Supreme Court Upholds Tender Disqualification: Agmatel India Pvt. Ltd. vs. Resoursys Telecom & Ors. (2022)

Date of the Judgment: 31 January 2022

Citation: 2022 INSC 84

Judges: Dinesh Maheshwari, J., Vikram Nath, J.

Can a court interfere with a tender inviting authority’s decision on what constitutes a “similar category product”? The Supreme Court of India recently addressed this question in a case involving a tender for the supply of tablets. The core issue was whether the High Court was right to overturn the tender committee’s decision to disqualify a bidder for not meeting the past performance criteria, specifically regarding the supply of “same or similar category products”. The Supreme Court bench consisted of Justice Dinesh Maheshwari and Justice Vikram Nath, with the majority opinion authored by Justice Maheshwari.

Case Background

Navodaya Vidyalaya Samiti (NVS) issued a tender on 12 February 2021, for the supply of 68,940 tablets for school children. The tender required bidders to have experience in supplying “same or similar category products.” M/s Resoursys Telecom, the writ petitioner, submitted a bid, claiming their past supply of smartphones met the “similar category” requirement. NVS rejected their bid on 25 June 2021, stating that smartphones were not considered “same or similar” to tablets. Resoursys Telecom contested this, arguing that smartphones and tablets are similar electronic products. The High Court of Delhi ruled in favor of Resoursys Telecom, leading to the current appeal by NVS and Agmatel India Pvt. Ltd., the bidder whose offer was accepted by NVS.

Timeline:

Legal Framework

The core of the dispute revolved around the interpretation of the tender condition requiring bidders to have supplied “same or similar Category Products.” The relevant clauses from the tender document are:

• Experience Criteria:“The Bidder or its OEM {themselves or through reseller(s)} should have regularly, manufactured and supplied same or similar Category Products to any Central / State Govt Organization / PSU / Public Listed Company…”
• Past Performance:“The Bidder or its OEM {themselves or through re-seller(s)} should have supplied same or similar Category Products for 80% of bid quantity, in at least one of the last three Financial years…”. This was later reduced to 60% by a corrigendum.
• Bid Specific Additional Terms and Conditions: “The Bidder / OEM {themselves or through reseller(s)}, should have executed project for supply and installation/ commissioning of same or similar Category Products during preceding 3 financial years (i.e. current year and three previous financial years) as on opening of bid, as per following criteria: (i) Single order of at least 35% of estimated bid value; or (ii) Two orders of at least 20% each of estimated bid value; or (iii) Three orders of at least 15% each of estimated bid value.”

The dispute arose because NVS considered only past supplies of tablets as meeting the “same or similar” criteria, while Resoursys Telecom argued that their past supplies of smartphones should also be considered.

Arguments

Arguments on behalf of the Appellants (NVS and Agmatel):

• The tender was specifically for tablets, and the past performance criteria required experience with “same or similar category products,” which NVS interpreted to mean tablets or similar types of tablets, not smartphones.
• Smartphones and tablets are distinct products belonging to different categories, as classified by the Government e-Marketplace (GeM) portal. Tablets fall under “Computer Equipment and Accessories,” while smartphones are under “Communication Devices and Accessories.”
• The tender terms were clear, and no other bidder raised any queries about the interpretation of “same or similar category products,” except the writ petitioner.
• The tender inviting authority is the best judge of its requirements, and courts should defer to their interpretation unless it is mala fide or perverse, citing Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr.: (2016) 16 SCC 818.
• The High Court erred in conducting a technical evaluation of the products and substituting its interpretation for that of the tender authority, citing Galaxy Transport Agencies v. New J K Roadways : 2020 SCC OnLine SC 1035.

Arguments on behalf of the Respondent (Resoursys Telecom):

• The rejection of their bid was arbitrary and inconsistent, as the reasons for rejection varied across different communications from NVS.
• Smartphones and tablets are similar electronic products, and various government agencies have treated them interchangeably in tender documents.
• The tender condition should be interpreted to promote maximum competition, and NVS’s narrow interpretation was intended to favor a particular bidder.
• The terms “same or similar category products” should not be interpreted restrictively to exclude smartphones, as they serve similar functions.

