Whether Essentiality of a term in Notice Inviting Tender can be decided by Employer?

Yet another problem could be faced by an employer (such
as CCL) if the language used in the terms of the NIT or the GTC
is not adhered to and its plain meaning discarded. A problem
could be faced by an employer if every bidder furnishes a bank
guarantee in a different format or one that it is comfortable with.
In such a situation, CCL would have to scrutinize each bank
guarantee to ascertain whether it meets with its requirements
and the NIT and the GTC. Apart from the text of the bank
guarantee, minor changes could be made by a bidder such as
enforceability in a place other than Ranchi (but in Jharkhand)
etc. This would place an avoidable and undue burden on the
employer particularly if there are a large number of bidders.
. Not only this, any decision taken by the employer in
accepting or rejecting a particular bank guarantee in a format
not prescribed by it could lead to (avoidable) litigation requiring
the employer to justify the rejection or acceptance of each bank
guarantee. This is hardly conducive to a smooth and hassle-free
bidding process.
52. There is a wholesome principle that the Courts have been
following for a very long time and which was articulated in Nazir
Ahmad v. King EmperorAIR 1936 PC 253 namely“Where a power is given to
do a certain thing in a certain way the thing must be done in
that way or not at all. Other methods of performance are
necessarily forbidden.” There is no valid reason to give up this
salutary principle or not to apply it mutatis mutandis to bid
documents. 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. It must
follow from the application of the principle laid down in Nazir
Ahmed that if the employer prescribes a particular format of the
bank guarantee to be furnished, then a bidder ought to submit
the bank guarantee in that particular format only and not in any
other format. However, as mentioned above, there is no

inflexibility in this regard and an employer could deviate from
the terms of the bid document but only within the parameters
mentioned above.
53. Nazir Ahmed has been followed in dozens of decisions
rendered by this Court and by other constitutional Courts in the
country. The Central Vigilance Commission has accepted this
principle in a modified form as a guiding principle in its circular
dated 31st December, 2007 wherein it is mentioned that all
organizations ought to evolve a procedure for acceptance of bank
guarantees that is compatible with the guidelines of banks and
the Reserve Bank of India. One such requirement is that the
bank guarantee should be in a proper prescribed format and
should be verified verbatim on receipt with the original.
Adherence to this principle of verbatim verification would not
only avoid undue problems for the employer but would also
virtually eliminate subjectivity on the part of the employer.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8004 OF 2016
Central Coalfields Limited & Anr. .
V
SLL – SML (Joint Venture Consortium) &
Ors. 
Dated:August 17, 2016
Citation: AIR 2016 SC 3814,(2016) 8 SCC622

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When tender committee can waive technical irregularity in compliance of terms of tender?

It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank the clause no. 6 of the tender notice was not obeyed literally, but the question is as to whether the said non- compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in GJ Fernandez v. State of Karnataka 7 Ors., [1990] 2 SCC 488 a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view. The High Court has, in the impugned decision, relied upon Ramana Dayaram Shetty v. International Airport Authority of India & Ors., [1979] 3 SCC 489 but has failed to appreciate that the reported case belonged to the first category where the strict compliance of the condition could be insisted upon. The authority in that case, by not insisting upon the requirement in the tender notice which was an essential condition of eligibility, bestowed a favour on one of the bidders, which amounted to illegal discrimination. The judgment indicates that the Court closely examined the nature of the condition which had been relaxed and its impact before answering the question whether it could have validly condoned the shortcoming in the tender in question. This part of the judgment demonstrates the difference between the two categories of the conditions discussed above. However it remains to be seen as to which of the two clauses, the present case belongs.

7. The nature of payment by a certified cheque was considered by this Court in Sita Ram Jhunjhunwala v. Bombay Bullion Association Ltd. & Anr., [1965] 35 Company Cases

526. Several objections were taken there in support of the plea that the necessary condition in regard to payment was not satisfied and in that context this Court quoted the observations from the judgment in an English decision (vide Spargo's case: 1873 L.R. & Ch. App. 407) that it is a general rule of law that in every case where a transaction resolves itself into paying money by A to B and then handing it back again by B to A, if the parties meet together and agree to set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards. This Court applied that the observations to a transaction requiring payment by one to another. The High Court's decisions in B.D. Yadav's case and T.V. Subhadra Amma's case are also illustrations where literal compliance of every term of the tender notice was not insisted upon.

8. In the instant case the certified cheque of the Union Bank of India drawn on is own branch must be treated as sufficient for the purpose of achieving the object of the condition and the Tender Committee took the abundant caution by a further verification from the bank. In this situation it is not correct to hold that the Diesel Locomotive Works had no authority to waive the technical literal compliance of clause 6, specially when it was in its interest of not to reject the said bid which was the highest. 

Supreme Court of India

Poddar Steel Corporation vs Ganesh Engineering Works And ... on 6 May, 1991

Equivalent citations: 1991 AIR 1579, 1991 SCR (2) 696

BENCH:
SHARMA, L.M. (J)
PUNCHHI, M.M.

CITATION:
 1991 AIR 1579    1991 SCR  (2) 696
 1991 SCC  (3) 273   JT 1991 (2) 577
 1991 SCALE  (1)928

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