THE STATE OF MADHYA PRADESH vs. U.P. STATE BRIDGE CORPORATION LIMITED

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4002 OF 2020 (ARISING OUT OF SLP (C) NO. 8496 OF 2020) THE STATE OF MADHYA PRADESH & ANR. …APPELLANTS VERSUS U.P. STATE BRIDGE CORPORATION LTD. & ANR. ...RESPONDENTS WITH CIVIL APPEAL NO. 4003 OF 2020 (ARISING OUT OF SLP (C) NO.8738 OF 2020) WITH CIVIL APPEAL NOS. 4004-4005 OF 2020 (ARISING OUT OF SLP (C) NOS.9539-9540 OF 2020) J U D G M E N T R.F. Nariman, J. 1. Leave granted. 2. These appeals pertain to a notice inviting tender [“ N.I.T. ”] dated 02.12.2019 by the State of Madhya Pradesh, Public Works Department [“ PWD ”]. The N.I.T. was for the construction of an Signature Not Verified Elevated Corridor (Flyover) from LIG Square to Navlakha Square Digitally signed by Anita Malhotra Date: 2020.12.08 17:52:36 IST Reason: (Old NH 3) A-B Road in Indore district in the State of Madhya Pradesh of a length of 7.473 kilometers. The work was for an 1 estimated cost of Rs. 272.66 crores, to be completed within a period of 24 months including the rainy season. Various parts of the N.I.T. are important and are referred to hereunder: 3. Under Section - 2, entitled “INSTRUCTIONS TO BIDDERS”, under clause A, entitled “GENERAL”, sub-clause 2.1.4 reads as follows:

Clause 2.2.2.2(ii) reads as follows:

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Provided that at least one similar work of 25% of Estimated Project Cost Rs. 68.17 Crores (Rs.Sixty Eight Crores Seventeen Lakhs only) shall have been completed from the Eligible Projects in Category 1 and/or Category 3 specified in Clause 2.2.2.5. For this purpose, a project shall be considered to be completed, if more than 90% of the value of work has been completed and such completed value of work is equal to or more than 25% of the estimated project cost. If any Major Bridge/ROB/Flyover/Tunnel is (are) part of the project, then the sole Bidder or in case the Bidder being a Joint Venture, any member of Joint Venture shall necessarily demonstrate additional experience in 2

Clause 2.2.2.5 states as follows:

3 (ii) The Technical capacity in respect of an Eligible Project situated in a developed country which is a member of OECD shall be further multiplied by a factor of 0.5 (zero point five) and the product thereof shall be the Experience Score for such Eligible Project.” Under clause 2.6.2(a), the authorities reserved the right to reject any bid, inter alia , on the following grounds:

Under Section - 3, entitled “EVALUATION OF TECHNICAL BIDS AND OPENING & EVALUATION OF FINANCIAL BIDS”, clauses 3.1.6.1 and 3.1.6.2 state as follows:

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Under Section - 4, entitled “FRAUD AND CORRUPT PRACTICES”, clause 4.1 read with the definition clause contained in clause 4.3(b), read as follows:

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xxx xxx xxx (b) “fraudulent practice” means a misrepresentation or omission of facts or suppression of facts or disclosure of incomplete facts, in order to influence the Bidding Process” Appendix IA consists of the letter comprising the technical bid addressed to the Office of the Chief Engineer, Bridge Construction Zone - Bhopal, which has to be filled up in a particular format. Paragraphs 11 and 13 of this letter are important and are set out hereinbelow:

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Appendix IB consists of the letter comprising the financial bid, which is also in a particular format, paragraph 2 of which reads as follows: 6

Annex I, entitled “Details of Bidder”, contains, in clause 7, the following:

