Full Judgment Text
$~67.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 06.10.2023
% Judgment delivered on: 03.11.2023
+ W.P.(C) 8619/2023 and CM APPL. 32714/2023 & CM APPL.
36561/2023
TPF ENGINEERING PVT LTD & ANR. ..... Petitioners
Through: Mr. Darpan Wadhwa, Sr. Advocate
with Mr. Malak Bhatt, Mr. Akash
Singh, Ms. Neeha Nagpal,
Mr.Siddharth Kumar, Ms. Ananya
Kanoria, Ms. Divita Vyas and
Mr.Amer Vaid, Advocates.
versus
NATIONAL HIGHWAYS LOGISTICS MANAGEMENT
LIMITED & ANR. ..... Respondents
Through: Mr. Arun Kumar Varma, Sr.
Advocate with Mr. Vikas Goel,
Mr.Abhishek Kumar, Mr. Vivek
Gupta and Ms. Twinkle Kataria,
Advocates for respondent No.1/
NHLML.
Mr. Bhagvan Swarup Shukla, CGSC
and Mr. Sarvan Kumar, GP for
respondent No.2/ UOI.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJEEV NARULA
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ROHELLA
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J U D G M E N T
SATISH CHANDRA SHARMA, C.J.
A. Introduction
1. The present writ petition emanates from the issuance of a letter issued
by National Highway Logistics Management Limited (hereinafter
“ NHLML ” or “ Respondent No. 1 ”) whereby, TPF Engineering Private
Limited (hereinafter “ TPFE ” or “ Petitioner ”) has been declared technically
unresponsive; and has been disqualified from the tendering process of the
Tender ( defined below ) on account of the extension / application of the
Debarment Order ( defined below ) to the Petitioner.
B. Brief Facts
2. The Petitioner before this Court is a company engaged in construction
of roads, bridges and other ancillary activities, and admittedly part of a
conglomerate i.e., M/S TPF S.A. (“ TPFS ”), a consultancy firm with global
presence.
3. The facts reveal that Respondent No. 1 issued a request for proposal
dated 31.12.2022 for the purpose of inter alia the feasibility study for
development of certain identified ropeway projects i.e., the Ropeway
Projects (Bundle-3) ( as defined under the Tender ) (the “ RFP ” or “ Tender ”).
Pertinently, the bids in relation to the Tender were invited in 2 (two) phases:
(i) the technical bid; and (ii) the financial bid. Undisputedly, the Petitioner
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and its joint-venture and / or consortium partner i.e., MDP Consulting
submitted its technical bid in relation to the Tender.
4. On the other hand, vide a letter of debarment dated 05.06.2023
bearing number: DC/53/DraftTermination/NewAE/efile-201323, the
National Highways Authority of India (“ NHAI ”) debarred M/S TPF Gentisa
Eurustudios S.L (“ TPFG ”) for a period of 2 (two) years from the date of
issue of the said order from participating in future national highway (“ NH ”)
projects of the NHAI and / or the Ministry of Road Transport and Highways
(“ MoRTH ”) or its executing agencies either directly or indirectly (the
“ Debarment Order ”).
5. Pertinently, in the interregnum between the issuance of the Debarment
Order and the declaration of the results of the technical evaluation of bids
submitted in relation to the Tender as more particularly identified in
Paragraph 6 of this Judgement below. Respondent No.1 by way of an email
dated 12.06.2023 sought a clarification from the Petitioner in relation to the
relationship between TPFG and the Petitioner by 3:00 PM on 13.06.2023
(the “ Query ”). The Petitioner responded to Query within the requisite time
period vide a letter dated 13.06.2023 whereunder, the Petitioner clarified that
the relationship between TPFG and the Petitioner is limited to that of a
common majority shareholder i.e., TPFS; and further clarified that the
management, structure and company administration of TPFG and the
Petitioner is distinct, independent and separate from each other.
6. Thereafter Respondent No. 1 vide a letter dated 23.06.2023 declared
(i) the result of the technical evaluation of the bid(s) in relation to the Tender
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whereunder the Petitioner scored 96.05 points and found itself in the top 3
(three) amongst the 8 (eight) bidders; (ii) clarified that the financial bids of
all technically responsive bidders in relation to the Tender were scheduled to
be opened at 11:30 AM on 27.06.2023; and (iii) declared the Petitioner as
disqualified on account of the Debarment Order read with a circular dated
04.01.2022 issued by MoRTH bearing number RW/NH- 33044/76/2021-
S&R(P&B) framing inter alia standard operating procedures (“ SOP ”)
whereunder any debarment order qua a non-performing firm, stands
automatically extended to all „ allied firms ‟ of the said non-performing firm
i.e., herein the Petitioner was debarred on account of the Debarment Order
passed in relation to TPFG (the “ Circular ”) (the “ Impugned Letter ”).
7. Aggrieved by the Impugned Letter, the Petitioner has preferred this
present writ petition seeking inter alia the quashing of the Impugned Letter;
and a direction to treat the Petitioner as „technically responsive‟ so as to
enable the Petitioner to participate in the financial bidding process under the
Tender.
C. Submissions on behalf of the Petitioner
8. Mr. Darpan Wadhwa, Senior Counsel appearing on behalf of the
Petitioner has submitted before this Court that the Petitioner has been
disqualified from the tendering process solely on account of Respondent No.
1 treating TPFG as an „ allied firm ‟ of the Petitioner on account of an
interpretation of the Circular read with an Office Memorandum bearing
number bearing No. F.1120/2018-PPD dated 02.11.2021, formulating
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guidelines on „Debarment of Firms from Bidding‟ issued by Department of
Expenditure, Ministry of Finance, Procurement Policy Division (the “ OM ”).
