves to be set aside.”

20. The principles pertaining to essentiality of conditions of a tender document and the power of deviation from the same have been summarised by the Supreme Court in B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. and Ors., (2006) 11 SCC 548. If there are essential conditions, the same must be adhered to, and if there is no power of general relaxation, the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully. The Supreme Court in the said Judgement held as follows:

21. What constitutes as an essential term and condition in a tender document is dependent upon the author of the said document. It is well settled that the interpretation of a tender document can only be done by the author of the said document and that Courts are obligated to defer to author’s rendition of the same. This has been expounded time and again by the Supreme Court in a catena of judgements, such as Agmatel India Private Limited v. Resoursys Telecom and Ors., (2022) 5 SCC 362, wherein the Supreme Court had observed that author of the tender document is taken to be the best person to understand and appreciate its requirements. The relevant paragraph of the said Judgement has been reproduced as follows: “20.4. With reference to the decision of this Court in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd. [Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818], the learned Solicitor General has argued that author of the tender document is the best person to understand and appreciate its requirements; and that the courts must defer to such understanding and appreciation of tender documents by the tender inviting authority, unless there be any allegation of mala fide or perversity. The learned Solicitor General has particularly referred to the enunciation by this Court that even if an interpretation to the tender document by the author of the tender is not acceptable to the constitutional court, that, by itself, would not be a reason for interfering with the interpretation given.

20.5. It has further been contended that the threshold of mala fide intention to favour someone or arbitrariness or irrationality or perversity must be met before the Court would interfere with the decisionmaking process or the decision itself. Even in the case of ambiguity or doubt, the Court would be refraining from giving its own interpretation unless the interpretation given by the administrative authority is shown to be perverse or mala fide or intended to favour someone. The learned Solicitor General has contended that there being no finding about any mala fide or perversity or bias, the High Court has erred in interfering in the present tender process. It has been argued that even if the interpretation of tender document by the appellant was not found acceptable by the High Court, that, by itself, was not a sufficient reason for interference. It has also been submitted that the interpretation of the appellant NVS is based on the pre-dominant purpose of the goods sought to be procured and no arbitrariness or irrationality could be imputed therein.”

22. The Supreme Court, in Agmatel India Private Limited (supra), had relied upon Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and Anr., (2016) 16 SCC 818 wherein it was observed that constitutional courts must defer to the understanding and appreciation of the author of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. The paragraph of the said Judgement iterating the same is as under:

15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given.”

23. In Silippi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133, the Supreme Court, while discussing the aspect of judicial intervention in matters of contract involving state instrumentalities had held that the authority which floats the contract or tender, and has authored the tender documents is the best judge regarding interpretation of the same. Any interference by the Court has to be for the purposes of preventing arbitrariness, irrationality, bias, mala fides or perversity. In paragraph 20 of the said Judgement, the Supreme Court observed as follows:

24. The foregoing judicial pronouncements demonstrate that the interpretation of the clauses of a tender document are best comprehended and interpreted by the author of the tender document itself. If there are two possible interpretations of a clause of the tender document, then the Courts must defer to the interpretation accorded by the author and refrain from substituting the same with its own understanding. It is only when the circumstances reveal that a certain clause of the tender document explicitly violates the mandate of Article 14 of the Constitution of India can the Courts step in to interfere in such contractual matters.

25. The actual detailed bid submitted by Grant Thornton is as follows:

26. In the instant case, the Detailed Financial Bid that was to be submitted by the bidders who had scored the requisite technical score awarded after scrutiny by the Technical Evaluation Committee was to be done in accordance with Annexure-13 of Corrigendum-XII dated 20.05.2021 which revised the tender document in question. As per Table 3 of Annexure-13, which pertained to the Subject Matter Expert for Tier-1 or 2, the Unit Value at Sl.No.1 of Column 1 was to be multiplied by a multiplication factor of 100 before arriving at the total (C). Accordingly, the values (A, B and C) in Table 1, 2 and 3 were required to be calculated by way of an equation (0.61*A + 0.38*B + 0.01*C) to arrive at the Gross Total Value (X). Further, Table 3 is also not in the format prescribed in Annexure - 13.

27. A perusal of the Detailed Financial Bid of Grant Thornton reveals that the company failed in multiplying the Unit Value at Sl.No.1 of Column 1 with 100 before arriving at the total (C), and this led to a discrepancy in the GTV. On account of this arithmetical error, the Detailed Financial Bid of Grant Thornton was disqualified by way of the letter dated 08.10.2021 for not having quoted the value as per the specified format. It has been submitted by learned Senior Counsel appearing for Grant Thornton that the arithmetical error is rectifiable, as stipulated in Clause 9.[2] (l) of the tender document, and the error was caused due to the placement of both the formats for submission of the bid. Neither of the contentions advanced by the learned Senior Counsel hold any water.

28. Clause 9.[2] (l) of the revised tender document, as reproduced above, categorically notes that if faced with discrepancy between the unit price and the total price, the unit price must prevail and the total price shall be corrected. It does not envisage a system where there is a grave error in omitting the multiplying factor itself and the same is rectified. Omission of the multiplying factor of 100 has a consequential bearing on the GTV, and it cannot be said that the arithmetical error is minute. Further, it is pertinent to note at this juncture that NICSI reserves the right to accept any bid under Clause 9 (i) of the tender document and mere acceptance of Grant Thornton’s technical bid does not entitle it to getting empanelled.

