Date of the Judgment: December 08, 2020
Citation: 2020 INSC 946
Judges: R.F. Nariman, J. and K.M. Joseph, J.
Can a bidder suppress information about an ongoing criminal case related to their past projects when participating in a tender process? The Supreme Court of India recently addressed this question, clarifying the importance of transparency and full disclosure in government contracts. This case revolves around the rejection of a bid due to the non-disclosure of an FIR and subsequent charge sheet related to a bridge collapse. The judgment was delivered by a two-judge bench comprising Justice R.F. Nariman and Justice K.M. Joseph, with the majority opinion authored by Justice R.F. Nariman.
Case Background
The State of Madhya Pradesh, through its Public Works Department (PWD), issued a Notice Inviting Tender (NIT) on December 2, 2019, for the construction of an elevated corridor (flyover) in Indore. The estimated cost of the project was Rs. 272.66 crores, with a completion period of 24 months. Several companies participated in the bidding process, including U.P. State Bridge Corporation Limited (UPSBC), Rajkamal Builders Infrastructure Pvt. Ltd. (Rajkamal Builders), and Rachana Construction Co.
UPSBC’s bid was rejected by the State of Madhya Pradesh on the grounds that it suppressed information regarding a prior criminal investigation. Specifically, an FIR had been lodged against UPSBC on May 15, 2018, concerning the collapse of a bridge constructed by them in Varanasi, which resulted in fatalities and injuries. Although a charge sheet was filed, the trial was stayed by the High Court of Judicature at Allahabad on July 30, 2019. This information was not disclosed in the bid submitted by UPSBC.
Rachana Construction Co.’s bid was also rejected for not meeting the technical qualification criteria, particularly the requirement of having completed at least one similar work of 25% of the estimated project cost.
Following the rejection of its technical bid, UPSBC filed a writ petition, leading to an interim order to open its financial bid. Upon opening, UPSBC’s bid was found to be Rs. 306.27 crores, while Rajkamal’s bid was Rs. 315.80 crores. Rachana Construction Co.’s bid was not considered due to its disqualification.
Timeline:
| Date | Event |
|---|---|
| December 2, 2019 | State of Madhya Pradesh issues NIT for flyover construction. |
| May 15, 2018 | FIR lodged against UPSBC regarding bridge collapse in Varanasi. |
| July 30, 2019 | High Court of Judicature at Allahabad stays trial related to the FIR against UPSBC. |
| March 13, 2020 | Technical Evaluation Committee rejects UPSBC’s bid. |
| March 17, 2020 | Interim order by High Court to open UPSBC’s financial bid. |
| June 15, 2020 | High Court rules in favor of UPSBC, directing the issuance of a letter of intent. |
| July 2, 2020 | High Court upholds rejection of Rachana Construction Co.’s bid. |
| August 4, 2020 | High Court upholds rejection of Rachana Construction Co.’s bid in review. |
| December 8, 2020 | Supreme Court sets aside High Court’s judgment in favor of UPSBC and upholds the rejection of Rachana Construction Co.’s bid. |
Course of Proceedings
The High Court of Madhya Pradesh initially ruled in favor of UPSBC, stating that there was no suppression of facts as the term “investigation” under the Code of Criminal Procedure (Cr.P.C.) does not include a trial. The High Court was also influenced by the difference in financial bids between UPSBC and Rajkamal. The High Court directed the State of Madhya Pradesh to issue a letter of intent (LOI) to UPSBC.
In a separate writ petition, the High Court upheld the rejection of Rachana Construction Co.’s bid, finding that the company did not meet the technical qualification criteria.
Legal Framework
The case revolves around the interpretation of specific clauses in the NIT. Key clauses include:
- Clause 2.1.4: Stipulates that the bid amount should be indicated clearly in both figures and words, and in case of any difference, the amount indicated in words shall be taken into account.
- Clause 2.2.2.2(ii): Requires bidders to have completed at least one similar work of 25% of the estimated project cost. For highway projects including bridges, the bidder must demonstrate experience in construction of a similar bridge with a span equal to or greater than 50% of the longest span of the proposed structure.
- Clause 2.2.2.5: Specifies categories and factors for evaluation of technical capacity.
