Full Judgment Text
Reportable
2023INSC864
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 5968 of 2023
(Arising out of SLP (C) No 18100 of 2023)
BTL EPC Ltd …Appellant
Versus
Macawber Beekay Pvt Ltd and Others …Respondents
W I T H
Civil Appeal No 5969 of 2023
(Arising out of SLP (C) No 18574 of 2023)
&
Civil Appeal No 5970 of 2023
(Arising out of SLP (C) No 19227 of 2023)
J U D G M E N T
Dr Dhananjaya Y Chandrachud, CJI
1. Leave granted.
2. These appeals arise from a judgment dated 27 July 2023 of a Division Bench of the
High Court of Karnataka. The High Court set aside a judgment of a Single Judge, in a
Signature Not Verified
Digitally signed by
CHETAN KUMAR
Date: 2023.09.27
17:58:26 IST
Reason:
1
1 2
writ appeal . As a consequence of the impugned judgment, a Letter of Intent which
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was issued by Bharat Heavy Electricals Limited , in favour of the appellant has been
quashed and BHEL has been directed to consider the bid submitted by the first
respondent in terms of a Notice Inviting Tenders dated 24 June 2022.
3. BHEL was awarded a contract for setting up the 5x800 MW Yadadri Thermal Power
Station. A part of the work was sought to be subcontracted. BHEL invited bids for
undertaking the work of design, engineering, manufacturing, supply and other
related works pertaining to an Ash Handling Plant. The appellant submitted its bid. On
29 September 2022, a letter of intent was issued to the appellant for a total contract
value of Rs 378.64 crores.
4. The controversy in the present case turns on the pre-qualification requirement for
bidders, notified by BHEL. Clause 01.00.00 deals with the technical criteria. Clauses
01.01.01, 01.01.02, and 01.01.03 are material in the present case. Clause 01.01.01
contains certain specific requirements that bidders had to fulfill. It read as follows:
“The bidder should have executed at least one (1)
number Ash Handling Plant (AHP) in India/abroad for
a thermal power station using sea water/plain water
involving design, engineering, manufacture,
procurement, supply, erection & commissioning (or
supervision of erection & commissioning) comprising
the following systems which should be in successful
operation for at least (1) year as on date of
submission of the bid:
1
Writ Appeal No 1169 of 2022 (GM-TEN)
2
“LoI”
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“BHEL” (the second respondent)
2
a. Bottom ash handling system comprising jet pump
system in conjunction with water impounded
bottom ash hopper designed from minimum 50
TPH (on dry ash basis) capacity or more for
pulverized coal fired boilers.
AND
b. First stage fly ash handling system for conveying fly
ash from ESP hoppers to Intermediate Surge
Hopper (ISH) by vacuum conveying system
designed for minimum 30 TPH capacity (dry ash
basis) per stream.
AND
c. Second stage fly ash handling system for
conveying fly ash from Intermediate Surge Hopper
(ISH) to Fly ash silos by pressure conveying system
designed from minimum 20 TPH capacity (dry ash
basis) per line for a distance not less than 500 mtrs.
AND
d. High Concentration Ash Slurry Disposal (HCSD)
System for minimum 40 TPH capacity (dry ash
basis) per line.
The above Clauses 01.01.01 (a), (b), (c) and (d)
can be in one single plant or in a combination of
plants.”
5. Clause 01.01.02 stipulated that a bidder who is a supplier of a bulk material handling
system, but does not fulfill the requirements under clause 01.01.01 could also
participate, subject to certain stipulations. The clause is extracted below:
“Bidder who is a supplier of bulk material handling
system but does not meet the requirements under
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clause 01.01.01 above in part or in full can also
participate provided he has executed at least the
following systems design, engineering, manufacture,
supply, erection & commissioning (or supervision of
erection & commissioning):
a. Fly Ash Handling System for conveying Fly Ash from
ESPs in dry form (vacuum conveying or pressure
conveying system) or in wet slurry mode
OR
b. Bulk material handling system, comprising of bell
conveyors having a minimum design capacity of
800 TPH
The systems mentioned at 01.01.02 (a) or (b) above
should be in successful operation in at least two (2)
plants for at least two (2) years as on date of
submission of bid and should have been installed for
pulverized coal fired boiler units in India/abroad
generating not less than 40 TPH of Ash per boiler.
