When rejection of tender bid is not permissible?

In the present case, taking note of the observations and the
purpose for which the EMD has to be deposited, we find that it cannot be

said that failure to upload the scanned copy is an essential term of the
tender process especially considering that there is nothing on record to show
that at any point of time, the Petitioners who were otherwise holding a draft
in favour of the concerned Department had failed to produce the proof of the
scanned copy when demanded. In such circumstances, the action of the
concerned Department in refusing to open the bid of the Petitioners is
arbitrary, unreasonable and cannot be sustained.
 IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 479 OF 2015
 Bharat Conductors Pvt. Ltd.,

V 
The Executive Engineer,

 CORAM :- F.M. REIS &
 NUTAN D. SARDESSAI, JJ.
 Date : 7/8th September, 2016.
Citation: 2016(6) MHLJ 408

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Whether payment of earnest money can be considered to be an essential term of tender process?

Apart from that, the payment of earnest money cannot be
considered to be an essential term of the tender process. The Apex
Court, in a Judgment reported in (1991) 3 SCC 273 in the case of
Poddar Steel Corporation vs. Ganesh Engineering Works and others,
has observed at paras 6 and 8, thus :
“6. It is true that in submitting its tender accompanied
by a cheque of the Union Bank of India and not of the
State Bank clause 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 C.J. Fernandez v. State of
Karnataka (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 (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.
8. In the present case the certified cheque of the Union 
Bank of India drawn on its 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 not to reject the said bid
which was the highest. We, therefore, set aside the
impugned judgment and dismiss the writ petition of
respondent 1 filed before the High Court. The appeal is
accordingly allowed with costs throughout.”
In the present case, considering the purpose for which the earnest
money is being deposited, we find that it is not an essential term of the
tender process. On going through the terms of the tender, it appears
that the earnest money would be adjusted as security deposit if the bid
of the tenderer is accepted. Hence, once the tender documents, along
with the demand draft, were accepted by the respondent-Corporation, it
was not open to the respondent-Corporation to unilaterally reject the
bid of the petitioner. In such circumstances, we find that the rejection
of the bid of the petitioner cannot be sustained and deserves to be
quashed and set aside. 
 IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 79/2016
Sudha Facility Management Service,

V/s.
 The Managing Director,
Citation: 2016(6) MHLJ 96

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When contractor in government contract should not be disqualified?

So far as clause (j) of the detailed notice inviting E-tender No.01/KMDA/MAT/CE/2013-2014 dated 10.5.2013 emanating from the office of the Chief Engineer is concerned, it seems to us that contrary to the conclusion in the impugned judgment, the clause is not an essential element or ingredient or concomitant of the subject NIT. In the course of hearing, the Income Tax Return has been filed by the Appellant-company and scrutinized by us. For the Assessment Year 2011-2012, the gross income of the Appellant- company was Rs.15,34,05,627, although, for the succeeding Assessment Year 2012-2013, the income tax was NIL, but substantial tax had been deposited. We think that the Income Tax Return would have assumed the character of an essential term if one of the qualifications was either the gross income or the net income on which tax was attracted.

In many cases this is a salutary stipulation, since it is indicative of the commercial standing and reliability of the tendering entity. This feature being absent, we think that the filing of the latest Income Tax Return was a collateral term, and accordingly the Tendering Authority ought to have brought this discrepancy to the notice of the Appellant- company and if even thereafter no rectification had been carried out, the position may have been appreciably different. It has been asserted on behalf of the Appellant-company, and not denied by the learned counsel for the Respondent-Authority, that the financial bid of the Appellant-company is substantially lower than that of the others, and, therefore, pecuniarily preferable.

14. In this analysis, we find that the Appeal is well founded and is allowed. The impugned judgment is accordingly set aside. The disqualification of the Appellant-company on the ground of it having failed to submit its latest Income Tax Return along with its bid is not sufficient reason for disregarding its offer/bid. 
SUPREME COURT OF INDIA

Rashmi Metaliks Ltd. & ANR. Vs. Kolkata Metropolitan Development Authority & Ors.

[Civil Appeal No. 6772 of 2013]

VIKRAMAJIT SEN, J.

Dated:11-9-2013

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