9. In this regard it has been submitted that admittedly, TPFG and the
Petitioner have the same holding company i.e., TPFS. However, TPFG was
debarred vide the Debarment Order by a sister concern of the Respondent
i.e., the NHAI and accordingly, the application of the said Debarment Order
to the Tender issued by Respondent No. 1 relying on the OM and the
Circular was without any foundation or in consonance with the terms or
conditions of the Tender. Accordingly, it was submitted that the issuance of
the Impugned Letter to the extent of disqualification was improper and
ought not to be made the basis of disqualification of the Petitioner from the
tendering process.
10. Furthermore, it has been reiterated that the reliance of Respondent No.
1 on the term „ allied firms ‟ under Paragraph 3 of the OM is misplaced as the
case herein does not pertain to a situation wherein either the Petitioner or its
own holding company has been blacklisted, however this is a case wherein
an ancillary company has been debarred and the same has been extended to
the Petitioner i.e., the sole commonality between the Petitioner and TPFG is
limited to that of a common majority shareholder / holding company.
Accordingly, it is submitted that in the absence of a commonality qua
management structure, administrative staff, managerial set-up or the
workforce between the Petitioner and TPFG, the Petitioner could not have
been classified as an „ allied firm‟ of TPFG. Reliance has also been placed on
certain identified provisions of the Companies Act, 2013 (the “ Companies
Act ”); the Income Tax Act, 1961 (the “ IT Act ”) to contrast the test(s) for
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commonality between two identified persons to contend that TPFG and the
Petitioner ought not be treated as „ allied firms ‟ defined under Paragraph 3 of
the OM. For ease of reference, the definition of „ allied firms ‟ is reproduced
hereunder:
“3. Allied firm: All concerns which come within the sphere of
effective influence of the debarred firms shall be treated as
allied firms. In determining this, the following factors may be
taken into consideration:
a. Whether the management is common;
b. Majority interest in the management is held by the partners
or directors of banned/ suspended firm;
c. Substantial or majority shares are owned by the banned/
suspended firm and by virtue of this it has a controlling voice.
d. Directly or indirectly controls, or is controlled by or is under
common control with another bidder.
e. All successor firms will also be considered as allied firms.”
11. In this regard it has been submitted that the aforementioned definition
is vague and contrary, and consequently the extension of the Debarment
Order to the Petitioner is arbitrary and in contravention to Article 14 of the
Constitution of India on account of the lack of any nexus between the
Petitioner and the debarred firm i.e., TPFG.
12. Lastly, it has been contended before this Court that Respondent No. 1
could not have issued the Impugned Letter in the absence of affording the
Petitioner an opportunity to be heard. Accordingly, it is submitted that the
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actions of Respondent No. 1, are contrary to the well-established principles
of natural justice. In this regard, reliance has been placed on:
(i) Sunrise House Keeping & Support Services Private Limited v.
Chandigarh Industrial & Tourism Development Corporation
Limited & Anr., W.P. (C) 1879 of 2017 (P&H);
(ii) Frontier Alloy Steels Ltd. v. Union of India , 2007 SCC OnLine All
940;
(iii) Pritam Singh & Sons v. State of Punjab , 1996 SCC OnLine P&H
405;
(iv) Roshni Enterprises v. Union of India , 2011 SCC OnLine Del 2540;
(v) Raghunath Thakur v. State of Bihar , (1989) 1 SCC 229; and
(vi) JBM Ecolife Mobility (P)Ltd. v. Union of India , 2022 SCC OnLine
Del 3350 (“ JBM Ecolife II ”).
D. Submissions on behalf of the Respondent(s)
13. Mr. Arun Kumar Varma, Senior Counsel appearing on behalf of
Respondent No. 1 has submitted before this Court that the Petitioner i.e.,
National Highways Logistics Management Limited (previously known as
Cochin Port Road Company Limited) is a wholly owned special purpose
vehicle (“ SPV ”) of NHAI which was incorporated on 19.01.2004 under the
Companies Act, 1956. Further, it is submitted that the MoRTH directed the
implementation of multi-modal logistics parks (“ MMLPs ”), high
connectivity to ports and other ancillary works through Respondent No. 1.
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Accordingly, the Tender came to be issued under the Parvatmala
Pariyojana by Respondent No. 1.
14. In this background, it has been contended before this Court that the
Petitioner‟s contention qua the alleged violation of principles of natural
justice in issuing the Impugned Letter is misguided as no contract has been
entered into between the Petitioner (or its joint venture / consortium) and
Respondent No. 1. Furthermore, Mr. Varma has placed reliance on
Paragraph 5 of Appendix II of the RFP to contend that the Petitioner has
waived its right to challenge the rejection of its bid. For ease of reference, on
Paragraph 5 of Appendix II of the RFP is reproduced as under:
“5. I/We acknowledge the right of the authority to reject our
application without assigning any reason or otherwise and
hereby waive our right to challenge the same on any account
whatsoever.”
15. Accordingly, it has been submitted that in light of the unambiguous
terms of Clause 5 of Appendix II of the RFP; and in light of the well settled
principle of law i.e., that the terms of a tender must be construed strictly, the
contention of the Petitioner cannot be sustained in light of Petitioner waiving
its right to challenge the rejection of its application / bid by Respondent No.
1. Furthermore, this Courts‟ attention has been drawn to Paragraph 14,
Paragraph 15 and Paragraph 19 of the OM to contend that the question of
affording an opportunity of hearing to the Petitioner simply does not arise
when the OM categorically prohibits the issuance of contracts to inter alia
„allied firms‟ of debarred persons. Furthermore, he has also submitted that
similarly, the revocation of a debarment order shall also apply immediately
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and uniformly without affording the Respondent(s) an opportunity to contest
the same. For ease of reference, Paragraph 14, Paragraph 15 and Paragraph
19 of the OM are reproduced hereunder:
“14. An order for debarment passed shall be deemed to have
been automatically revoked on the expiry of that specified
period and it will not be necessary to issue a specific formal
order of revocation.
