2002 JTR(SC) 726
2002 AIR(SC) 2766 ; 2002 AIR(SCW) 3127 ; 2002 2 ArbLR 616 ; 2002 4 AWC 2774 ; 2003 Supp BomCR(SC) 159 ; 2002 4 CivLJ 5 ; 2002 DNJ 553 ; 2002 4 ICC 404 ; 2002 3 JCR(SC) 72 ; 2002 5 JT 383 ; 2002 4 MhLJ(SC) 675 ; 2002 4 MPHT 433 ; 2002 4 MPLJ 311 ; 2002 3 RAJ 74 ; 2002 3 RCR(Civ) 655 ; 2002 5 Scale 339 ; 2002 6 SCC 315 ; 2002 SCR 284 ; 2002 1 WLC 676 ; 2002 KHC 1718 ; 2002 5 Supreme 145
2002(5) Supreme 145
SUPREME COURT OF INDIA
(From Madhya Pradesh High Court)
S. Rajendra Babu and P. Venkatarama Reddi, JJ.
Kanhaiya Lal Agrawal -Appellant
versus
Union of India & Ors. -Respondents
Civil Appeal Nos. 4359-4361 of 2002
(Arising out of SLP (C) Nos. 6083-6085 of 2002)
Decided on 29-7-2002
Counsel for the Parties :
For the Appellant : Prakash Shrivastava, Advocate.
For the Respondents : Anoop Chaudhary and Ranjit Kumar, Sr. Advocate Shiv Sagar Tiwari, Bishesha Nand Jha, Manish Singhvi, and Mrs. Anil Katiyar, Advocates.
IMPORTANT POINT
Commercial practice of giving rebate or concession in the event of quick finalisation of tender (offered with tender) does not affect the interest of any other party.
Act Referred :CONSTITUTION OF INDIA : Art.14, Art.16, Art.226
(A) The relevant statutory provisions include Article 14, Article 16, and Article 226 of the Constitution of India. Article 14 guarantees equality before the law and equal protection of the laws, Article 16 ensures equality of opportunity in matters of public employment, and Article 226 empowers the High Courts to issue writs for the enforcement of fundamental rights or for any other purpose. In this case, these constitutional provisions are invoked to assess whether the tender process adhered to principles of fairness, equality, and non-arbitrariness. The court examines whether the acceptance of a tender with a conditional rebate violated any mandatory procedure or resulted in unreasonable or mala fide conduct, thereby engaging constitutional protections against arbitrary state action and ensuring a transparent, equitable procurement process.
(B) Key legal principles include that an essential condition of a tender, non-compliance with which leads to rejection, must be clear; a tender must be unconditional, and any relaxation must be notified to all bidders to ensure equal treatment; commercial inducements such as rebates for early acceptance are permissible if they do not alter the tenders core terms or violate mandatory procedures; and courts will not ordinarily interfere in contract decisions unless they are unreasonable, arbitrary, mala fide, or disregard mandatory procedures.
Facts of the case:
The first respondent invited tenders for the supply, delivery, and stacking of 75,000 cubic metre machine crushed track ballast with a 24-month supply period, requiring strict compliance with tender conditions. The appellant submitted a tender on 27.2.2001 offering rates with an attached note proposing conditional rebates of 5%, 3%, and 2% for contract award within 45, 60, and 75 days, respectively, while keeping the offer open for at least 90 days. Respondent No. 5 submitted a lower tender but made a conditional rebate offer five days after the tender opening. The single judge directed fresh offers, but the division bench held that the appellants rebate constituted an impermissible alteration of the tender document and awarded the contract to Respondent No. 5. This court then accepted the appellants challenge against that order.
Findings of Court:
The court found that the tender notice did not prohibit conditional offers, and the appellants rebate proposal did not alter essential terms but was a commercial inducement to expedite acceptance, provided the offer remained open for the required period. The concession was part of the tender itself, whereas Respondent No. 5s offer was made after the tender opening, which was neither illegal nor arbitrary for the railway administration to accept. The division benchs approach was set aside, as the acceptance of the appellants tender did not violate mandatory procedure or fairness, provided it was unconditional within the stipulated timeframe.
Issues:
Whether the appellants tender with a conditional rebate was valid and could be accepted, and whether accepting it affected the interests of other parties by violating tender equality or mandatory procedure.
Ratio Decidendi:
A tender must be unconditional, but permissible corrections or clarifications are allowed; an offer of rebate for early acceptance is not an impermissible condition if it does not alter essential terms, is disclosed upfront, and is open for the required minimum period, and the accepting authority may choose the offer that provides the best commercial terms without arbitrary interference, provided no other partys rights under Article 14 or 226 are violated.