AND
Collaborate(s)/Associate(s) with party(ies) who
meet(s) either the total requirement under 01.01.01
(a), (b) and (c) above or any of the above
requirement under 01.01.01 (a), (b) and (c), which
the bidder himself is not able to meet.
In such a case, the Bidder shall be required to furnish
consortium agreement jointly executed by the
Bidder and the collaborator(s)/Associate(s) and
each executant, shall be jointly and severally liable
to employer for successful performance of the
relevant system, as per the format (Annexure -A)
enclosed along with bid. The collaboration
agreement should be submitted along with the bid.
In such a case, each Collaborator/Associate shall be
required to furnish a bank guarantee at the time of
placement of order as follows:
i. INR 10 Lakh (Rupees Ten Lakh) for
Collaborator/Associate for Jet pumping
system
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ii. INR 25 Lakh (Rupees Twenty Five Lakh) for
Collaborator/Associate for Vaccum
conveying system
iii. INR 25 Lakh (Rupees Twenty Five Lakh) for
Collaborator/Associate for Pressure
Transportation system
AND
Collaborate(s)/Associate(s) with party who meets
the requirement under 01.01.01 (d) above which the
bidder himself is not able to meet.
In such a case, the Bidder shall be required to furnish
Agreement of Support jointly executed by the Bidder
and the collaborator/Associate for successful
performance of the HCSD system as per the format
(Annexure-B) enclosed along with bid. The
Agreement of Support should be submitted along
with the bid.
In case bidder collaborates/associates for more than
one system with a party, then the
Collaborators/Associate shall be required to furnish a
bank guarantee for an amount arrived at by adding
up the amounts for the relevant systems as above.”
6. Clause 01.01.03 then provided as follows:
“The activity of design and engineering under
01.01.01 (a), (b) and (c) should have been carried
out by the bidder and not through any external
design agency/agencies. The activity of design and
engineering under 01.01.01 (d) should have been
carried out by the bidder or through any external
design agency having experience of HCSD system.
For design and engineering activity referred under
paras 01.01.02 the activity should have been carried
out by either the bidder or through design
agency/agencies having experience for reference
systems. In case of collaborator(s)/associate(s)
meeting the balance part of total requirement under
clause 01.01.01 (a), (b), (c) and (d) the activity of
design and engineering for the reference systems
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should have been carried out by them.
Bidders qualifying under Sl No.01.01.02 and
collaborating/associating with party(s) meeting
total/balance part of 01.01.01 (a), (b), (c) and (d)
shall follow the following for supply and
manufacturing of equipment. Bidder shall
manufacture from their manufacturing set up based
on collaborator(s)/associate(s) drawing for the
clause which bidder himself is not meeting the
requirement but the collaborator(s)/associate(s) is
meeting the requirement, then the
collaborator(s)/associate(s) shall approve bidder’s
manufacturing facilities and manufacturing quality
standards. Also after the manufacture of the items,
the product shall be inspected by the respective
collaborator(s)/associate(s) and furnish certificate of
conformance (COC) for the product.
Also, BHEL/Customer shall approve manufacturing
facilities of the equipment of the vendor’s self-
manufacturing items in case the items are being
manufactured by bidder as per
collaborator(s)/associate(s) design and
manufacturing drawing.”
7. These clauses were followed by the documents which were required to be furnished.
Among them, if the bidder had entered into a consortium agreement in order to
meet the requirements of clause 01.01.01 as permitted by clause 01.01.02, a copy of
the consortium agreement was to be submitted along with the tender documents. If
the bidder was a foreign party, there was a mandatory requirement of having a
collaboration/consortium agreement with an Indian agency for erection and
commissioning at site.