4. Eleven companies bid for the aforesaid project, including U.P. State Bridge Corporation Limited [“ UPSBC ”], Rajkamal Builders Infrastructure Pvt. Ltd. [“ Rajkamal Builders ”] and Rachana Construction Co. Insofar as UPSBC is concerned, the State of Madhya Pradesh rejected its bid on the ground that the bidder suppressed information required under paragraph 13 of Appendix IA 7 and clause 7(b) of Annex I. Hence, the aforesaid bid was considered to be non-responsive. Likewise, insofar as Rachana Construction Co. is concerned, it did not fulfil the criteria under clause 2.2.2.2(ii) of the N.I.T. for “one similar work” of 25% of the estimated project cost, and was also therefore considered non-responsive. Pursuant to the rejection of the technical bid of UPSBC in the Technical Evaluation Committee’s meeting held on 13.03.2020, Writ Petition No. 6681 of 2020 was filed by UPSBC and by an interim order dated 17.03.2020, the financial bid of UPSBC was ordered to be opened. 5. On the opening of the financial bids, it was found that UPSBC had bid for a sum of Rs. 306.27 crores and Rajkamal had bid for Rs. 315.80 crores. Being disqualified, Rachana Construction Co.’s bid for Rs. 293.25 crores was not under consideration. 6. By the impugned judgment dated 15.06.2020 in Writ Petition No. 6681 of 2020 filed by UPSBC, it was held that as on the date of submission of the technical bid, since no investigation was pending within the meaning of clause 7(b) of Annex I, there was no suppression of facts by UPSBC, despite the fact that an FIR dated 15.05.2018 had been lodged against it in respect of a particular bridge constructed by it at Janpad, Varanasi which had collapsed, killing 15 persons and injuring 11 persons. The investigation in this case resulted in a charge sheet being filed. After the trial 8 commenced, the High Court of Judicature at Allahabad, by an order dated 30.07.2019, stayed the trial. Despite these facts not being stated in the bid document submitted by UPSBC, the High Court found that there was no suppression of facts, as clause 7(b) of Annex I only required details as to investigations that were pending, and as “investigation” as defined under the Code of Criminal Procedure [“ Cr.P.C. ”] was different from inquiries and trials, there was no need to disclose the FIR and its aftermath, as there was no “investigation pending” strictly speaking, as it had culminated in a charge sheet. The High Court was also swayed by the fact that there was a difference of Rs. 9 crores between the financial bids of UPSBC and Rajkamal. Public interest therefore demanded that the rejection of UPSBC’s technical bid be set aside. The State of Madhya Pradesh was therefore directed to issue a letter of intent [“ LOI ”] in favour of UPSBC for the financial bid of Rs. 306.27 crores within a period of 30 days from the date of the judgment. 7. Meanwhile, Rachana Construction Co. also filed Writ Petition No. 8404 of 2020 challenging the rejection of its technical bid by the State of Madhya Pradesh. By the impugned judgment dated 02.07.2020, the High Court adverted to the judgment dated 15.06.2020 in UPSBC’s writ petition and thereafter went on to examine whether Rachana Construction Co.’s bid had been rightly 9 rejected. Insofar as Rachana Construction Co.’s bid was concerned, the High Court referred to clause 2.2.2.2(ii) in paragraph 9 of its judgment and held that there was nothing wrong with the State of Madhya Pradesh’s rejection, as follows:

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8. In addition, the High Court also held that Rachana Construction Co., despite knowing that UPSBC had filed a writ petition, neither 11 intervened in the said writ petition nor filed an independent writ petition on its own until much later. Considering that the UPSBC had been declared as L-1 by a judgment dated 15.06.2020, UPSBC should have been arrayed as a respondent in the writ petition and not being so arrayed, the petition also suffered from non-joinder of a necessary party and therefore had to be dismissed. 9. Shri Saurabh Mishra, Additional Advocate General, took us through the N.I.T. and relied upon several clauses thereof. His principal argument was that the expression “investigation pending” cannot be taken to be in the sense of the Cr.P.C., as otherwise the said clause would be rendered otiose. “Investigation pending” would necessarily include within its scope all subsequent steps towards criminality of an accused, as a result of which clause 7(b) of Annex I required UPSBC to disclose material facts. He also relied upon the clause dealing with “fraudulent practice” and stated that the omission of a material fact would amount to a fraudulent practice, and this being a most material fact, as a particular bridge constructed by UPSBC had collapsed resulting in an FIR being lodged against it, not being disclosed by UPSBC, would be fatal under the fraudulent practice clause also. 10. Shri Dhruv Mehta, learned Senior Advocate, appearing on behalf of UPSBC, relied heavily on the judgment in Caretel Infotech Ltd. v. 12 Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81 [“ Caratel Infotech ”] , for the proposition that where a tender was in a particular format, nothing beyond the information that is required by that format need be given, and since no investigation was in fact pending against his client, clause 7(b) of Annex I could not have been invoked to non-suit his client. He also relied upon the judgment in Secy., Deptt. of Home Secy., A.P. v. B. Chinnam Naidu, (2005) 2 SCC 746 , in which case the petitioner concerned had to fill up a recruitment form in which previous convictions had to be stated. Since merely being arrested would not amount to a previous conviction, it was held that the petitioner could not be said to have suppressed the fact of his being convicted. He then argued that in any case if there is any ambiguity in the clause the rule of contra proferentem applies, as a result of which the literal interpretation, which is a possible interpretation, ought to prevail, and for this he cited Bank of India v. K. Mohandas, (2009) 5 SCC 313 . He was at pains to point out that no ground other than clause 7(b) of Annex I could now be taken, as the ground of fraudulent practice, which was sought to be argued by the State of Madhya Pradesh in this Court, was not a ground on which UPSBC’s bid was rejected. He also pointed out that public interest would require that the financial bid be accepted, being Rs. 9 crores less than that of Rajkamal. 13 11. Shri Anupam Lal Das, learned Senior Advocate appearing on behalf of Rachana Construction Co. assailed the impugned judgments dated 02.07.2020 and 04.08.2020 by relying upon the Contract Agreement dated 23.08.2017 between his client and the Dedicated Freight Corridor Corporation of India Limited [“ DFCCIL ”] for the work of construction of two nos. of road over bridges for an amount of Rs. 76.87 crores, 95% of which had been completed, for which a payment of Rs. 68.71 crores had been received. This being so, and this being above 25% of the estimated cost of the present tender (fixed at Rs. 68.17 crores), he stood technically qualified. It was wholly incorrect for the authorities to have bifurcated one project awarded under one tender into two, merely because two road over bridges had to be built. He also stated that non-joinder of a necessary party could not be held against him as all the facts were known and UPSBC could have intervened in Rachana Construction Co.’s matter. 12. Shri Puneet Jain, learned counsel appearing on behalf of Rajkamal, attacked the judgment in UPSBC’s case and supported the judgment in Rachana Construction Co.’s case, stating that quite apart from the clauses referred to and relied upon by the State of Madhya Pradesh, it was clear that Appendix IA had not been properly read, as paragraphs 11 and 13 had to be read together. 14 Clearly paragraph 11 indicated that if UPSBC were “indicted” in a criminal case, which would cast doubt on its ability to undertake the project, this would be sufficient to reject UPSBC’s bid. Insofar as Rachana Construction Co. is concerned, he referred to and relied upon clause 2.2.2.2(ii) and in particular, the latter part of the clause, which required that the bidder would have to demonstrate additional experience in respect of the bridge to be constructed in the present tender and would have to show that it had completed at least one similar major bridge of a span equal to or greater than 50% of the longest span of the structure proposed in this project. He adverted to the two road over bridges that were constructed under the agreement dated 23.08.2017 by Rachana Construction Co. for DFCCIL, both being of a length of 2380 meters when taken together. This would fall woefully short of 50% of 7.473 kilometers, which would amount to 3.736 kilometers, and on this additional ground also, Rachana Construction Co.’s bid ought to be rejected. 13. We have heard all the learned counsel for the parties. The parameters of judicial review in matters such as the present have been well stated in many decisions of this Court, beginning with the

which a 3 judge bench of this Court laid down the following principles: 15 “ 94. The principles deducible from the above are: (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” (pages 687-688) 14. Likewise, in Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 , this Court held: “ 22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is 16

15. In Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622 , this Court held as follows: “ 47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the 17

16. Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818 , puts the proposition extremely well when it states: “ 14. We must reiterate the words of caution that this Court has stated right from the time when Ramana Dayaram Shetty v. International Airport Authority of India [Ramana 18

17. This view of the law has been subsequently reiterated and followed in Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 (see paragraph 25 at page 287) and Caratel Infotech (supra) (see paragraphs 38-39 at pages 92-93). 18. Judged by these parameters, it is clear that this Court must defer to the understanding of clauses in tender documents by the author thereof unless, pithily put, there is perversity in the author’s construction of the documents or mala fides. As against this, Shri Dhruv Mehta is also correct in drawing our attention to Caratel Infotech (supra), and in particular, to paragraphs 4, 9, 22 and 23, which are set out hereinbelow: 19