Result:
The appeals are allowed, the orders of the high court (division bench and single judge) are set aside, and the writ petition is dismissed with no costs awarded.
(A) The relevant statutory provisions include Article 14, Article 16, and Article 226 of the Constitution of India. Article 14 guarantees equality before the law and equal protection of the laws, Article 16 ensures equality of opportunity in matters of public employment, and Article 226 empowers the High Courts to issue writs for the enforcement of fundamental rights or for any other purpose. In this case, these constitutional provisions are invoked to assess whether the tender process adhered to principles of fairness, equality, and non-arbitrariness. The court examines whether the acceptance of a tender with a conditional rebate violated any mandatory procedure or resulted in unreasonable or mala fide conduct, thereby engaging constitutional protections against arbitrary state action and ensuring a transparent, equitable procurement process.
(B) Key legal principles include that an essential condition of a tender, non-compliance with which leads to rejection, must be clear; a tender must be unconditional, and any relaxation must be notified to all bidders to ensure equal treatment; commercial inducements such as rebates for early acceptance are permissible if they do not alter the tenders core terms or violate mandatory procedures; and courts will not ordinarily interfere in contract decisions unless they are unreasonable, arbitrary, mala fide, or disregard mandatory procedures.
Facts of the case:
The first respondent invited tenders for the supply, delivery, and stacking of 75,000 cubic metre machine crushed track ballast with a 24-month supply period, requiring strict compliance with tender conditions. The appellant submitted a tender on 27.2.2001 offering rates with an attached note proposing conditional rebates of 5%, 3%, and 2% for contract award within 45, 60, and 75 days, respectively, while keeping the offer open for at least 90 days. Respondent No. 5 submitted a lower tender but made a conditional rebate offer five days after the tender opening. The single judge directed fresh offers, but the division bench held that the appellants rebate constituted an impermissible alteration of the tender document and awarded the contract to Respondent No. 5. This court then accepted the appellants challenge against that order.
Findings of Court:
The court found that the tender notice did not prohibit conditional offers, and the appellants rebate proposal did not alter essential terms but was a commercial inducement to expedite acceptance, provided the offer remained open for the required period. The concession was part of the tender itself, whereas Respondent No. 5s offer was made after the tender opening, which was neither illegal nor arbitrary for the railway administration to accept. The division benchs approach was set aside, as the acceptance of the appellants tender did not violate mandatory procedure or fairness, provided it was unconditional within the stipulated timeframe.
Issues:
Whether the appellants tender with a conditional rebate was valid and could be accepted, and whether accepting it affected the interests of other parties by violating tender equality or mandatory procedure.
Ratio Decidendi:
A tender must be unconditional, but permissible corrections or clarifications are allowed; an offer of rebate for early acceptance is not an impermissible condition if it does not alter essential terms, is disclosed upfront, and is open for the required minimum period, and the accepting authority may choose the offer that provides the best commercial terms without arbitrary interference, provided no other partys rights under Article 14 or 226 are violated.
Result:
The appeals are allowed, the orders of the high court (division bench and single judge) are set aside, and the writ petition is dismissed with no costs awarded.
JUDGMENT
Rajendra Babu, J.-Leave granted.
2. The first respondent invited tenders for execution of five items of work including supply, delivery and stacking of 75,000 cubic metre Machine crushed track ballast as per specifications at its depot in Naurozabad and loading it into railway wagons. The supply period was for 24 months. The conditions in the tender notice required that the rates at which supply was to be made had to be stated in words as well as in figures against each item of work as per Schedule attached thereto; that the tenders submitted with any omissions or alteration of the tender document were liable to be rejected; however, permissible corrections could be attached with due signature of tenderers; that the tenderer should hold the offer open till such date as may be specified in the tender which was for a minimum period of 90 days from the date of opening of the tender; that contravention of the conditions would automatically result in forfeiture of security deposit; that the tender was liable to be rejected for non-compliance of any of the conditions in the tender form.
3. Five tenders were received. The appellant made his tender on 27.2.2001 with a covering letter that if his offer is accepted within the stipulated time rebate would be offered by him to the effect that in case the contract was given to him within 45 days, 60 days and 75 days, he would extend rebate of 5%, 3% and 2% respectively on the rates tendered by him. Respondent No. 5 had made a similar offer but after five days of the opening of the tender, while the appellant had made such offer of rebate even at the time of making the tender in the letter accompanying the tender documents. However, respondent No. 5 offered to reduce rates by 1.25% if accepted in 30 days and 1% if accepted in 45 days. The 1st respondent accepted the tender offered by the appellant on the rates subject to rebate. Agreement was entered into by him on 19.4.2001. Respondent No. 5 filed a writ petition claiming that his tender should have been accepted, as the rates offered by him are the lowest.