8. Clause 01.01.02 permitted a bidder who did not meet the criteria specified in 01.01.
01, to enter into a consortium agreement. Accordingly, the appellant entered into a
consortium agreement with a Chinese company by the name of Fujian Longking
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Company Limited, the fourth respondent. Annexure 1 of the agreement specified the
rights and responsibilities of the appellant on the one hand and the Chinese
company on the other in the following terms:
“1. The first party (M/s BTL EPC Ltd. Kolkata) shall
undertake complete works as detailed in NIT
which includes detailed design & engineering,
manufacturing, supply, erection, testing,
commissioning, trial run, demonstration of PG
test and handing over for complete ash
handling plant.
2. The second party (M/s Fujian Longking, China)
shall undertake basic design, vetting of detail
engineering, Support in manufacturing,
Support/Supervision of erecting, commissioning
& PG test for complete AHP (excluding HCSD
system).”
9. On 23 July 2020, the Public Procurement Division in the Department of Expenditure of
the Union Ministry of Finance issued an Order imposing certain restrictions under Rule
144(xi) of the General Financial Rules 2017, whereby a prospective bidder from a
country that shares a land border with India, would be eligible to bid, only if such
bidder is registered with the Competent Authority. The Order, which is described as
“Public Procurement No 1” specified a requirement of registration in the following
terms:
“Requirement of registration
1 Any bidder from a country which shares a land border with
India will be eligible to bid in any procurement whether of
goods, services (including consultancy services and non-
consultancy services) or works (including turnkey projects)
only if the bidder is registered with the Competent Authority,
specified in Annex I.
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2 This Order shall not apply to (i) cases where orders have
been placed or contract has been concluded or
letter/notice of award/acceptance (LoA) has been issued
on or before the date of this order; and (ii) cases falling
under Annex II.”
10. Clause (6) of the Order defined a “bidder” as follows:
“Bidder” for the purpose of this Order (including the term
‘tenderer’, ‘consultant’, ‘vendor’ or ‘service provider’ in certain
contexts) means any person or firm or company, including any
member of a consortium or joint venture (that is an association of
several persons, or firms or companies), every artificial juridical
person not falling in any of the descriptions of bidders stated
hereinbefore, including any agency, branch or office controlled
by such person, participating in a procurement process.”
11. Similarly, clause (8) contains a definition of the expression “bidder from a country
which shares a land border with India” in the following terms:
“Bidder from a country which shares a land border with India” for
the purpose of this Order means
a) An entity incorporated, established or registered in such a
country; or
b) A subsidiary of an entity incorporated, established or
registered in such a country; or
c) An entity substantially controlled through entities
incorporated, established or registered in such a country; or
d) An entity whose beneficial owner is situated in such a
country; or
e) An Indian (or other) agent of such an entity; or
f) A natural person who is a citizen of such a country; or
g) A consortium or joint venture where any member of the
consortium or joint venture falls under any of the above.”
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12. The first respondent instituted a writ petition under Article 226 of the Constitution
before the High Court of Karnataka contending that the award of the contract to the
appellant was in breach of the conditions which were imposed in the Order dated 23
July 2020 of the Union Ministry of Finance. The contention was that the Chinese
company which had entered into a consortium agreement with the appellant so as
to enable the appellant to fulfill the eligibility conditions under the tender floated by
BHEL was required to be registered with the competent authority, according to the
Public Procurement Order dated 23 July 2020. It was urged that in the absence of
such registration, the tender submitted by the appellant did not meet the technical
requirements and could not have been considered by BHEL.