- Clause 2.6.2: Grants the authority the right to reject any bid if a material misrepresentation is made or uncovered.
- Clause 3.1.6: Outlines the tests of responsiveness for technical bids.
- Clause 4.1: Allows the authority to reject a bid if the bidder engages in corrupt or fraudulent practices.
- Clause 4.3(b): Defines “fraudulent practice” as a misrepresentation, omission, or suppression of facts to influence the bidding process.
- Appendix IA, Paragraph 11: Requires bidders to certify that they have not been convicted or indicted by a court of law, which could cast doubt on their ability to undertake the project.
- Appendix IA, Paragraph 13: Requires bidders to certify that no investigation by a regulatory authority is pending against them.
- Appendix IB, Paragraph 2: Requires bidders to certify that all information provided in the bid is true and correct.
- Annex I, Clause 7: Requires bidders to certify that no investigation by a regulatory or investigating agency is pending against them.
The Supreme Court examined these clauses to determine whether the State of Madhya Pradesh was justified in rejecting the bids of UPSBC and Rachana Construction Co.
Arguments
Arguments by the State of Madhya Pradesh
- The State argued that the term “investigation pending” should not be interpreted narrowly as defined under the Cr.P.C. Instead, it should encompass all steps related to the criminality of an accused.
- The State contended that UPSBC’s failure to disclose the FIR and subsequent charge sheet amounted to a material misrepresentation and a “fraudulent practice” under clause 4.3(b) of the NIT.
- The State argued that paragraph 11 of Appendix IA, which requires disclosure of indictments, was also violated by UPSBC.
Arguments by U.P. State Bridge Corporation Limited (UPSBC)
- UPSBC argued that since no investigation was pending at the time of the bid, as the investigation had culminated in a charge sheet, there was no suppression of facts.
- UPSBC relied on the judgment in Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81, arguing that bidders are only required to disclose information specifically requested in the tender format.
- UPSBC argued that any ambiguity in the clause should be interpreted in favor of the bidder under the rule of contra proferentem, citing Bank of India v. K. Mohandas, (2009) 5 SCC 313.
- UPSBC emphasized that the financial bid was Rs. 9 crores less than Rajkamal’s and thus public interest would be served by accepting their bid.
Arguments by Rachana Construction Co.
- Rachana Construction Co. argued that it met the technical qualification criteria, as the contract for two road over bridges was a single project.
- Rachana Construction Co. contended that the cost of the project was above 25% of the estimated cost of the current tender.
- Rachana Construction Co. argued that the non-joinder of UPSBC as a necessary party should not be held against them.
Arguments by Rajkamal Builders Infrastructure Pvt. Ltd.
- Rajkamal supported the State’s arguments and contended that the High Court’s decision in favor of UPSBC was incorrect.
- Rajkamal argued that paragraphs 11 and 13 of Appendix IA should be read together, and that UPSBC’s indictment in a criminal case should have been disclosed.
- Rajkamal also argued that Rachana Construction Co. did not meet the technical criteria, as the span of the bridges constructed by them was less than 50% of the proposed flyover.
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Interpretation of “Investigation Pending” | “Investigation” under Cr.P.C. is different from inquiries and trials; no need to disclose FIR and aftermath. | UPSBC |
| “Investigation pending” should include all steps towards criminality. | State of Madhya Pradesh | |
| Omission of material fact amounts to fraudulent practice. | State of Madhya Pradesh | |
| Disclosure Requirements | Bidders are only required to disclose information specifically requested in the tender format. | UPSBC |
| Paragraphs 11 and 13 of Appendix IA should be read together; indictment should be disclosed. | Rajkamal | |
| Technical Qualification | Single project with two road over bridges meets the technical criteria. | Rachana Construction Co. |
| Span of bridges constructed by Rachana Construction Co. is less than 50% of the proposed flyover. | Rajkamal | |
| Public Interest | Financial bid of UPSBC is Rs. 9 crores less than Rajkamal’s. | UPSBC |
| Rajkamal is willing to match UPSBC’s bid. | Rajkamal |
Issues Framed by the Supreme Court
The Supreme Court addressed the following key issues:
- Whether the High Court was correct in holding that there was no suppression of facts by UPSBC.
- Whether the High Court was correct in holding that Rachana Construction Co.’s bid was rightly rejected.