15. A debarment order may be revoked before the expiry of
the Order, by the competent authority, if it is of the opinion that
the disability already suffered is adequate in the circumstances
of the case or for any other reason.
x x x
19. The Debarment shall be automatically extended to all its
allied firms. In case of joint venture/ consortium is debarred all
partners will also stand debarred for the period specified in
Debarment Order. The names of partners should be clearly
specified in the "Debarment Order".”
16. It was submitted that, in the aforementioned context, Respondent No.
1 dispensed with granting the Petitioner an opportunity of being heard as the
same would be reduced to a mere formality. Reliance in this regard has been
placed on a decision of this Court in JBM Ecolife Mobility (P) Ltd. v.
Union of India , 2022 SCC OnLine Del 1397.
17. Thereafter, Mr. Varma has vehemently contended that the issuance of
the Impugned Letter cannot be faulted, especially on account of a common
holding company between the Petitioner and TPFG i.e., a fact that has not
been disputed by the Petitioner, which would result in the Petitioner being
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treated as an „ allied firms ‟ under Paragraph 3 of the OM. Furthermore, it has
been submitted that the said definition is merely indicative, not
determinative and accordingly, the reliance placed by the Petitioner on the
provisions of the Companies Act and IT Act to restrict the latitude of the
debarment order is misguided on account of a clear policy decision to
restrict business dealings with non-performers and its allied firms.
Additionally, it has been submitted that the aforementioned policy decision
is reflected under Clause 1.4 of the Tender whereunder the Petitioner would
have been rendered ineligible. The same reads as under:
“1.4 The Consultants may apply either as a sole firm or
forming Joint Venture with other consultants. In case of Joint
Venture, the maximum number of Joint Venture partners is
limited to three including Associate partner, if any (i.e. Case 1:
one lead + JV 1 +JV 2 or Case 2: one Lead + one JV partner +
one Associate partner). The Applicant whether a sole applicant
or joint venture may include an Associate company also. Any
entity which has been barred by the Ministry of Road Transport
and Highways (MORTH) or its implementing agencies for the
works of Expressways, National Highways, ISC, EI Works and
any other work being carried by MoRTH/ NHAT NHIDCL/
NHLML and the bar subsists as on the date of application,
would not be eligible to submit the bid, either individually or as
a member of a Joint Venture.”
18. Lastly, it has been submitted that not only is the holding company a
commonality between the Petitioner and TPFG but the Board of Directors of
both companies also feature a common director. Accordingly, the contention
raised by the Petitioner qua the erroneous treatment of the Petitioner as an
allied firm of TPFG ought to be rejected.
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ROHELLA
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19. In rejoinder, Mr. Wadhwa has submitted that the prohibition under
Clause 1.4 of the Tender could not have been agitated against the Petitioner,
as on the date of submission of bids, no Debarment Order subsisted against
even TPFG; and that on account of a single common director, the
management could not be said to be common.
E. Analysis & Findings
20. This court has heard the Learned Counsel(s) appearing on behalf of
the parties and perused the record.
21. Pertinently, as a precursor, it would be relevant to reiterate that this
Court passed an interim order dated 28.06.2023, in the present writ petition
whereunder Respondent No. 1 had been directed to consider the Petitioner‟s
technical and financial bid on merits subject to the outcome of the present
petition. Thereafter, vide an order dated 20.07.2023, the Respondents were
directed to open the financial bids received in the Tender and present the
results to this Court in a sealed cover. On 25.07.2023, the Petitioner was
identified as H-1 in relation to Package No. 2 ( as defined under the Tender )
and accordingly, this writ petition now stands confined to the
abovementioned section of the Tender.
22. Undisputedly, the Petitioner participated in the tendering process
pursuant to the Tender and successfully submitted its bid. Thereafter, on
12.06.2023, Respondent No. 1 vide the Query sought certain clarifications in
relation to the nature of the relationship between the Petitioner and TPFG
i.e. a company that had since been debarred by the NHAI. In furtherance of
the Query, the Petitioner vide a letter dated 13.06.2023, delineated the nature
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of the relationship between the Petitioner; and TPFG. Pertinently, it was
disclosed that the two companies shared a common majority shareholder /
holding company. The shareholding of (i) the Petitioner; and (ii) TPFG are
reproduced below:
23. Subsequently, the Impugned Letter came to be issued whereunder
inter alia the Petitioner was (i) declared technically unresponsive; and (ii)
disqualified from the tendering process of the Tender by extending the
application of Debarment Order upon the Petitioner on account of the
guidelines framed under the SOP; and the Circular whereunder a debarment
order automatically stands extended to all „ allied firms‟ of such debarred
firm. Aggrieved by the issuance of the Impugned Letter, the Petitioner has
filed this present writ petition.
24. The fulcrum of the dispute before this Court is whether the Petitioner
could be classified as an „ allied firm ‟ of the TPFG and accordingly could be
disqualified from the tendering process of the Tender.