13. The Single Judge of the Karnataka High Court dismissed the writ petition by a
judgement dated 2 November 2022. The Single Judge held that
(i) Entering into a consortium agreement was permissible under the terms of the
tender;
(ii) The submission of the tender by the appellant, along with the copy of the
agreement, was proper;
(iii) On the issue of mandatory registration under the Public Procurement Order, a
clarification dated 8 February 2021 stated that a bidder can procure raw
material, as opposed to finished goods, from an entity such as the fourth
respondent even if the latter was not registered with the competent authority;
4
Writ Petition No 20333 of 2022 (GM-TEN)
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(iv) Since the appellant was not even procuring raw materials but only sought
support for design, erection and commissioning requirements, the bid did not
violate the procurement order;
(v) The Court’s scrutiny was limited to the decision-making process;
(vi) The financial bid of the appellant was Rs 58 crores lower in value than the
financial bid submitted by the first respondent; and
(vii) The decision-making process was not arbitrary and did not merit interference,
in line with the principle of limited judicial scrutiny of the discretion vested in a
tendering authority.
14. The judgment of the Single Judge was carried in appeal.
15. The Division Bench of the High Court reversed the decision of the Single Judge and
allowed the writ appeal. The respondent (who was the appellant before the Division
Bench) argued that
(i) The consortium agreement between the appellant and the Chinese entity was
meant to confer eligibility on the appellant, which did not possess the requisite
qualifications on its own;
(ii) Thus, by way of the consortium agreement, a bidding consortium was created
where the Chinese entity was a joint bidder;
(iii) As such, according to the Public Procurement Order the Chinese company
was required to register with the competent authority in order to participate in
the tender process; and
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(iv) In the absence of registration, the bidding consortium comprising the
appellant and the Chinese Company did not meet the technical criteria of the
tender.
16. The appellant on the other hand, maintained that
(i) The agreement was not a consortium agreement in the technical sense (clause
7 of the pre-qualification requirements);
(ii) It was called a consortium agreement only because it was styled in accordance
with the template for a consortium agreement, appended to the tender
document;
(iii) If it were actually a consortium agreement in the strict sense, the Chinese
company would have contributed to the bid and had a share in the profits as
well;
(iv) the nature of the agreement was more like a service contract than like a
consortium agreement strictly speaking;
(v) The Chinese company was a mere associate who was providing services in
relation to the designs under the terms of the agreement; it did not contribute to
the bid and was not entitled to any profits that accrued in favor of the appellant;
(vi) The bid was submitted and awarded in favour of the appellant as a standalone
bidder and not as a part of a bidding consortium; and
(vii) Considering the nature of the contract and the Chinese company’s limited role,
the non-registration under the Procurement Order was inconsequential.
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17. By its impugned judgment dated 27 July 2023, the Division Bench reversed the
decision of the Single Judge. The Division Bench observed that
(i) The agreement between the appellant and the Chinese Company is an
undertaking to the tendering authority as to the due performance of the
contract;
(ii) The agreement is central to the appellant’s bid and is thus a consortium
agreement;
(iii) The bid was thus made on behalf of the bidding consortium;
(iv) According to the Single Judge, the requirement of registration was not
applicable in view of the clarification by the subsequent Office Memorandum
dated 23 July 2020; this subsequent clarification applied in respect of import of
raw material and whether the goods procured would be considered raw
material or finished goods was relevant only after the award of the contract;
(v) The requirement of mandatory registration had not been done away with by
the clarification contained in the Office Memorandum dated 23 July 2020;
(vi) The Chinese company, as a part of the bidding consortium was required to
register in the absence of which the bidding consortium was ineligible to
participate in the tender process; and
(vii) BHEL, in awarding the tender, had overlooked this violation and wrongly based
its decision only on the financial bid.
18. The Division Bench thus, set aside the Single Judge’s decision. The LoI which was
awarded to the appellant has been set aside with the consequential direction to
process the bids submitted by the first respondent in terms of the Notice Inviting
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Tenders. In the meantime, albeit in pursuance of interim directions to the effect that
no equities would be created in favour of the successful bidder, work has proceeded
apace. The stage of the work and the impact, if any, it should have on the outcome
of these proceedings would be considered subsequently .