Sub-Submissions categorized by main submissions:

Innovativeness of the argument: The writ petitioner’s argument that various government agencies have treated tablets and smartphones interchangeably was innovative. The appellants’ reliance on the GeM portal’s classification was also a novel point.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the High Court was justified in interfering with the view taken by the tender inviting authority, i.e., NVS, in rejection of the technical bid of writ petitioner for want of fulfilment of ‘Past Performance’ criterion about supply of ‘same or similar Category Products’ of 60% of bid quantity in at least one of the last three financial years?

The Court also dealt with the sub-issue of whether “Smart Phones” and “Tablets” fall under the same or similar category of products.

Treatment of the Issue by the Court:

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Reliance Energy & Anr. v. Maharasthra State Road Development Corporation Ltd & Ors. : (2007) 8 SCC 1 (Supreme Court of India) – Referred to by the High Court to emphasize that tender terms must be clear and certain.
• Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr.: (2016) 16 SCC 818 (Supreme Court of India) – Cited to support the principle that the tender authority is the best judge of its requirements.
• Galaxy Transport Agencies v. New J K Roadways : 2020 SCC OnLine SC 1035 (Supreme Court of India) – Used to emphasize that courts should not interfere in technical evaluations by tender authorities.
• Nabha Power Ltd. v. Punjab SPCL : (2018) 11 SCC 508 (Supreme Court of India) – Referred to by the High Court regarding the “business efficacy test” for implied conditions in contracts.
• United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd.: (2016) 3 SCC 49 (Supreme Court of India) – Cited by the High Court regarding the doctrine of ‘Contra proferentem’.
• Tata Cellular v. Union of India : (1994) 6 SCC 651 (Supreme Court of India) – Cited by the High Court to emphasize that the tender authority cannot act arbitrarily.
• Bharat Coking Coal Ltd. v. AMR Dev Prabha 2020 SCC OnLine SC 335 (Supreme Court of India) – Referred to for the principle of deference to the authority’s interpretation of tender documents.
• Silppi Constructions Contractors v. Union of India, 2019 SCC OnLine SC 1133 (Supreme Court of India) – Cited to emphasize the need for restraint and caution in judicial intervention in contract matters.
• Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 (Supreme Court of India) – Referred to regarding the scope of judicial review in tender matters.
• Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 (Supreme Court of India) – Cited to emphasize that technical bids are scrutinized by experts, and courts should not interfere.

Legal Provisions:

• Section 151A of the Customs Act, 1950 – Referred to for the classification of “Tablet” computers by the Central Board of Excise and Customs.

Table of Authority Consideration:

Judgment

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

How each authority was viewed by the Court?

The Supreme Court used the authorities to support its reasoning:

• The court distinguished Reliance Energy & Anr. v. Maharasthra State Road Development Corporation Ltd & Ors. [CITATION], stating it did not apply to the facts of the present case.
• The court followed Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr. [CITATION], emphasizing that the tender authority is the best judge of its requirements.
• The court followed Galaxy Transport Agencies v. New J K Roadways [CITATION], stating that courts should not interfere in technical evaluations.
• The court distinguished Nabha Power Ltd. v. Punjab SPCL [CITATION], stating that the “business efficacy test” was not applicable.
• The court distinguished United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd. [CITATION], stating that the doctrine of ‘Contra proferentem’ was not applicable.
• The court referred to Tata Cellular v. Union of India [CITATION], but clarified that the tender authority cannot act arbitrarily.
• The court followed Bharat Coking Coal Ltd. v. AMR Dev Prabha [CITATION], for the principle of deference to the authority’s interpretation of tender documents.
• The court followed Silppi Constructions Contractors v. Union of India [CITATION], to emphasize the need for restraint in judicial intervention in contract matters.
• The court followed Jagdish Mandal v. State of Orissa [CITATION], regarding the scope of judicial review in tender matters.
• The court followed Montecarlo Ltd. v. NTPC Ltd. [CITATION], to emphasize that technical bids are scrutinized by experts.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that the tender inviting authority is the best judge of its requirements and that courts should not interfere in technical evaluations unless there is clear evidence of mala fide or perversity. The court emphasized the need for judicial restraint in contractual matters and deferred to the expert opinion of the tender evaluation committee. The court also noted that the tender terms were clear and that the interpretation of “same or similar category products” by NVS was not unreasonable.