29. In fact, Clauses 8.[2] (x), 8.[2] (xi) and 9.[2] (j) of the tender document have been reproduced as under for ease of comprehension: “8.[2] GENERAL INSTRUCTIONS FOR BID SUBMISSION..... x. Bids not submitted as per the specified format and nomenclature may be rejected. xi. Ambiguous/Incomplete/Illegible bids may be out rightly rejected. Not quoted bids shall be consider as non-responsive and shall be rejected. ***** 9.[2] FINANCIAL EVALUATION j. A Financial Evaluation Committee (FEC) would scrutinize the commercial bids. Bids found lacking in strict compliance to the commercial bid format shall be rejected straightaway.”

30. Thus, Clauses 8.[2] (x) and 8.[2] (xi) state that bids that have not been submitted as per the prescribed format or are incomplete, may be rejected, and Clause 9.[2] (j) notes that bids that are lacking in strict compliance to the commercial bid format shall be rejected straightaway. These Clauses have been noted in the impugned Communication dated 08.10.2021 and Grant Thornton has been conveyed the reasoning for its disqualification. Further, it cannot be said that the financial bid format as duly prescribed in Annexure- 13 is not an essential condition that can be waived or rectified at a later juncture. Due to the omission in multiplying the unit value with the multiplying factor of 100, Grant Thornton had been denoted the L-1 bidder. This Court is of the opinion that on account of Grant Thornton being declared as the L-1 bidder, it cannot be said that the omission was of such nature that it was unessential or ancillary.

31. Having arrived at the conclusion that Grant Thornton had failed to follow an essential condition that had been prescribed in the tender document, this Court deems it fit to delve into whether this Court can exercise its power of judicial review in the instant matter. The inherent limitations in the exercise of power of judicial review of contractual matters have been delineated by the Supreme Court consistently in various judgements. It has been observed that Courts may only interfere in an administrative decision if, and only if, the same is arbitrary, irrational, unreasonable, mala fide or biased. In the absence of these situations, the Courts must not countenance interference with the decision merely at the behest of an unsuccessful bidder.

32. The aforementioned observation was made by the Supreme Court in the case of Tata Cellular v. Union of India, (1994) 6 SCC 651, wherein it was categorically noted that the Government is the guardian of the finances of the State; it is expected to protect the financial interest of the State and, therefore, the right to refuse the lowest or any other tender is available to the Government. The relevant portion of the said Judgement has been reproduced as under:

33. In Central Coalfields Limited and Anr. v. SLL-SML (Joint Venture Consortium) and Ors., (2016) 8 SCC 622, the Supreme Court observed that a contract is a commercial transaction, and evaluating tenders and awarding contracts are essential commercial functions. In view of this, the power of judicial review should not be permitted to be invoked to protect private interests at the cost of public interest, or to decide contractual disputes. The Supreme Court in the matter therein stated as under:

“22. … Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or Whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”;

(ii) Whether public interest is affected.

34. Grant Thornton has submitted a flawed bid which is not in the format prescribed and there are calculation mistakes in the original bid submitted by them which had resulted in the rejection of the bid. As stated earlier, the Courts are very rigid in substituting their own conclusion to the one arrived at by the tender evaluating authority unless that decision is completely perverse and accentuated by mala fides. The present tender is one of creation of panel. It cannot be said that Grant Thornton’s bid is being rejected to favour a certain entity solely on the ground that no work has been awarded to Grant Thornton.

35. Flowing from the aforesaid Judgements, it is clear as day that the scope of interference by way of judicial review in tender matters is extremely limited, and can only be justified if done to rectify patent arbitrariness, unreasonableness, mala fides, or bias, in the administrative decision. In the absence of the same, the Court must stay its hands and should not interfere, even if a procedural aberration or error in assessment or prejudice to a tenderer is made out. In the matter herein, the decision taken to disqualify Grant Thornton for having committed an arithmetical error is in accordance with the Clauses of the tender document as have been delineated above. It cannot be said that the decision of NICSI is tainted with patent arbitrariness, unreasonableness, mala fides, or bias, that would require the interference of this Court. This Court is of the opinion that NICSI’s decision to disqualify Grant Thornton from the bidding process for lacking in strict compliance to the commercial bid format was appropriate and correct. This Court, therefore, keeping in mind the limited scope of judicial intervention in contractual matters, refrains itself from interfering in the same.

36. Having arrived at the conclusion that W.P.(C) 13405/2021 is liable to be dismissed, a perusal of the record in W.P.(C) 14924/2021 brings to the notice of this Court that there is strength in the submissions of the learned Senior Counsel for PwC that there is indeed no legal basis for having excluded PwC from the panel of agencies. On disqualification of Grant Thornton and with Deloitte having been denoted the L-1 bidder, by way of the letter dated 29.10.2021, NICSI had sought acceptance on the part of PwC to match the L-1 rates by 02.12.2021. Despite having consented to acceptance of the L-1 rates by 02.12.2021, PwC was not issued a letter of empanelment.

37. No cogent reasoning has been provided by NICSI for having issued a letter of empanelment to the other three bidders and for not having issued the letter of empanelment to PwC. As has been deliberated upon hereinabove, this Court retains the right to interfere in contractual matters if the decision taken is arbitrary, irrational, unreasonable, mala fide or biased. This Court is of the opinion that in absence of proper reasoning having been provided by NICSI for not issuing a letter of empanelment to PwC despite the acceptance being conveyed by PwC, NICSI is obligated to issue a letter of empanelment to PwC

38. Accordingly, the W.P.(C) 13405/2021 is dismissed, along with the pending application(s), if any.

39. List W.P.(C) 14924/2021 on 02.12.2022.

SATISH CHANDRA SHARMA, C.J. SUBRAMONIUM PRASAD, J NOVEMBER 09, 2022 Rahul/RR