19. Besides this appeal which has been filed by the successful party to whom the
contract was awarded by BHEL, a companion Special Leave Petition has been filed
before this Court by BHEL and by the Telangana State Power Generation Company
Limited. The latter had awarded the contract for the construction of a 5x800 MW
Thermal Power Station to BHEL and in its submission, the project is likely to get affected
by the orders which have been passed by the High Court in relation to the setting up
of the Ash Handling Plant.
20. We have heard Mr Mukul Rohatgi, Mr Gaurab Banerjee and Mr V Giri, senior counsel
appearing on behalf of the appellants in support of the appeals. Mr Harish N Salve
and Mr Neeraj Kishan Kaul, senior counsel have appeared on behalf of the original
petitioner before the High Court, namely, the first respondent. For convenience of
reference, the parties as they appear in the lead appeal are referred to in these
proceedings.
21. The controversy in the present case lies in a narrow frame. Clause 01.01.01 stipulates
four requirements that each bidder has to fulfill. All the requirements are cumulative
as is indicated by the use of the word “and” after sub-clauses (a), (b) and (c).
Evidently, it is not in dispute that the appellant did not fulfill the technical requirements
specified in clause 01.01.01. However, this was not the end of the matter for the
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reason that clause 01.01.02 specifically contemplated such an eventuality. This clause
stipulates that a bidder which is a supplier of bulk material handling systems, but does
not meet the requirements under clause 01.01.01 in part or in full, could also
participate provided such a bidder had executed at least the systems design,
engineering, manufacture, supply, erection and commissioning of projects of the
nature described in either (a) or (b). Apart from having experience of the projects
that were specified under clause 01.01.02, there was an additional condition which
was that such a bidder must collaborate/associate with a party or parties who meet
all the requirements of sub-clauses (a), (b), and (c) of clause 01.01.01. In other words,
though the bidder itself was not able to meet the requirements of clause 01.01.01,
such non-compliance would be obviated if the bidder collaborated or associated
with an entity that met the requirements of sub-clauses (a), (b) and (c) either
individually or in conjunction with the bidder himself. In that case, the bidder was
required to furnish a consortium agreement jointly executed with the
collaborator/associate so as to accept joint and several responsibilities towards the
tendering authority. Clause 01.01.03 contains certain stipulations in regard to the
activity of design and engineering under clause 01.01.01.
22. Clause 7.2 of the pre-qualification requirements contains specific stipulations in
regard to the nature of the bidding consortium. Clause 7.2 is in the following terms:
“The members of bidding Consortium should have
entered into a Memorandum of Association (MOA)
between themselves. One of the members of
Consortium, holding at least 51% of the
equity/ownership stake shall be authorized and
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nominated as the ‘Lead member’ (Lead Member) to
act and represent all the members of the Consortium
for bidding and implementation of the Project.”
23. The agreement between the appellant and the Chinese company, it is common
ground, did not involve an equity, stake, or ownership of the Chinese company. This
aspect has not been disputed. The issue which fell for determination before the High
Court was whether the bid submitted by the appellant was liable to be rejected on
the ground that the Chinese company with whom it had entered into a consortium
agreement was not registered with the competent authority in terms of the Public
Procurement Order dated 23 July 2020.
24. At this stage, it would be material to note that the Procurement Order dated 23 July
2020 has been clarified by an OM dated 8 February 2021. The OM stipulates that in
terms of paragraph 11 of the Order dated 23 July 2020, in the case of a works
contract including a turnkey contract, the contractor shall not be allowed to sub-
contract the work to any contractor from a country that shares a land boundary with
India unless the contractor is registered with the competent authority. The OM clarifies
the earlier order by stipulating that:
“However, no such restriction is stipulated in the
Order regarding other procurements i.e.
procurement of Goods, Services, etc.”