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25. At the outset it would be relevant to refer to the OM issued by
Department of Expenditure, Ministry of Finance, Procurement Policy
Division whereunder the capitalised term(s) „Allied Firms ‟ and „ Firm ‟ have
been defined. Upon a perusal of the definition of the capitalised term „Allied
Firms ‟ and „ Firm ‟ defined under Paragraph 3 of the OM, this Court is of the
considered opinion that, the said term is inclusive so as to extend to firms
which may „be controlled by‟; or under the „common control of‟ a particular
person. Pertinently, a parallel may be drawn against Section 2(76) of the
Companies Act whereunder, the capitalised term „ Related Party ‟ has been
defined to include “ a subsidiary of the same holding company ”. For ease of
reference Section 2(76) of the Companies Act is reproduced as under:
“2. (76) “related party”, with reference to a company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a
partner;
(iv) a private company in which a director or manager is a
member or director;
(v) a public company in which a director or manager is a
director or holds along with his relatives, more than two per
cent. of its paid-up share capital;
(vi) any body corporate whose Board of Directors, managing
director or manager is accustomed to act in accordance with
the advice, directions or instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a
director or manager is accustomed to act:
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Provided that nothing in sub-clauses (vi) and (vii) shall apply
to the advice, directions or instructions given in a professional
capacity;
(viii) any company which is—
(A) a holding, subsidiary or an associate company of
such company; or
(B) a subsidiary of a holding company to which it is also
a subsidiary;
(ix) such other person as may be prescribed;”
26. Accordingly, in light of the language of the OM whereunder the term
„allied firms‟ has been defined; this Court is of the considered opinion that a
firm which is controlled by a common parent or a holding company or is
controlled by a subsidiary or under the common control with another related
party would satisfy the definition of allied firms. Accordingly, as TPFS
exercises “common ownership interest” ( defined under the Tender ) in both
the Petitioner; and TPFG both TPFG and the Petitioner have rightly been
treated as allied firms / related parties by Respondent No. 1.
27. Therefore, this Court must now consider whether Respondent No. 1
could have disqualified the Petitioner on account of it being an „ allied firm‟
of TPFG. Pertinently, TPFG was debarred vide the Debarment Order,
thereafter, vide the issuance of the Impugned Letter, the application of the
Debarment Order was extended to the Petitioner. As we have already held
hereinabove, that the Petitioner was rightly treated as an allied firm ,
accordingly, the question before this Court is whether the extension of the
Debarment Order under Paragraph 9.3 of the Circular to the Tender was
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proper. For ease of reference Paragraph 9.3 of the Circular is reproduced as
under:
“9.3 Debarment/declaration as non-performer of a particular
firm shall automatically extend to all its allied firms. In case a
joint venture/ consortium is debarred, all partners/members
shall stand debarred for the entire period.”
28. Upon, a perusal of the aforementioned circular, the application of the
Debarment Order is deemed to automatically extend to all its allied firms .
Under Paragraph 9.3 of the Circular, the Debarment Order is self-activating
qua the Petitioner herein and therefore it would naturally restrain the
Petitioner from participating in future NH projects of NHAI / MoRTH or its
executing agencies either directly or indirectly.
29. In the context, it would be relevant to note that Tender was issued by
Respondent No. 1 under the Parvatmala Pariyojana formulated by the
MoRTH. Undoubtedly, Respondent No. 1 is an executing agency of the
NHAI / MoRTH which has as per the counter affidavit filed by Respondent
No. 1, has been incorporated as a SPV of NHAI for the implementation of
inter alia MMLPs, high connectivity to ports and other ancillary works.
30. Accordingly, the application of the Debarment Order to the Tender
must be tested against the anvil of Paragraph 9.3 of the Circular and the
terms and conditions of the Tender. In this background, it would be pertinent
to note that Paragraph 9.3 of the Circular contemplates an automatic or self-
activating extension of an order of debarment to allied firms of the debarred
entity. Furthermore, Paragraph 12 of the Debarment Order contemplates a
prospective prohibition from participation in NH projects of NHAI /
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MoRTH or its executing agencies either directly or indirectly. Furthermore,
Clause 1.4 of the Tender clarifies that a prospective bidder would have been
deemed ineligible to submit its bid in the event that an order of debarment
operated against such prospective bidder as on date of the application. The
relevant extracts of the Debarment Order; and the Tender are reproduced as
under:
(i) Relevant Paragraph of the Debarment Order:
“12. In view of the above and in accordance with St. No. 3 (a)
Et (e) of table given in Para-4.1 NHAI Policy Circular no.
16.12 dated 18.01.2022, the Competent Authority has approved
the debarment of the Consultant i.e. TPF Getinsa Eurostudios
S.L. and Segmental Consulting Et Infrastructure Advisory (P)
Ltd. for a period of 2(two) years from the date of issue of this
Order from participating in future NH projects of
NHAI/MoRTEtH or its executing agencies either directly or
indirectly.”
(ii) Relevant Clause of the Tender:
“1.4 The Consultants may apply either as a sole firm or
forming Joint Venture with other consultants. In case of Joint
Venture, the maximum number of Joint Venture partners is
limited to three including Associate partner, if any (i.e. Case 1:
one lead + JV 1 +JV 2 or Case 2: one Lead + one JV partner +
one Associate partner). The Applicant whether a sole applicant
or joint venture may include an Associate company also. Any
entity which has been barred by the Ministry of Road Transport
and Highways (MORTH) or its implementing agencies for the
works of Expressways, National Highways, ISC, EI Works and
any other work being carried by MoRTH/ NHAT NHIDCL/
NHLML and the bar subsists as on the date of application,
would not be eligible to submit the bid, either individually or as
a member of a Joint Venture.”
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31. Admittedly, the Tender was issued on 31.12.2023, thereafter the
Petitioner submitted its bid on 22.03.2023; and subsequently on 11.05.2023,
the Petitioner was found to be technically qualified in respect of the Tender.
However, vide the Impugned Letter, the Petitioner was inter alia
disqualified from the tendering process of the Tender on account Clause 1.4
of Tender; Paragraph 9.3 of the Circular; read with the Debarment Order.
32. Therefore, this Court must consider whether the rigors under Clause
1.4 of the Tender would only apply in the event a Debarment Order subsist
on the date of the application i.e., which as per the Petitioner must be
interpreted to mean that an order of debarment must subsist as on the date of
submission of the bid; or whether the rigors of Clause 1.4 of the Tender
could be invoked through the various stages of tendering process prior to the
issuance of the Letter of Allotment (“ LoA ”), as contended by Respondent
No. 1. In this regard, it would be necessary to refer to certain decisions of
the Hon‟ble Supreme Court of India (the “ Supreme Court ”) in relation to
scope of judicial review in the interpretation of a tender document.