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19. It is clear that Shri Dhruv Mehta is right when he refers to and relies upon the aforesaid judgment for the proposition that where there is a format which had to be strictly complied with, his client was justified in going by the literal reading of the aforesaid format, which only required a disclosure of pending investigations under clause 7(b) of Annex I of the N.I.T. However, as has correctly been pointed out by Shri Saurbh Mishra and Shri Puneet Jain, clause 7(b) of Annex I, which is in terms similar to paragraph 13 of Appendix IA, must be read together with paragraph 11 thereof, which, as has been pointed out hereinabove, requires the bidder to certify that in regard to matters other than security and integrity of the country, the bidder has not been convicted by a court of law or indicted. Clearly in the facts of the present case, though the investigation is no longer pending and though there is no conviction by a court of law, UPSBC has certainly been “indicted”, in that, a charge sheet has been filed against it relatable to the FIR dated 15.05.2018 in which a trial is pending, though stayed by the High Court. Also, Shri Saurabh Mishra is correct in stating that “fraudulent practice”, as defined in clause 4.3(b) of the N.I.T., would include an omission of facts or disclosure of incomplete facts in order to influence the 22 bidding process. In the facts of the present case, there is clearly an omission of a most relevant fact and suppression of the same fact, namely that an FIR had been lodged against UPSBC in respect of the construction of a bridge by it, which had collapsed, and in which a charge sheet had been lodged. 20. This being the case, Secy., Deptt. of Home Secy., A.P. v. B. Chinnam Naidu, (2005) 2 SCC 746 is clearly distinguishable, as in the facts of that case, the expression “convicted” could not have possibly included the factum of arrest which was pre-conviction. On the facts of the present case, we have seen as to how UPSBC has indulged in a fraudulent practice and has suppressed the fact that it was indicted for offences relatable to the construction of a bridge by it, which had collapsed. Equally, paragraphs 12 to 18 of the judgment in Vinubhai Haribhai Malaviya v. State of Gujarat, (2019) 17 SCC 1 , which distinguish between investigation, inquiry and trial in a criminal case, are also of no avail to UPSBC in view of the finding hereinabove. Equally, the well-known rule of contra proferentem as expounded in Bank of India v. K. Mohandas, (2009) 5 SCC 313 (at paragraph 32) is also of no avail, given the fact that there is no ambiguity whatsoever insofar as the fraudulent practice clause and paragraph 11 of Appendix IA are concerned. 23 21. Adverting to Shri Dhruv Mehta’s argument that his client has been non-suited only on application of clause 7(b) of Annex I, a reference to the Technical Evaluation Committee’s order dated 13.03.2020 declaring UPSBC’s bid non-responsive shows that it also refers to Appendix IA comprising the technical bid and paragraph 13 thereof, in particular. We have already held that paragraph 13 has to be read along with paragraph 11, which clearly states that a person who is “indicted” for a criminal offence has to disclose the factum of indictment. A technical objection based on the rejection order cannot be allowed to prevail in the face of the suppression of a most material fact, that is of an FIR pertaining to the construction of a bridge by UPSBC, which has collapsed. 22. Coming to the public interest factor, and the fact that the financial bid of UPSBC is about Rs. 9 crores less than that of Rajkamal, the sting has been removed inasmuch as Shri Puneet Jain readily accepts that if, as a result of UPSBC being disqualified, his client is to be awarded the tender, he will do so at the same amount as the financial bid of UPSBC. For all these reasons, the impugned judgment dated 15.06.2020 is set aside. 24 23. We now come to Rachana Construction Co.’s case. Insofar as Rachana Construction Co. is concerned, it will not be open for a constitutional court, in accordance with all the decisions cited hereinabove, to substitute their view of the view of the tendering authority, when it reads clause 2.2.2.2(ii) in the manner that has been done. Suffice it to say that the expression “at least one similar work” could possibly mean only one such work, namely, the construction of one such bridge and not two such bridges, even if two bridges were to be constructed under the same tender document. It is not possible, therefore, for this Court to say that the construction of the aforesaid clause by the tendering authority is an impossible one rendering it perverse. Also, Shri Puneet Jain’s argument, though made here for the first time, does support the State of Madhya Pradesh, in that the two road over bridges that have been constructed under the agreement between DFCCIL and Rachana Construction Co. have a span of only 2380 meters taken together, which is certainly less than 50% of 7.473 kilometers. For these reasons, we dismiss Rachana Construction Co.’s SLP and uphold the judgment dated 02.07.2020 and the review judgment dated 04.08.2020. 25 24. Given the lapse of time taken in court proceedings, the State of Madhya Pradesh is directed to issue a LOI as soon as is practically possible to Rajkamal insofar as the present tender is concerned at the same financial bid as that of UPSBC. All the appeals are disposed of accordingly. ……………….......................... J. (ROHINTON FALI NARIMAN) ……………….......................... J. (K.M. JOSEPH) New Delhi; December 08, 2020. 26