25. The High Court went on to decide whether the registration requirement applied even
after the clarification and whether the absence of such registration vitiated the bid
and the decision to award the contract to the appellant.
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26. The submissions which have been urged on behalf of the appellant are that:
(i) The appellant was at all material times the sole bidder to whom a LoI was
awarded by BHEL on 29 September 2022;
(ii) There was no bidding consortium within the meaning of clause 7.2 of the pre-
qualification requirements;
(iii) The Chinese company with whom a consortium agreement was entered into by
the appellant had no equity in the project which was being contracted for by
the appellant;
(iv) The Procurement Order dated 23 July 2020 with the clarification which was issued
thereafter on 8 February 2021 requires only a registration and does not impose a
disqualification; and
(v) As a matter of public interest, the High Court ought not to have interfered
consistently with settled legal principles since a large part of the work has
already been completed.
27. These submissions have been opposed on behalf of the respondents who have urged
that:
(i) The appellant did not qualify under clause 01.01.01 and could bid for the
project only in pursuance of the experience of the Chinese entity with
whom a collaboration agreement was entered into;
(ii) The consortium agreement with the Chinese company specifically stated
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that the appellant did not qualify in terms of clause 01.01.01;
(iii) The definition of the expression ‘bidder’ in the OM dated 23 July 2020 is
broad enough so as to encompass a consortium agreement;
(iv) The above position would be amplified by the responses submitted by the
appellant in the course of the queries that were raised in the tendering
process;
(v) Clause 52 of the Special Conditions of Contract specifically emphasizes the
conditions that were set out in the OM;
(vi) The responses which were furnished by the appellant to the pre-
qualification requirements contain a specific statement that the appellant
had entered into a consortium agreement with the Chinese company; and
(vii) Likewise, the Chinese company in its letter dated 18 July 2023 clarified that
it had entered into a consortium agreement in pursuance of which it was
undertaking joint and several liability towards BHEL.
The bid which was submitted by the appellant was lower than the bid submitted by
28.
the first respondent in the vicinity of Rs 58 crores. During the course of the hearing, it
has been submitted on behalf of the first respondent that the first respondent would
be willing to match the bid which was submitted by the appellant and if the contract
is awarded to it in pursuance of the impugned judgment of the Division Bench of the
High Court, it would take over the contract from the stage where it was left by the
appellant. However, BHEL and Telangana State Power Generation Company have
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stated that since the ongoing work is design intensive, substituting a new entity would
require redesigning of the whole project at a significant cost to the exchequer.
29. In assessing the validity of the rival submissions, it needs to be noted that the
Procurement Order issued by the Union Ministry of Finance on 23 July 2020 imposes a
requirement of registration where a bidder shares a land border with India. The order
specifies that such a bidder would be eligible to bid in any procurement of goods,
services (including consultancy and non-consultancy services), or works, including
turnkey projects if the bidder is registered with the competent authority as set out in
Annexure I. The expression ‘bidder’ is defined in clause (6) in broad terms so as to
encompass any member of a consortium or joint venture. Similarly, clause (8) also
incorporates a consortium or joint venture.
30. Clause 11 of the Order contains the following provision in relation to the sub-
contracting of works contracts in the following terms:
“In works contracts, including turnkey contracts,
contractors shall not be allowed to sub-contract
works to any contractor from a country which shares
a land border with India unless such contractor is
registered with the Competent Authority. The
definition of “contractor from a country which shares
a land border with India” shall be as in paragraph 8
above. This shall not apply to sub-contracts already
awarded on or before the date of this Order.”