33. The Supreme Court in Agmatel India (P) Ltd. Vs. Resoursys
Telecom , (2022) 5 SCC 362, has analysed the scope of judicial review in
contractual matters, particularly in relation to the process of interpretation of
a tender document. Accordingly, the Supreme Court in Agmatel India (P)
Ltd. (Supra) relying on Galaxy Transport Agencies Vs. New J.K.
Roadways, Fleet Owners & Transport Contractors , (2021) 16 SCC 808;
Montecarlo Ltd. v. NTPC Ltd. , (2016) 15 SCC 272; and Afcons
Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd. , (2016) 16 SCC 818,
held as under:
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“26. The abovementioned statements of law make it amply clear
that the author of the tender document is taken to be the best
person to understand and appreciate its requirements; and if its
interpretation is manifestly in consonance with the language of
the tender document or subserving the purchase of the tender,
the Court would prefer to keep restraint. Further to that, the
technical evaluation or comparison by the Court is
impermissible; and even if the interpretation given to the tender
document by the person inviting offers is not as such acceptable
to the constitutional court, that, by itself, would not be a reason
for interfering with the interpretation given.”
34. 34. Moreover in, Silppi Constructions Contractors v. Union of
India , (2020) 16 SCC 489 the Supreme Court observed as under:
“20. The essence of the law laid down in the judgments referred
to above is the exercise of restraint and caution; the need for
overwhelming public interest to justify judicial intervention in
matters of contract involving the State instrumentalities; the
courts should give way to the opinion of the experts unless the
decision is totally arbitrary or unreasonable; the court does not
sit like a court of appeal over the appropriate authority; the
court must realise that the authority floating the tender is the
best judge of its requirements and, therefore, the court's
interference should be minimal. The authority which floats the
contract or tender, and has authored the tender documents is
the best judge as to how the documents have to be interpreted.
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If two interpretations are possible then the interpretation of the
author must be accepted. The courts will only interfere to
prevent arbitrariness, irrationality, bias, mala fides or
perversity. With this approach in mind we shall deal with the
present case.”
35. Lastly, the Supreme Court in Michigan Rubber (India) Ltd. v. State
of Karnataka , (2012) 8 SCC 216 enunciated principles warranting judicial
interference in contractual matters involving the State, the same are
reproduced as under:
“23. From the above decisions, the following principles
emerge:
(a) The basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence
and substance is the heartbeat of fair play. These
actions are amenable to the judicial review only to
the extent that the State must act validly for a
discernible reason and not whimsically for any
ulterior purpose. If the State acts within the bounds
of reasonableness, it would be legitimate to take into
consideration the national priorities;
(b) Fixation of a value of the tender is entirely
within the purview of the executive and the courts
hardly have any role to play in this process except
for striking down such action of the executive as is
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proved to be arbitrary or unreasonable. If the
Government acts in conformity with certain healthy
standards and norms such as awarding of contracts
by inviting tenders, in those circumstances, the
interference by courts is very limited;
(c) In the matter of formulating conditions of a
tender document and awarding a contract, greater
latitude is required to be conceded to the State
authorities unless the action of the tendering
authority is found to be malicious and a misuse of its
statutory powers, interference by courts is not
warranted;
(d) Certain preconditions or qualifications for
tenders have to be laid down to ensure that the
contractor has the capacity and the resources to
successfully execute the work; and
(e) If the State or its instrumentalities act
reasonably, fairly and in public interest in awarding
contract, here again, interference by court is very
restrictive since no person can claim a fundamental
right to carry on business with the Government.
Therefore, a court before interfering in tender or contractual
matters, in exercise of power of judicial review, should pose to
itself the following questions:
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(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?
and
(ii) Whether the public interest is affected?
If the answers to the above questions are in the negative, then there
should be no interference under Article 226.”
36. Accordingly, the extension of the Debarment Order to the Tender qua
the Petitioner and the consequent disqualification of the Petitioner from the
Tender must be considered in this narrow scope of judicial review so as to
determine whether the interpretation of Clause 1.4 of the Tender adopted by
Respondent No. 1 was arbitrary, irrational, biased, mala fide or perverse. In
the considered opinion of this Court, the interpretation of the Tender
adopted by Respondent No. 1, is manifestly in consonance with the language
adopted under the Tender. The interpretation of Clause 1.4 of the Tender
advanced by the Ld. Counsel appearing on behalf of the Petitioner would
frustrate the object of the Debarment Order. On the other hand, the
interpretation adopted by Respondent No.1 cannot be faulted for being
irrational, whimsical and / or arbitrary as the extension of the Debarment
Order to the Petitioner qua the Tender is in consonance with the underlying
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policy considerations of the tendering authority i.e., limiting exposure of the
State exchequer to non-performers and their allied firms / related parties. In
this background, Respondent No. 1 has undoubtedly, acted reasonably, fairly
and above all, in public interest.
37. In this context, we are unable to accept the arguments of the Petitioner
vis-à-vis the restrictive interpretation of Clause 1.4 of the Tender. Such an
interpretation would amount to permitting the Petitioner to continue in the
tendering process of the Tender while the Debarment Order is in operation
against it. Debarring an entity from participation in participation in NH
projects of NHAI / MoRTH or its executing agencies either directly or
indirectly cannot be limited to mean only debarment from submission of a
bid but would naturally include all other subsequent stages of the tendering
process culminating into an award of a contract.
38. Accordingly, following the decisions of the Supreme Court as more
particularly outlined above, this Court finds no infirmity qua the
interpretation of the terms and conditions of the Tender and consequently,
the issuance of the Impugned Letter to the Petitioner, thereby disqualifying
the Petitioner from the tendering process of the Tender.