4. The learned Single Judge, before whom acceptance of the tender offered by the appellant was challenged, took the view that the tender notice did not admit of an offer being made in the form of rebate as offered by the appellant and it was also clear that an offer made by respondent No. 5 after the opening of the tender is of no consequence and gave the direction of taking fresh offers from the appellant and Respondent No. 5. The matter was carried in appeal to the Division Bench. The Division Bench, after adverting to several decisions on the question of award of contracts, stated that the tender notice did not contemplate any attachment of conditions by giving rebate which would amount to alteration of the tender document which is impermissible; that the tender should be unconditional and relaxation, if any, should have been notified to all the tenderers to enable them to change their rates; that all the tenderers should have been treated equally and fairly, and on that basis, took the view that the tender of Respondent No. 5 is at a lower rate and hence, acceptable and set aside the order of the learned Single Judge directing fresh negotiations with the parties. The Division Bench directed that supply of material by the appellant be stopped forthwith and balance material be taken from Respondent No. 5 at the rate furnished by him. Hence, these appeals against the order of the High Court.
5. This Court is normally reluctant to intervene in matters of entering into contracts by the Government, but if the same is found to be unreasonable, arbitrary, mala fide or is in disregard of mandatory procedures it will not hesitate to nullify or rectify such actions.
6. It is settled law that when an essential condition of tender is not complied with, it is open to the person inviting tender to reject the same. Whether a condition is essential or collateral could be ascertained by reference to consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be essential part of the tender otherwise it is only a collateral term. This legal position has been well explained in G.J. Fernandez vs. State of Karnataka & Ors., 1990(2) SCC 488.
7. In the present case, the short question that falls for consideration is whether the tender offered by the appellant with the rebate could have been accepted and whether such acceptance would affect the interests of any other party.
8. The letter dated 27.2.2001 accompanying the tender made by the appellant after setting out rate offered by him also set out certain circumstances with a note in the following terms :-
"Note :-I would like to offer if the tender is finalised in my favour :
(a) 5% reduction in rate within 45 days;
(b) 3% reduction in rate within 60 days;
(c) 5% reduction in rate within 75 days;
(d) to make use of the machinery at the quickest possible time."
Bureaucratic delay is a notorious fact and delay in finalising tenders will cause hardship to the tenderer. In such circumstances, if a hardened businessman makes an attractive offer of concessional rates if tender is finalized within a shorter period, it cannot be said that the rates offered are subject to conditions. The rates offered are clear and the time within which they are to be accepted is also clear. As long as such offer does not militate against the terms and conditions of inviting tender it cannot be said that such offer is not within its scope. All that is required is that offer made is to be kept open for a minimum period of 90 days. Offer in compliance of that term has been made by the appellant. The concession or rebate given is an additional inducement to accept the offer expeditiously to have a proper return on the investment made by the tenderer in the equipment and not keeping the labour idle for long periods which is part of commercial prudence. The commercial aspect of each one of the offers made by the parties will have to be ascertained and, thereafter a decision taken to accept or reject a tender.
9. The Division Bench of the High Court proceeded on the basis that the offer of concession is contrary to the terms of tender but we have demonstrated to the contrary.
10. Now the appellant made his offer of concessional rates along with the tender while Respondent No. 5 made such offer after opening of the tenders. It is difficult to conceive that the Respondent No. 5 who is a prudent businessman would not be aware of commercial practice of giving rebate or concession in the event of quick finalization of a transaction. What the appellant offered was part of the tender itself while the Respondent No. 5 made such offer separately and much later. There was nothing illegal or arbitrary on the part of Railway Administration in accepting the offer of the appellant, which was made at the time of submitting the tender itself.
11. In the result, we allow these appeals by setting aside the orders made by the High Court both by the Division Bench and the learned Single Judge and dismiss the writ petition. No costs.
(N.K.R.) Appeal allowed.
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Parallel Citations of other Journals :
Kanhaiya Lal Agrawal v. Uninon of India & Ors., 2002(5) Supreme 145 : 2002(5) JT 383 : (2002) 6 SCC 315 : AIR 2002 SC 2766 : 2002(4) Civ.L.J. 51
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