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31. The above requirement in clause 11 was subsequently clarified in the OM of the Union
Ministry of Finance dated 8 February 2021 so as to exclude from its ambit the
procurement of goods and services. According to the appellant, the relaxation which
was granted on 8 February 2021 would enure to its benefit. At this stage, it would be
material to note that clause 01.01.02 of the pre-qualification requirements enables
bidders who otherwise do not fulfill the requirements of clause 01.01.01 to submit a bid
so long as they fulfill the requirements of having experience in the commissioning of
projects as spelt out in the paragraph and in addition, they would have to have a
collaborator or an associate who meets the requirements of clause 01.01.01. In such a
case, the bidder is required to furnish a consortium agreement jointly executed with
the collaborator or associate. It was in pursuance of the above requirement that the
appellant submitted a consortium agreement with the Chinese company.
32. Clause 7 of the bid documents stipulates that a bidder may collaborate or tie up in
any legal form with other parties. As part of this requirement, clause 7.2 envisages that
a Memorandum of Association should be executed between the members of a
bidding consortium in which one of the members holding at least 50% of the
equity/ownership stake would be treated as a lead member to act for and represent
all the members of the consortium. The agreement between the appellant and the
Chinese company does not fall within the description of clause 7.2 since the Chinese
company has no ownership or equity in the project, no MoU as required by the clause
was executed between the appellant and the Chinese entity and it has no
contribution in the bid. The agreement was pure and simple, an agreement in terms
of the requirements that were imposed by clause 01.01.02.
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33. Neither Telangana State Power Generation Company Limited nor for that matter BHEL
raised any dispute in regard to the eligibility of the appellant to bid for the contract.
The challenge was addressed by the first respondent who is a competing bidder
whose bid was admittedly higher than the bid which was submitted by the successful
bidder by approximately Rs 58 crores. The Procurement Order dated 23 July 2020
imposes a registration requirement and also states that the bidder would not be
eligible unless it is registered in the event that it belongs to a country that shares a
land border with India. The primary decision on whether the appellant meets the
technical requirements of the tender on account of its collaborator/associate being
a Chinese company that was not registered had to be determined by BHEL. BHEL has
not found that there was a breach of the OM dated 23 July 2020 which, as noted
earlier, has been relaxed by the subsequent OM dated 8 February 2021. In this
context, it has been submitted on behalf of the appellant that out of a total contract
value of Rs 378.64 crores in the contract between BHEL and the appellant, the
Chinese sub-contract for carrying out design and other related aspects of the Ash
Handling Plant is to the extent of US dollars 95,000 corresponding approximately to Rs
78 lakhs, which is only 0.2% of the entire contract value. BHEL and the Telangana
State Power Generation Company found that the agreement with the Chinese
company was in the nature of a service agreement and not a “consortium” under
clause 7.2 of the pre-qualification requirements. The bid was made by the appellant
as a standalone entity and not in a consortium comprising the unregistered Chinese
entity. It was neither a joint bid nor a bid made by a bidding consortium. Thus, the
registration requirement did not apply. Further, in accordance with the pre-
qualification requirements, the appellant’s manufacturing facilities were duly
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examined and approved by BHEL, and the bid was approved after due
consideration and satisfaction of BHEL, the tendering authority. The Union
Government by its subsequent OM dated 8 February 2021 has diluted the rigours of
the earlier Procurement Order dated 23 July 2020 by stipulating that the earlier order
shall not affect the procurement of goods and services per se .
34. In this view of the matter, we are of the considered view that the Division Bench
which was considering an appeal against a judgment of a Single Judge rejecting the
writ petition ought to have proceeded with circumspection.