39. We must now turn to another facet of the present dispute before us.
Mr. Wadhwa, has framed in essence the following questions for our
considerations whether (i) the Petitioner was independently required to be
afforded an opportunity of hearing before the application / extension of the
Debarment Order; and (ii) whether the issuance of the Impugned Letter is
liable to be interfered with consequent to a failure on the part of the
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Respondent No. 1 to have provided that opportunity of hearing to the
Petitioner.
40. Undisputedly, as observed in the Debarment Order, TPFG was
provided with multiple opportunities to refute all the allegations levelled
against it and show cause as to why disciplinary action should not be taken
against it. Moreover, the said opportunities were availed by TPFG who has
inter alia vide a letter bearing number: 225 dated 14.03.2023 submitted its
clarifications which have been duly considered by the NHAI prior to the
issuance of the Debarment Order. Furthermore, prior to the issuance of the
Impugned Letter, vide an email dated 12.06.2023, Respondent No. 1 called
upon the Petitioner to explain its relationship with TPFG i.e., the debarred
entity. Vide a letter dated 13.06.2023 issued to Respondent No.1, the
Petitioner disclosed that it shared a common holding company with TPFG.
Thereafter, the Impugned Letter came to be issued as a consequence of the
Debarment Order issued in favor of TPFG. As observed herein above, the
extension of the Debarment Order qua an allied firm i.e., the Petitioner
herein is an automatic and inevitable consequence of an order of debarment
being issued to an allied firm / related party. Accordingly, it is in this
background that the contravention of principles of natural justice would
have to be considered.
41. It would be pertinent to refer to the decision of the Supreme Court in
Dharampal Satyapal Ltd. v. CCE , (2015) 8 SCC 519, wherein, the Supreme
Court has appreciated the underlying historical context qua principles of
natural justice; and thereafter went onto observe that the principles of natural
justice cannot be applied in a straitjacket formula whilst appreciating (i) the
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rule of prejudice; and (ii) useless formality exception . The relevant extracts
of Dharampal Satyapal (Supra) have been reproduced below:
“19. What is the genesis behind this requirement? Why it is
necessary that before an adverse action is taken against a
person he is to be given notice about the proposed action and
be heard in the matter? Why is it treated as inseparable and
inextricable part of the doctrine of principles of natural justice?
20. Natural justice is an expression of English Common Law.
Natural justice is not a single theory—it is a family of views. In
one sense administering justice itself is treated as natural virtue
and, therefore, a part of natural justice. It is also called
“naturalist” approach to the phrase “natural justice” and is
related to “moral naturalism”. Moral naturalism captures the
essence of commonsense morality—that good and evil, right
and wrong, are the real features of the natural world that
human reason can comprehend. In this sense, it may
comprehend virtue ethics and virtue jurisprudence in relation to
justice as all these are attributes of natural justice. We are not
addressing ourselves with this connotation of natural justice
here.
21. In Common Law, the concept and doctrine of natural
justice, particularly which is made applicable in the decision-
making by judicial and quasi-judicial bodies, has assumed a
different connotation. It is developed with this fundamental in
mind that those whose duty is to decide, must act judicially.
They must deal with the question referred both without bias and
they must give (sic an opportunity) to each of the parties to
adequately present the case made. It is perceived that the
practice of aforesaid attributes in mind only would lead to
doing justice. Since these attributes are treated as natural or
fundamental, it is known as “natural justice”. The principles of
natural justice developed over a period of time and which is
still in vogue and valid even today are : (i) rule against bias i.e.
nemo debet esse judex in propria sua causa; and (ii)
opportunity of being heard to the party concerned i.e. audi
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alteram partem. These are known as principles of natural
justice. To these principles a third principle is added, which is
of recent origin. It is the duty to give reasons in support of
decision, namely, passing of a “reasoned order”.
24. The principles have a sound jurisprudential basis. Since the
function of the judicial and quasi-judicial authorities is to
secure justice with fairness, these principles provide a great
humanising factor intended to invest law with fairness to secure
justice and to prevent miscarriage of justice. The principles are
extended even to those who have to take an administrative
decision and who are not necessarily discharging judicial or
quasi-judicial functions. They are a kind of code of fair
administrative procedure. In this context, procedure is not a
matter of secondary importance as it is only by procedural
fairness shown in the decision-making that a decision becomes
acceptable. In its proper sense, thus, natural justice would
mean the natural sense of what is right and wrong.
25. This aspect of procedural fairness, namely, right to a fair
hearing, would mandate what is literally known as “hearing the
other side”. Prof. D.J. Galligan [ On “Procedural Fairness” in
Birks (Ed.), The Frontiers of Liability, Vol. 1 (Oxford 1994)]
attempts to provide what he calls “a general theory of fair
treatment” by exploring what it is that legal rules requiring
procedural fairness might seek to achieve. He underlines the
importance of arriving at correct decisions, which is not
possible without adopting the aforesaid procedural fairness, by
emphasising that taking of correct decisions would demonstrate
that the system is working well. On the other hand, if mistakes
are committed leading to incorrect decisions, it would mean
that the system is not working well and the social good is to that
extent diminished. The rule of procedure is to see that the law is
applied accurately and, as a consequence, that the social good
is realised. For taking this view, Galligan took support from
Bentham [A Treatise of Judicial Evidence (London 1825)] , who
wrote at length about the need to follow such principles of
natural justice in civil and criminal trials and insisted that the
said theory developed by Bentham can be transposed to other
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forms of decision-making as well. This jurisprudence of
advancing social good by adhering to the principles of natural
justice and arriving at correct decisions is explained by
Galligan in the following words:
“On this approach, the value of legal procedures is
judged according to their contribution to general
social goals. The object is to advance certain social
goals, whether through administrative processes, or
through the civil or criminal trial. The law and its
processes are simply instruments for achieving some
social good as determined from time to time by the
law-makers of the society. Each case is an instance
in achieving the general goal, and a mistaken
decision, whether to the benefit or the detriment of a
particular person, is simply a failure to achieve the
general good in that case. At this level of
understanding, judgments of fairness have no place,
for all that matters is whether the social good, as
expressed through laws, is effectively achieved.”