Treatment of the Issue by the Court:
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the High Court was correct in holding that there was no suppression of facts by UPSBC. | No | The Supreme Court held that UPSBC suppressed material facts by not disclosing the FIR and charge sheet related to the bridge collapse. The court stated that the term “investigation pending” should not be narrowly interpreted and that the bidder was required to disclose indictments under paragraph 11 of Appendix IA. |
| Whether the High Court was correct in holding that Rachana Construction Co.’s bid was rightly rejected. | Yes | The Supreme Court upheld the High Court’s decision, stating that the term “at least one similar work” could possibly mean only one such work and not two such bridges, even if two bridges were to be constructed under the same tender document. The court also noted that the span of the bridges constructed by Rachana Construction Co. was less than 50% of the proposed flyover. |
Authorities
Cases Relied Upon by the Court
| Case Name | Court | Legal Point | How it was used |
|---|---|---|---|
| Tata Cellular v. Union of India, (1994) 6 SCC 651 | Supreme Court of India | Judicial review in administrative action | The Court cited this case to emphasize the principle of judicial restraint in interfering with administrative decisions, particularly in matters of tenders and contracts. |
| Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 | Supreme Court of India | Judicial review of tenders | The Court referred to this case to reiterate that judicial review should not interfere with tender processes unless there is mala fide, arbitrariness, or a clear public interest issue. |
| Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622 | Supreme Court of India | Essential terms of NIT | The Court used this case to highlight that the terms of a NIT should be given meaning and significance and that the soundness of a decision should not be questioned unless it is irrational or mala fide. |
| Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818 | Supreme Court of India | Interpretation of tender documents | The Court relied on this case to state that the author of tender documents is the best person to understand its requirements and that courts should defer to this understanding unless there is mala fide or perversity. |
| Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 | Supreme Court of India | Judicial review in tender matters | This case was cited to reinforce the principle of judicial restraint in tender matters. |
| Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81 | Supreme Court of India | Compliance with tender formats | The Court considered this case, which held that bidders are only required to disclose information specifically requested in the tender format. However, the Court distinguished it based on the facts of the present case. |
| Secy., Deptt. of Home Secy., A.P. v. B. Chinnam Naidu, (2005) 2 SCC 746 | Supreme Court of India | Interpretation of “convicted” | The Court distinguished this case, which held that “convicted” does not include arrest. The Court found that the facts of the present case were different. |
| Bank of India v. K. Mohandas, (2009) 5 SCC 313 | Supreme Court of India | Rule of contra proferentem | The Court considered this case, which discusses the rule of contra proferentem. However, the Court found that the rule was not applicable in the present case as there was no ambiguity in the relevant clauses. |
| Vinubhai Haribhai Malaviya v. State of Gujarat, (2019) 17 SCC 1 | Supreme Court of India | Distinction between investigation, inquiry, and trial | The Court found that this case, which distinguishes between investigation, inquiry, and trial, was not applicable to the present case. |
Legal Provisions Considered
| Legal Provision | Description | How it was used |
|---|---|---|
| Clause 2.1.4 of the NIT | Specifies the format for bid amounts. | The Court noted this clause as part of the overall tender requirements. |
| Clause 2.2.2.2(ii) of the NIT | Specifies technical qualification criteria for bidders. | The Court analyzed this clause to determine whether Rachana Construction Co. met the technical requirements. |
| Clause 2.2.2.5 of the NIT | Specifies categories and factors for evaluation of technical capacity. | The Court noted this clause as part of the overall tender requirements. |
| Clause 2.6.2 of the NIT | Reserves the right to reject any bid for misrepresentation. | The Court referred to this clause to support the rejection of UPSBC’s bid. |
| Clause 3.1.6 of the NIT | Outlines the tests of responsiveness for technical bids. | The Court noted this clause as part of the overall tender requirements. |
| Clause 4.1 of the NIT | Allows rejection of bids for corrupt or fraudulent practices. | The Court used this clause to justify the rejection of UPSBC’s bid due to fraudulent practice. |
| Clause 4.3(b) of the NIT | Defines “fraudulent practice.” | The Court used this definition to determine that UPSBC’s actions constituted a fraudulent practice. |
| Paragraph 11 of Appendix IA of the NIT | Requires bidders to certify they have not been convicted or indicted. | The Court found that UPSBC violated this clause by not disclosing its indictment. |
