Supreme Court Upholds Tender Award: Galaxy Transport Agencies vs. New J.K. Roadways (2020)

Date of the Judgment: 18 December 2020

Citation: Not Available in the source

Judges: R.F. Nariman, J., Navin Sinha, J., K.M. Joseph, J.

When a government body issues a tender, how much say should a court have in interpreting the tender’s rules? The Supreme Court of India recently addressed this question in a dispute over a contract for supplying commercial vehicles. The core issue was whether the High Court was correct in overturning the decision of the tender authority, which had awarded the contract to Galaxy Transport Agencies. The Supreme Court bench, consisting of Justices R.F. Nariman, Navin Sinha, and K.M. Joseph, delivered the judgment, with Justice Nariman authoring the opinion.

Case Background

The Inspector General of Police, Kashmir Zone, invited online tenders on 18.02.2020 for the supply of commercial vehicles for the financial year 2020-2021. Four parties submitted bids, including M/s Galaxy Transport Agencies (the Appellant) and M/s New J.K. Roadways (JK Roadways). The tender process involved a technical bid and a financial bid. On 11.03.2020, the Tender Opening Committee found JK Roadways and another bidder did not meet the technical requirements. Galaxy Transport Agencies was deemed technically eligible, and its financial bid was the lowest. Consequently, on 30.03.2020, the contract was awarded to Galaxy Transport Agencies.

Timeline:

Course of Proceedings

JK Roadways filed a writ petition challenging the contract awarded to Galaxy Transport Agencies. The Single Judge of the High Court of Jammu and Kashmir at Srinagar rejected JK Roadways’ challenge on 30.06.2020, finding that Galaxy Transport Agencies met all eligibility criteria. However, the Division Bench of the High Court of Jammu and Kashmir at Srinagar overturned this decision on 16.10.2020, ruling that JK Roadways was wrongly disqualified and that Galaxy Transport Agencies did not meet the work experience requirement. The Division Bench directed the authorities to invite fresh tenders. Galaxy Transport Agencies then appealed to the Supreme Court of India.

Legal Framework

The key legal provisions in this case are the tender conditions specified in the Notice Inviting Tender (N.I.T.). Condition No. 27 of the N.I.T. stated:

“The firm/association shall have working experience of at least Five years with documentary proof and work should not [be] less [than] 2 Crores.”

Condition No. 31 stated:

“The firm/tenderer should have owned at least 30 nos. of vehicles both HMV/LMV and attached 200 vehicles with the firm alongwith documentary proof.”

Arguments

Arguments of Galaxy Transport Agencies (Appellant):

• The Appellant argued that Condition No. 31 of the N.I.T. required bidders to possess both Heavy Motor Vehicles (HMV) and Light Motor Vehicles (LMV). Since JK Roadways only provided a list of HMVs, they were ineligible.

• The Appellant contended that the tendering authority’s interpretation of the tender conditions should be respected. The Division Bench should not have reinterpreted the conditions.

• The Appellant submitted that they had the required work experience of at least 5 years, as evidenced by the work experience certificates from the Financial Years 2014-2015 to 2018-2019.

• The Appellant argued that the Tender Opening Committee, an expert body, had already scrutinized their documents and found them technically qualified.

• The Appellant contended that the issue of service license was not argued before the Division Bench and should not be re-agitated.

Arguments of JK Roadways (Respondent):

• JK Roadways argued that Condition No. 31 of the N.I.T. allowed bidders to provide a list of either HMVs or LMVs or both. They contended that the use of “/” in the condition meant “or,” not “and.”

• JK Roadways argued that Galaxy Transport Agencies did not possess the required 5 years of work experience, as their experience was limited to a few months in 2014 and 2015.

• JK Roadways argued that Galaxy Transport Agencies did not have a valid service license for the relevant period.

• JK Roadways argued that the work experience certificates submitted by the Appellant were in the name of “Galaxy Agencies,” a different entity.

Arguments of the Union Territory of Jammu & Kashmir:

• The Union Territory of Jammu & Kashmir supported the tender award to Galaxy Transport Agencies, arguing that the Division Bench was incorrect in its interpretation of Condition No. 27 of the N.I.T.

• They contended that the Tender Opening Committee, an expert body, had scrutinized the documents and found the Appellant qualified.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the Division Bench of the High Court was correct in re-interpreting Condition No. 31 of the N.I.T.
2. Whether the Division Bench was correct in holding that Galaxy Transport Agencies did not meet the work experience requirement under Condition No. 27 of the N.I.T.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

Legal Provisions Considered by the Court:

• Condition No. 27 of the N.I.T.: This condition required the firm to have a working experience of at least five years with documentary proof, and the work should not be less than ₹2 crores.
• Condition No. 31 of the N.I.T.: This condition required the firm to own at least 30 vehicles, both HMV/LMV, and have 200 attached vehicles with documentary proof.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., 2016 (16) SCC 818: The Court followed this authority, emphasizing that the tender author is the best interpreter of its requirements.
• Bharat Coking Coal Ltd. v. AMR Dev Prabha 2020 SCC OnLine SC 335: The Court reiterated the principle that the tender author is best placed to interpret tender documents.
• Silppi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133: The Court used this authority to highlight the need for restraint in judicial intervention in contract matters.
• Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517: The Court relied on this case to emphasize that judicial review is limited to checking the legality of the decision-making process, not its soundness.
• Montecarlo Ltd. v. NTPC Ltd., 2016 (15) SCC 272: The Court used this authority to support the view that technical bids should be evaluated by experts, and courts should exercise restraint in interfering with such evaluations.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principle that the author of a tender document is the best judge of its requirements. The Court emphasized that unless there is clear evidence of arbitrariness or mala fide, the interpretation of tender conditions by the tendering authority should be respected. The Court also highlighted that expert evaluations, such as those made by the Tender Opening Committee, should not be second-guessed by courts unless there is a clear reason to do so. The Court’s reasoning was primarily based on the need to maintain judicial restraint in matters of contract and tender, and to respect the expertise of the tendering authority.

Logical Reasoning

Judgment

The Supreme Court set aside the judgment of the Division Bench of the High Court and restored the judgment of the Single Judge. The Court held that the tendering authority’s interpretation of Condition No. 31 of the N.I.T. was correct and should not have been interfered with. The Court also found that the Division Bench erred in re-evaluating the work experience of Galaxy Transport Agencies, as the expert Tender Opening Committee had already found them qualified. The Supreme Court emphasized the need for judicial restraint in tender matters and respect for the expertise of the tendering authority.

The Court quoted from Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., 2016 (16) SCC 818 stating, “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.”

The Court further quoted from Bharat Coking Coal Ltd. v. AMR Dev Prabha 2020 SCC OnLine SC 335, stating, “BCCL having authored these documents, is better placed to appreciate their requirements and interpret them.”

The Court also quoted from Silppi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133, stating, “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.”

Key Takeaways

• Tender conditions should be interpreted by the tendering authority, and courts should exercise restraint in interfering with such interpretations.
• Expert evaluations by tender committees should be respected, and courts should not second-guess such evaluations unless there is clear evidence of arbitrariness or mala fide.
• Judicial review in tender matters is limited to checking the legality of the decision-making process, not its soundness.
• The word “both” in a tender condition means that all the items listed with “both” are required.

Directions

There were no specific directions given by the Supreme Court other than setting aside the Division Bench’s judgment and restoring the Single Judge’s judgment.

Development of Law

The ratio decidendi of this case is that the interpretation of tender conditions by the tendering authority should be respected, and courts should exercise restraint in interfering with such interpretations. This case reinforces the principle that the author of a tender document is the best judge of its requirements. This judgment reinforces the principles laid down in previous judgments on tender matters, emphasizing the need for judicial restraint and respect for expert evaluation.

Conclusion

The Supreme Court’s decision in this case upholds the principle of deference to the tendering authority’s interpretation of tender conditions and the importance of respecting expert evaluations. The Court’s judgment reinforces the need for judicial restraint in matters of contract and tender, ensuring that the process is efficient and not unduly interfered with by judicial review unless there is clear evidence of arbitrariness or mala fide. The appeal was disposed of in favor of Galaxy Transport Agencies, restoring the original tender award.

Category

Parent Category: Contract Law

Child Categories: Tender Disputes, Interpretation of Contracts, Judicial Review, Government Contracts

Parent Category: Tender Law

Child Categories: Tender Conditions, Tender Process, Tender Evaluation

Parent Category: Code of Civil Procedure, 1908

Child Category: Order 41, Code of Civil Procedure, 1908

FAQ

Q: What was the main issue in the Galaxy Transport Agencies vs. New J.K. Roadways case?

A: The main issue was whether the High Court was correct in overturning the tender award to Galaxy Transport Agencies, particularly regarding the interpretation of tender conditions and the evaluation of work experience.

Q: What did the Supreme Court decide about the interpretation of tender conditions?

A: The Supreme Court held that the tendering authority’s interpretation of the tender conditions should be respected, and courts should not interfere unless the interpretation is perverse or mala fide.

Q: What does “both HMV/LMV” mean in the context of the tender condition?

A: The Supreme Court clarified that “both HMV/LMV” means that a bidder must own both Heavy Motor Vehicles (HMV) and Light Motor Vehicles (LMV), not just one of them.

Q: What did the Supreme Court say about the expert evaluation of tenders?

A: The Supreme Court stated that expert evaluations by tender committees should be respected, and courts should not second-guess such evaluations unless there is clear evidence of arbitrariness or mala fide.

Q: What is the key takeaway from this judgment for future tender processes?

A: The key takeaway is that courts should exercise restraint in interfering with tender processes and respect the expertise of the tendering authority. The interpretation of tender conditions by the tendering authority should be given due weight.