Galligan also takes the idea of fair treatment to a second level
of understanding, namely, pursuit of common good involves the
distribution of benefits and burdens, advantages and
disadvantages to individuals (or groups). According to him,
principles of justice are the subject-matter of fair treatment.
However, that aspect need not be dilated upon.
38. But that is not the end of the matter. While the law on the
principle of audi alteram partem has progressed in the manner
mentioned above, at the same time, the courts have also
repeatedly remarked that the principles of natural justice are
very flexible principles. They cannot be applied in any
straitjacket formula. It all depends upon the kind of functions
performed and to the extent to which a person is likely to be
affected. For this reason, certain exceptions to the aforesaid
principles have been invoked under certain circumstances. For
example, the courts have held that it would be sufficient to
allow a person to make a representation and oral hearing may
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not be necessary in all cases, though in some matters,
depending upon the nature of the case, not only full-fledged
oral hearing but even cross-examination of witnesses is treated
as a necessary concomitant of the principles of natural justice.
Likewise, in service matters relating to major punishment by
way of disciplinary action, the requirement is very strict and
full-fledged opportunity is envisaged under the statutory rules
as well. On the other hand, in those cases where there is an
admission of charge, even when no such formal inquiry is held,
the punishment based on such admission is upheld. It is for this
reason, in certain circumstances, even post-decisional hearing
is held to be permissible. Further, the courts have held that
under certain circumstances principles of natural justice may
even be excluded by reason of diverse factors like time, place,
the apprehended danger and so on.
39. We are not concerned with these aspects in the present case
as the issue relates to giving of notice before taking action.
While emphasising that the principles of natural justice cannot
be applied in straitjacket formula, the aforesaid instances are
given. We have highlighted the jurisprudential basis of
adhering to the principles of natural justice which are grounded
on the doctrine of procedural fairness, accuracy of outcome
leading to general social goals, etc. Nevertheless, there may be
situations wherein for some reason—perhaps because the
evidence against the individual is thought to be utterly
compelling—it is felt that a fair hearing “would make no
difference”—meaning that a hearing would not change the
ultimate conclusion reached by the decision-maker—then no
legal duty to supply a hearing arises. Such an approach was
endorsed by Lord Wilberforce in Malloch v. Aberdeen Corpn.
[(1971) 1 WLR 1578 : (1971) 2 All ER 1278 (HL)] , who said
that : (WLR p. 1595 : All ER p. 1294)
“… A breach of procedure … cannot give [rise to] a
remedy in the courts, unless behind it there is
something of substance which has been lost by the
failure. The court does not act in vain.”
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Relying on these comments, Brandon L.J. opined in Cinnamond
v. British Airports Authority [(1980) 1 WLR 582 : (1980) 2 All
ER 368 (CA)] that : (WLR p. 593 : All ER p. 377)
“… no one can complain of not being given an
opportunity to make representations if such an
opportunity would have availed him nothing.”
In such situations, fair procedures appear to serve no purpose
since the “right” result can be secured without according such
treatment to the individual.
40. In this behalf, we need to notice one other exception which
has been carved out to the aforesaid principle by the courts.
Even if it is found by the court that there is a violation of
principles of natural justice, the courts have held that it may not
be necessary to strike down the action and refer the matter back
to the authorities to take fresh decision after complying with the
procedural requirement in those cases where non-grant of
hearing has not caused any prejudice to the person against
whom the action is taken. Therefore, every violation of a facet
of natural justice may not lead to the conclusion that the order
passed is always null and void. The validity of the order has to
be decided on the touchstone of “prejudice”. The ultimate test
is always the same viz. the test of prejudice or the test of fair
hearing.
47. In Escorts Farms Ltd. v. Commr. [(2004) 4 SCC 281] , this
Court, while reiterating the position that rules of natural justice
are to be followed for doing substantial justice, held that, at the
same time, it would be of no use if it amounts to completing a
mere ritual of hearing without possibility of any change in the
decision of the case on merits. It was so explained in the
following terms : (SCC pp. 309-10, para 64)
“64. Right of hearing to a necessary party is a
valuable right. Denial of such right is serious
breach of statutory procedure prescribed and
violation of rules of natural justice. In these appeals
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preferred by the holder of lands and some other
transferees, we have found that the terms of
government grant did not permit transfers of land
without permission of the State as grantor. Remand
of cases of a group of transferees who were not
heard, would, therefore, be of no legal consequence,
more so, when on this legal question all affected
parties have got full opportunity of hearing before
the High Court and in this appeal before this Court.
Rules of natural justice are to be followed for doing
substantial justice and not for completing a mere
ritual of hearing without possibility of any change in
the decision of the case on merits. In view of the
legal position explained by us above, we, therefore,
refrain from remanding these cases in exercise of
our discretionary powers under Article 136 of the
Constitution of India.”
48. Therefore, on the facts of this case, we are of the opinion
that non-issuance of notice before sending communication
dated 23-6-2003 has not resulted in any prejudice to the
appellant and it may not be feasible to direct the respondents to
take fresh action after issuing notice as that would be a mere
formality.”