| Paragraph 13 of Appendix IA of the NIT | Requires bidders to certify that no investigation is pending. | The Court found that UPSBC violated this clause by not disclosing the FIR and charge sheet. |
| Paragraph 2 of Appendix IB of the NIT | Requires bidders to certify that all information is true and correct. | The Court noted this clause as part of the overall tender requirements. |
| Clause 7 of Annex I of the NIT | Requires bidders to certify that no investigation is pending. | The Court found that UPSBC violated this clause by not disclosing the FIR and charge sheet. |
Judgment
| Submission by Parties | Treatment by the Court |
|---|---|
| UPSBC argued that since no investigation was pending, there was no suppression of facts. | The Court rejected this argument, stating that the term “investigation pending” should not be narrowly interpreted and that UPSBC was required to disclose the FIR and charge sheet. |
| UPSBC relied on Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81, arguing that bidders are only required to disclose information specifically requested in the tender format. | The Court distinguished this case, stating that the facts of the present case were different and that UPSBC was required to disclose its indictment under paragraph 11 of Appendix IA. |
| UPSBC argued that any ambiguity in the clause should be interpreted in favor of the bidder under the rule of contra proferentem. | The Court rejected this argument, stating that there was no ambiguity in the fraudulent practice clause or paragraph 11 of Appendix IA. |
| Rachana Construction Co. argued that it met the technical qualification criteria. | The Court rejected this argument, upholding the High Court’s decision that the company did not meet the criteria. |
| Rajkamal argued that paragraphs 11 and 13 of Appendix IA should be read together, and that UPSBC’s indictment in a criminal case should have been disclosed. | The Court accepted this argument, stating that paragraph 13 had to be read along with paragraph 11, which clearly states that a person who is “indicted” for a criminal offence has to disclose the factum of indictment. |
The Supreme Court held that UPSBC engaged in a fraudulent practice by omitting and suppressing the fact that an FIR had been lodged against it concerning a bridge collapse and that a charge sheet had been filed. The court emphasized that the term “investigation pending” should not be narrowly interpreted as defined under the Cr.P.C., but should encompass all steps related to the criminality of an accused.
The Court also held that paragraph 11 of Appendix IA required UPSBC to disclose that it had been “indicted” in a criminal case. The Court stated that a technical objection based on the rejection order cannot be allowed to prevail in the face of the suppression of a most material fact.
The Court rejected the argument that the rule of contra proferentem should apply, stating that there was no ambiguity in the fraudulent practice clause and paragraph 11 of Appendix IA.
The Supreme Court upheld the rejection of Rachana Construction Co.’s bid, agreeing with the High Court that the company did not meet the technical qualification criteria. The Court stated that the expression “at least one similar work” could possibly mean only one such work, namely, the construction of one such bridge and not two such bridges.
The Supreme Court set aside the High Court’s judgment in favor of UPSBC and directed the State of Madhya Pradesh to issue a LOI to Rajkamal at the same financial bid as that of UPSBC.
How each authority was viewed by the Court?
The court relied on several authorities to determine the issues in the case:
- The court cited Tata Cellular v. Union of India, (1994) 6 SCC 651 to emphasize judicial restraint in administrative action.
- The court cited Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517 to emphasize that judicial review should not interfere with tender processes unless there is mala fide, arbitrariness, or a clear public interest issue.
- The court cited Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622 to highlight that the terms of a NIT should be given meaning and significance.
- The court cited Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818 to emphasize that the author of tender documents is the best person to understand its requirements.
- The court cited Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 to reinforce the principle of judicial restraint in tender matters.
- The court distinguished Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14 SCC 81, stating that the facts of the present case were different and that UPSBC was required to disclose its indictment under paragraph 11 of Appendix IA.
- The court distinguished Secy., Deptt. of Home Secy., A.P. v. B. Chinnam Naidu, (2005) 2 SCC 746, stating that the facts of the present case were different.
- The court rejected the argument that the rule of contra proferentem should apply, citing Bank of India v. K. Mohandas, (2009) 5 SCC 313, stating that there was no ambiguity in the fraudulent practice clause and paragraph 11 of Appendix IA.