35. It is settled law that in contracts involving complex technical issues, the Court should
exercise restraint in exercising the power of judicial review. Even if a party to the
contract is ‘State’ within the meaning of Article 12 of the Constitution, and as such, is
amenable to the writ jurisdiction of the High Court or the Supreme Court, the Court
should not readily interfere in commercial or contractual matters. This principle has
been reiterated in a recent judgment of this Court. Justice J B Pardiwala, speaking for
the Bench in Tata Motors Limited v. BEST held:
“48. This Court being the guardian of fundamental
rights Is duty- bound to Interfere when there Is
arbitrariness, irrationality, mala fides, and bias
However, this Court has cautioned time and again
that courts should exercise a lot of restraint while
exercising their powers of judicial review In
contractual or commercial matters This Court Is
normally loathe to Interfere In contractual matters
unless a clear-cut case of arbitrariness or mala fides
or bias or Irrationality Is made out One must
remember that today many public sector
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undertakings compete with the private industry The
contracts entered Into between private parties are
not subject to scrutiny under writ jurisdiction. No
doubt, the bodies which are State within the
meaning of Article 12 of the Constitution are bound
to act fairly and are amenable to the writ jurisdiction
of superior courts but this discretionary power must
be exercised with a great deal of restraint and
caution. The courts must realise their limitations and
the havoc which needless Interference in
commercial matters can cause. In contracts
Involving technical issues the courts should be even
more reluctant because most of us in Judges' robes
do not have the necessary expertise to adjudicate
upon technical Issues beyond our domain. The
courts should not use a magnifying glass while
scanning the tenders and make every small mistake
appear like a big blunder. In fact, the courts must
give fair play In the Joints' to the government and
public sector undertakings In matters of contract.
Courts must also not Interfere where such
interference will cause unnecessary loss to the public
5
exchequer. ”
36. The Court ought to defer to the discretion of the tender inviting authority which, by
reason of having authored the tender documents, is best placed to interpret their
terms. The Courts ought not to sit as courts of appeal but review the decision-making
6
process and examine arbitrariness or mala fides, if any.
37. Even in a writ appeal, it is well settled that the Division Bench would ordinarily not
interfere with the judgment of a Single Judge unless it suffers from perversity or error.
5
Tata Motors Limited vs Brihan Mumbai Electric Supply & Transport Undertaking (BEST) and Others,
2023 SCC OnLine SC 671.
6
Monte Carlo Limited vs National Thermal Power Corporation Limited, (2016) 15 SCC 272.
22
38. Hence, having considered the rival submissions, and for the above reasons, we are of
the view that the interference of the Division Bench in the judgment of the Single
Judge was not warranted. That apart, during the course of the hearing, it has
emerged before this Court that the contract is under implementation. Paragraphs 39
and 40 of the affidavit which was filed before the High Court by BHEL are extracted
below:
39. Of the total Project work, 80% of the civil work,
72% of the structural work and 65% of the supply
work of the Project in totality has been
completed. BTL has completed around 80% of
the mechanical engineering, supply and work
worth about INR 50,00,00,000 so far.
40. Further, 99% of the Engineering for the Wet Ash
system has been completed by BTL. Moreover,
50% of the Civil and Structural Works of the
Power station, being completed by BHEL, is
already in place”
39. At this stage, the High Court has, while setting aside the award of the contract to the
appellant, directed that the bid which was submitted by the first respondent shall be
considered in terms of the Notice Inviting Tenders. Though during the course of the
hearing, the first respondent has made a statement through senior counsel that it
would match the bid which was submitted by the appellant, there can be no
gainsaying the fact that this will cause insuperable difficulties in the implementation of
the contract since the work under the contract has progressed. While the appellant
was placed on notice that this would not create any special equities in its favour,
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there is apart from the interest of the appellant which is a private entity, the interest of
both the Telangana State Power Generation Company Limited and of BHEL, both of
which are public entities which have invested funds for the realization of the project
involving the setting up of the 5x800 MW thermal power plant.
40. For the above reasons, we allow the appeals and set aside the judgment of the
Division Bench of the High Court of Karnataka. The judgment of the Single Judge
dismissing the writ petition shall stand restored. There shall be no order as to costs.
The civil appeals are accordingly allowed.
41.
42. Pending applications, if any, stand disposed of.
…….……....…...….......…………………..CJI.
[Dr Dhananjaya Y Chandrachud]
…………......…........……………….…........J.
[J B Pardiwala]
....……….....…........……………….…........J.
[Manoj Misra]
New Delhi;
September 18, 2023
CKB
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