Sentiment Analysis of Reasons:

Fact:Law Ratio:

The court’s reasoning was primarily based on legal principles and precedents, with a smaller consideration of the specific facts of the case.

Logical Reasoning:

The Supreme Court rejected the High Court’s interpretation, stating that the tender authority’s view was reasonable and not arbitrary. The court emphasized that the High Court should not have substituted its interpretation for that of the tender inviting authority.

The court considered alternative interpretations but rejected them, emphasizing that the tender authority’s interpretation was not unreasonable or mala fide. The court also noted that the tender terms were clear and that the interpretation of “same or similar category products” by NVS was not unreasonable.

The Supreme Court held that the High Court’s interference was not justified. The court emphasized that the tender inviting authority is the best judge of its requirements and that courts should not interfere in technical evaluations unless there is clear evidence of mala fide or perversity. The court also noted that the tender terms were clear and that the interpretation of “same or similar category products” by NVS was not unreasonable.

The court stated, “The High Court, in the present matter has obviously proceeded with an assumption that the view as being taken by it, in acceptance of the case of the writ petitioner, was required to be substituted in place of the views of the tender inviting authority. That has been an error of law and cannot sustain itself in view of the consistent binding decisions of this Court.”

The court also mentioned, “Even if some organisations/institutions, with reference to their requirements or other relevant factors, had assumed these two products, i.e., “Tablets” and “Smart Phones” akin to each other, the facts do remain that these very products have been placed under different categories on the online portal GeM and have also been taken as classifiable differently by the customs authority.”

The court further noted, “The terms of tender in the present case had been clear, and they were ascertainable with specificity available on the very portal on which NIT was issued. It had not been a case of post facto interpretations by the tender inviting authority-NVS.”

There were no dissenting opinions; the judgment was unanimous.

The Supreme Court’s decision reinforces the principle that courts should exercise restraint in matters of contract and tender processes and that the tender inviting authority is the best judge of its requirements. The court’s decision also clarifies that technical evaluations should be left to experts unless there is clear evidence of mala fide or perversity. This case could potentially limit future judicial interference in tender processes.

Key Takeaways

• Tender inviting authorities have significant leeway in interpreting tender conditions, especially regarding technical specifications.
• Courts should exercise restraint in interfering with tender processes unless there is clear evidence of mala fide, bias, or perversity.
• The interpretation of “same or similar category products” is primarily the domain of the tender inviting authority.
• Technical evaluations should be left to the experts, and courts should not substitute their views.
• This judgment reinforces the principle that the tender authority is the best judge of its requirements.
• The decision may limit future judicial interference in tender processes, emphasizing the need for deference to expert opinions.

Directions

The Supreme Court did not give any specific directions other than setting aside the High Court’s judgment and dismissing the writ petition.

Development of Law

The ratio decidendi of this case is that the tender inviting authority is the best judge of its requirements, and courts should not interfere with the interpretation of tender conditions unless there is clear evidence of mala fide or perversity. This case reinforces the existing legal position that courts should exercise restraint in contractual matters and defer to the expert opinion of the tender evaluation committee. There was no change in the previous positions of law; rather, the court reiterated existing principles.

Conclusion

The Supreme Court allowed the appeals, setting aside the High Court’s judgment. The Court upheld the tender inviting authority’s decision to disqualify the writ petitioner for not meeting the past performance criteria, stating that the interpretation of “same or similar category products” by NVS was reasonable and not arbitrary. The Court emphasized that tender authorities are the best judges of their requirements and that courts should exercise restraint in interfering with tender processes.