- The court found that Vinubhai Haribhai Malaviya v. State of Gujarat, (2019) 17 SCC 1 was not applicable to the present case.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need for transparency and full disclosure in government contracts. The Court emphasized that bidders must provide complete and accurate information, and any omission or suppression of material facts can be grounds for rejection. The Court was also influenced by the fact that UPSBC had been indicted for offences relatable to the construction of a bridge by it, which had collapsed.
The Court was also influenced by the fact that Rajkamal was willing to match UPSBC’s financial bid, thereby removing any public interest concern related to a higher bid amount.
| Sentiment | Percentage |
|---|---|
| Need for Transparency and Full Disclosure | 40% |
| Suppression of Material Facts | 30% |
| Indictment of UPSBC | 20% |
| Rajkamal’s willingness to match the bid | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
Logical Reasoning
Issue: Whether UPSBC suppressed facts by not disclosing the FIR and charge sheet
Court’s Reasoning:
1. The term “investigation pending” should not be narrowly interpreted.
2. Paragraph 11 of Appendix IA requires disclosure of indictments.
3. UPSBC’s omission was a “fraudulent practice.”
Conclusion: UPSBC’s bid was rightly rejected due to suppression of facts.
Issue: Whether Rachana Construction Co.’s bid was rightly rejected
Court’s Reasoning:
1. The term “at least one similar work” means one such work, not two.
2. Rachana did not meet the technical qualification criteria.
Conclusion: Rachana’s bid was rightly rejected.
The Court considered the arguments of all the parties and the relevant clauses of the NIT. It rejected UPSBC’s argument that the term “investigation pending” should be interpreted narrowly, stating that the term should encompass all steps related to the criminality of an accused. The Court also rejected UPSBC’s argument that the rule of contra proferentem should apply, finding no ambiguity in the relevant clauses.
The Court also considered the public interest aspect and noted that Rajkamal was willing to match UPSBC’s financial bid, thereby removing any public interest concern related to a higher bid amount.
The Court considered the authorities cited by the parties and distinguished the cases cited by UPSBC, stating that the facts of the present case were different.
The Court’s decision was based on the interpretation of the terms of the NIT and the principle of transparency and full disclosure in government contracts.
The Supreme Court quoted from the judgment,
“Clearly in the facts of the present case, though the investigation is no longer pending and though there is no conviction by a court of law, UPSBC has certainly been “indicted”, in that, a charge sheet has been filed against it relatable to the FIR dated 15.05.2018 in which a trial is pending, though stayed by the High Court.”
“In the facts of the present case, there is clearly an omission of a most relevant fact and suppression of the same fact, namely that an FIR had been lodged against UPSBC in respect of the construction of a bridge by it, which had collapsed, and in which a charge sheet had been lodged.”
“Suffice it to say that the expression “at least one similar work” could possibly mean only one such work, namely, the construction of one such bridge and not two such bridges, even if two bridges were to be constructed under the same tender document.”
Key Takeaways
- Bidders in government tenders must provide complete and accurate information.
- Omission or suppression of material facts can lead to rejection of bids.
- The term “investigation pending” should be interpreted broadly to include all steps related to the criminality of an accused.
- The principle of transparency and full disclosure is paramount in government contracts.
- Courts will generally defer to the interpretation of tender documents by the tendering authority unless there is mala fide or perversity.
Directions
The Supreme Court directed the State of Madhya Pradesh to issue a Letter of Intent (LOI) to Rajkamal at the same financial bid as that of UPSBC.
Development of Law
The Supreme Court’s judgment clarifies that the term “investigation pending” should be interpreted broadly to include all steps related to the criminality of an accused. The judgment also emphasizes the importance of full disclosure and transparency in government contracts. This is a reiteration of the position of law that the author of the tender document is the best person to interpret the document and that the courts should not interfere unless there is mala fide or perversity.
Conclusion
The Supreme Court set aside the High Court’s judgment in favor of UPSBC and upheld the rejection of Rachana Construction Co.’s bid. The Court emphasized the need for transparency and full disclosure in government contracts and held that UPSBC had engaged in a fraudulent practice by suppressing material facts. The Court directed the State of Madhya Pradesh to issue an LOI to Rajkamal at the same financial bid as that of UPSBC.