Supreme Court clarifies tender eligibility criteria for construction projects: M/s Sam Built Well Pvt. Ltd. vs. Deepak Builders & Ors. (2017)

Introduction

Can a court interfere with an expert committee’s decision on tender eligibility? The Supreme Court of India addressed this question in a recent case concerning a construction tender. This case clarifies the extent of judicial review in tender matters, particularly regarding the interpretation of “similar work” experience. The judgment was delivered by a two-judge bench of Justices R.F. Nariman and Navin Sinha, with Justice R.F. Nariman authoring the opinion.

Case Background

The Institute of Nano Science and Technology, Mohali, issued a tender on March 16, 2017, for the construction of its campus. The estimated cost was ₹162.18 crores. The tender required bidders to have completed “similar work” in the past. Specifically, the tender required bidders to have completed either three similar works costing not less than ₹64.9 crores each, two similar works costing not less than ₹97.3 crores each, or one similar work costing not less than ₹129.7 crores. The tender defined “similar work” as “construction of institutional/educational buildings campus with minimum five storeys RCC framed structure building including electrical, plumbing, fire fighting, HVAC works under composite contract executed in India in a single contract.”

Deepak Builders, Respondent No. 1, submitted a bid claiming to have completed similar work. They cited several projects, including a district administrative complex, an office building, a memorial project, and a judicial court complex. However, the technical evaluation report, along with two other expert bodies, found that Deepak Builders did not meet the eligibility criteria. Consequently, the Institute informed Deepak Builders of their ineligibility.

Timeline

Course of Proceedings

Deepak Builders filed a writ petition after being declared ineligible. The Single Judge dismissed the petition, agreeing with the expert committees that the work done by Deepak Builders was not “similar” to the tender requirements. The Single Judge emphasized the limited scope of judicial review in tender matters. However, the Division Bench of the High Court overturned the Single Judge’s decision, stating that Deepak Builders was indeed eligible. The Division Bench directed the Institute to consider Deepak Builders’ bid along with other eligible bids.

Legal Framework

The core legal issue revolves around the interpretation of Clause 8 of the Notice Inviting Tenders (NIT). This clause specifies the eligibility criteria for bidders. It states that contractors should have completed similar works, defined as *“construction of institutional/educational buildings campus with minimum five storeys RCC framed structure building including electrical, plumbing, fire fighting, HVAC works under composite contract executed in India in a single contract.”*

Arguments

Appellant’s Arguments (M/s Sam Built Well Pvt. Ltd.):

• The appellant argued that the expert committee reports correctly applied the National Building Code of India, 2016, as the tender conditions made it applicable.
• According to the appellant, the learned Single Judge correctly appreciated that in tender matters, judicial review is very limited.
• The appellant contended that the Division Bench, while setting aside the judgment of the learned Single Judge, did not consider the parameters of judicial review of tenders.
• The appellant stated that there were no malafides or perversity involved, and thus, the Writ Court should not have interfered with the tender process.
• The appellant argued that the term “similar work” meant the construction of a complete campus, not just individual buildings.

Respondent’s Arguments (Deepak Builders & Ors.):

• The respondent argued that the National Building Code of India was only applicable to the safety aspects of the buildings.
• The respondent stated that their projects, which consisted of buildings with basements and five or more storeys, qualified as “similar works”.
• The respondent contended that the projects they had completed were institutional buildings and thus met the tender requirements.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following key questions:

1. Whether the Division Bench of the High Court was correct in setting aside the judgment of the learned Single Judge.
2. Whether the expert committees’ reports were based on a correct interpretation of the tender conditions.
3. Whether the projects completed by Respondent No. 1 constituted “similar work” as defined in the tender.
4. Whether the High Court exceeded its jurisdiction in interfering with the tender process.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following cases:

Judgment

The Supreme Court held that the Division Bench of the High Court erred in setting aside the judgment of the Single Judge. The Court emphasized that judicial review in tender matters is very limited. The Court stated that the owner or employer of a project is the best person to understand the tender requirements.

The Court observed that the Division Bench did not find any malafides or perversity in the expert committee reports. Therefore, the Court held that the Division Bench should not have interfered with the expert evaluation. The Court also noted that the High Court should not have re-evaluated the technical aspects of the tender.

The Supreme Court set aside the judgment of the Division Bench and restored the judgment of the Single Judge. The Court also set aside the tender awarded to Respondent No. 1. The Court accepted the Appellant’s offer to match the bid of Respondent No. 1, and ordered that the tender be awarded to the Appellant.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of judicial restraint in tender matters. The Court emphasized that technical evaluations should be left to experts. The Court also focused on the specific language of the tender document, particularly the definition of “similar work.” The Court’s reasoning also reflected a concern that the High Court had exceeded its jurisdiction by re-evaluating technical aspects of the tender.

The Court’s reasoning was based more on legal principles and interpretation of the tender document than on the specific facts of the case.

The court considered alternative interpretations but rejected them in favor of the expert committee’s findings and the plain meaning of the tender document.

The Supreme Court’s decision was based on the principle of judicial restraint, the expertise of the technical committees, and the plain reading of the tender document. The Court did not find any ambiguity in the tender conditions and therefore deferred to the interpretation of the experts.

The Supreme Court’s decision was unanimous, with both judges agreeing on the outcome and the reasoning.

The Court’s decision has implications for future cases involving tender disputes. It reinforces the principle that courts should not interfere with technical evaluations unless there is clear evidence of malafide or perversity.

The case did not introduce any new doctrines or legal principles. It reaffirmed existing principles of judicial review in tender matters.

The Court emphasized the importance of adhering to the specific language of tender documents. It also emphasized that the owner of the project is the best person to interpret the tender documents.

“We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents.”

“Technical evaluation or comparison by the court would be impermissible.”

“The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills.”

Key Takeaways

• Courts should exercise restraint in interfering with technical evaluations in tender matters.
• The owner of a project is the best person to interpret tender documents.
• The specific language of tender documents is crucial and should be strictly adhered to.
• Expert opinions should be given due consideration by the courts.
• Judicial review of tenders is limited to cases of malafide or perversity.

This judgment reinforces the importance of clear and unambiguous tender documents. It also highlights the need for expert evaluation in technical matters. The judgment may lead to fewer interventions by courts in tender processes.

Directions

The Supreme Court set aside the tender awarded to Respondent No. 1 and directed that the tender be awarded to the Appellant, M/s Sam Built Well Pvt. Ltd., at the price quoted by Respondent No. 1.

Development of Law

The ratio decidendi of this case is that courts should exercise restraint in interfering with technical evaluations in tender matters, and that the owner of a project is the best person to interpret tender documents. This case does not change the previous position of law but rather reaffirms it.

Conclusion

The Supreme Court’s decision in M/s Sam Built Well Pvt. Ltd. vs. Deepak Builders & Ors. clarifies the scope of judicial review in tender matters. The Court emphasized the importance of adhering to the specific language of tender documents and respecting expert evaluations. The judgment reinforces the principle that courts should not interfere with technical evaluations unless there is clear evidence of malafide or perversity.