42. Furthermore, the Supreme Court in State of U.P. v. Sudhir Kumar
Singh , 2020 SCC OnLine SC 847 enunciated certain principles in relation to
interference by Courts in matters claiming the contravention of principles of
natural justice. Pertinently, the Supreme Court in Sudhir Kumar Singh
(Supra) observed as under:
“39. An analysis of the aforesaid judgments thus reveals:
(1) Natural justice is a flexible tool in the hands of the judiciary to
reach out in fit cases to remedy injustice. The breach of the audi
alteram partem rule cannot by itself, without more, lead to the
conclusion that prejudice is thereby caused.
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(2) Where procedural and/or substantive provisions of law embody
the principles of natural justice, their infraction per se does not lead
to invalidity of the orders passed. Here again, prejudice must be
caused to the litigant, except in the case of a mandatory provision of
law which is conceived not only in individual interest, but also in
public interest.
(3) No prejudice is caused to the person complaining of the breach of
natural justice where such person does not dispute the case against
him or it. This can happen by reason of estoppel, acquiescence,
waiver and by way of non-challenge or non-denial or admission of
facts, in cases in which the Court finds on facts that no real prejudice
can therefore be said to have been caused to the person complaining
of the breach of natural justice.
(4) In cases where facts can be stated to be admitted or indisputable,
and only one conclusion is possible, the Court does not pass futile
orders of setting aside or remand when there is, in fact, no prejudice
caused. This conclusion must be drawn by the Court on an appraisal
of the facts of a case, and not by the authority who denies natural
justice to a person.
(5) The “prejudice” exception must be more than a mere
apprehension or even a reasonable suspicion of a litigant. It should
exist as a matter of fact or be based upon a definite inference of
likelihood of prejudice flowing from the non-observance of natural
justice.”
43. Accordingly, as the Petitioner was afforded an opportunity to explain
its relationship with TPFG; and in light of the admission by Petitioner qua
the relationship between itself and TPFG i.e., subsidiaries of a common
holding company, this Court is of the considered opinion that, an additional
opportunity of hearing prior to the issuance of the Impugned Letter would
necessarily be reduced to a mere ritual / useless formality. Furthermore, in
light of Clause 9.3 of the Circular read with Paragraph 3 of the OM
whereunder once the relationship between Petitioner and TPFG has been
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admitted to include a common holding company the classification of the
Petitioner as an allied firms / related party, the extension of the Debarment
Order is a natural, self-activating, automatic and invariable consequence,
accordingly, no fruitful purpose would have been served by extending the
Petitioner an additional opportunity of hearing.
44. Therefore, following the aforenoted decisions of the Supreme Court
and in light of the admitted position vis-à-vis TPFG; and the Petitioner, this
Court does not consider it necessary to exercise its jurisdiction under Article
226 of the Constitution of India in relation to the non-observance of natural
justice particularly in light of the unambiguous terms of the OM and the
Circular as more particularly identified above.
45. Before we conclude we must also deal with the judgements cited by
Mr. Wadhwa in relation to the application of principles of natural justice to
the case herein.
46. Firstly, reliance was placed on Sunrise House Keeping & Support
Services Private Limited (Supra) to contend that the Petitioner could not
have been disqualified by Respondent No. 1 merely on account of TPFG
being disqualified in the absence of a prior opportunity of hearing.
Pertinently in the said case, the Chandigarh Industrial & Tourism
Development Corporation Limited issued a tender in relation to mechanized
cleaning services however, it went on to the blacklist the petitioner therein
by piercing the corporate veil i.e., by identifying common directors between
the blacklisted firm and the petitioner therein to justify the extension of the
blacklisting in the absence of any policy or guidelines mandating such a
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procedure. In the considered opinion of this Court, the said case is
distinguishable on facts, as the facts of the present case reveal that a duly
formulated policy had been enacted whereby a debarment order is extended
to „ allied firms‟ of a debarred firm.
47. Secondly, reliance was placed on Frontier Alloy Steels Ltd. (Supra)
and Roshni Enterprises (Supra) to contend that principles of natural justice
demanded that prior to the determination of the Petitioner as an „ allied firm ‟
of the debarred entity, an opportunity of hearing ought to have been
provided. In the present case, the Petitioner pursuant to the Query, disclosed
that it shared a common holding company with the debarred entity i.e.,
TPFG. Accordingly, once the relationship is admitted and the said
relationship satisfied the definition of „ allied firms ‟ the question of a further
opportunity of hearing became immaterial. Therefore, the reliance placed by
the Petitioner on the aforementioned cases is misguided and does not assist
the Petitioner herein.
48. Thirdly, reliance on Pritam Singh (Supra) is misdirected as the said
case pertains to the blacklisting of firms by way of a non-speaking; and
unreasoned order. In the present case, neither has the Petitioner been
blacklisted nor is the Impugned Letter and / or Debarment Order non-
speaking or unreasoned. Accordingly, the reliance placed Pritam Singh
(Supra) would not assist the Petitioner herein.
49. Fourthly, the reliance was placed on Raghunath Thakur (Supra) is
erroneous as the observations of the Supreme Court were made in relation to
providing the primary entity an opportunity of hearing and accordingly, has
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no weight in the present case wherein TPFG i.e., the debarred entity has
been afforded multiple opportunities of hearing prior to the issuance of the
Debarment Order.
50. Finally, reliance was placed on JBM Ecolife II , however the said case
is distinguishable on facts as therein the primary debarment order was set
aside and accordingly, the subsequent order i.e., extending the primary
debarment order to the sister concern / allied firm was also set aside. In the
present case, the factual matrix does not envisage the primary Debarment
Order being set aside.
Conclusion
51. For the foregoing reasons, we find that the Petitioner has been unable
to make out a case warranting interference of this Court under Article 226 of
the Constitution of India.
52. The writ petition is, accordingly, dismissed.
(SATISH CHANDRA SHARMA)
CHIEF JUSTICE
(SANJEEV NARULA)
JUDGE
NOVEMBER 03, 2023
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