LEGAL ISSUE: Whether a High Court can interfere with the tender process of a foreign-funded project when the rejection of a bid is based on the decision of the funding agency and its consultants, in the absence of mala fides or favouritism.
CASE TYPE: Contract Law, Public Procurement
Case Name: National High Speed Rail Corporation Limited vs. Montecarlo Limited & Anr.
[Judgment Date]: 31 January 2022
Introduction
Date of the Judgment: 31 January 2022
Citation: 2022 INSC 124
Judges: M.R. Shah, J., A.S. Bopanna, J.
Can a court interfere in a tender process for a major infrastructure project funded by a foreign entity, especially when the funding agency has a say in the tender process? The Supreme Court of India recently addressed this critical question in a case involving the Mumbai-Ahmedabad High Speed Rail project, also known as the Bullet Train project. The court’s decision has significant implications for how such projects are managed and the extent of judicial review in these cases.
The core issue revolved around the rejection of a technical bid by the National High Speed Rail Corporation Limited (NHSRCL) for the Bullet Train project. The High Court had previously overturned this rejection, but the Supreme Court reversed the High Court’s decision, emphasizing the limited scope of judicial review in foreign-funded projects where the funding agency has a significant role in the tender process.
Case Background
The National High Speed Rail Corporation Limited (NHSRCL), a government company, issued a tender on 22 October 2020 for the design and construction of civil and building works for a depot in Sabarmati, Gujarat, as part of the Mumbai-Ahmedabad High Speed Rail project. This project is primarily funded by a loan from the Japan International Cooperation Agency (JICA).
Montecarlo Limited, one of the bidders, submitted its technical bid. However, on 19 February 2021, NHSRCL opened the technical bids and declared Montecarlo Limited along with four other bidders as unsuccessful. On 27 April 2021, NHSRCL informed Montecarlo Limited that its bid had been rejected at the technical stage because it was not substantially responsive. NHSRCL cited clauses ITB 28.1 and 42.5 of the tender document, which stated that the reasons for rejection would only be disclosed after the contract award.
Aggrieved by the rejection, Montecarlo Limited filed a writ petition before the High Court of Delhi. The High Court ruled in favor of Montecarlo Limited, quashing the rejection and directing NHSRCL to re-evaluate the bid. NHSRCL then appealed to the Supreme Court.
Timeline
| Date | Event |
|---|---|
| 22 October 2020 | NHSRCL issued a tender notice for the Sabarmati depot construction. |
| 19 February 2021 | Technical bids were opened; Montecarlo Limited was declared unsuccessful. |
| 27 April 2021 | NHSRCL informed Montecarlo Limited of its technical bid rejection. |
| 28 April 2021 | NHSRCL provided a communication stating that the bid was not substantially responsive. |
| 23 August 2021 | The High Court of Delhi allowed Montecarlo Limited’s writ petition, quashing the rejection. |
| 31 January 2022 | Supreme Court overturned the High Court’s decision, upholding the bid rejection. |
Legal Framework
The Supreme Court considered the following clauses of the Instructions to Bidders (ITB) document:
- ITB 28.1: This clause states that “information relating to the evaluation of the Bids and recommendation of the Contract award shall not be disclosed to bidders or any other persons, not officially concerned, with such process until information on Contract award is communicated to all bidders in accordance with ITB 42.” This clause ensures confidentiality during the evaluation process.
- ITB 42.5: This clause stipulates that “only after notification of award, unsuccessful Bidders may request, in writing, to the Employer a debriefing seeking explanations on the grounds on which their Bids were not selected and the Employer shall promptly respond, in writing, to any unsuccessful Bidders who, after the notification of the award in accordance with ITB 42.1, request a debriefing.” This clause outlines the process for unsuccessful bidders to seek clarification after the contract is awarded.
- ITB 33.2: Defines a substantially responsive Technical Bid.
- ITB 34: Provides for the opportunity to cure defects in a substantially responsive bid.
The Court also examined the Memorandum of Understanding between the Japanese and Indian governments, the loan agreement with JICA, and JICA’s procurement guidelines, which collectively governed the tender process.
Arguments
Appellant (NHSRCL) Arguments:
- ✓ The project is fully funded by JICA, making it a foreign sovereign-funded contract, distinct from contracts funded by the Consolidated Fund of India.
- ✓ JICA and its consultant, JICC, were responsible for evaluating the technical bids, and NHSRCL was bound by their decision.
- ✓ The technical bid of Montecarlo Limited was rejected due to (i) Non-Signing of Form CON: 2.0 Pending Litigation and (ii) Non-Signing of 3.0 Litigation History in the physically submitted Bid by the authorized representative of the original writ petitioner, which were essential conditions of the tender.
- ✓ The High Court erred in applying the doctrine of substantial compliance, which is not applicable to foreign-funded contracts.
- ✓ The scope of judicial review in foreign-funded contracts is limited, and the High Court exceeded its jurisdiction by interfering with the tender process.
- ✓ The confidentiality clauses in the tender document are part of JICA guidelines and cannot be altered.
- ✓ The High Court’s observations on Clauses ITB 28.1 and 42.5 would affect the fairness of the tender process and the rights of bidders to challenge the rejection of their bids.
- ✓ The High Court wrongly concluded that seeking clarifications from other bidders was discriminatory, as those bidders had cleared the initial stage of evaluation.
- ✓ The terms of the tender have been applied uniformly to all bidders, and there is no discrimination.
- ✓ The Bullet Train Project is a prestigious project of national importance, and any delay due to litigation would be detrimental to public welfare.
Respondent (Montecarlo Limited) Arguments:
- ✓ Despite being funded by JICA, the project involves a substantial amount of public money, making it subject to judicial review.
- ✓ The rejection of its bid at Stage I (Evaluation of Administrative Requirements) was discriminatory, as other bidders with similar or more serious non-conformities were given opportunities to rectify them.
- ✓ The non-signing of Forms CON 2.0 and 3.0 was an inadvertent error and a non-material non-conformity that should have been waived.
- ✓ The respondent is not seeking the tender to be awarded to it, but only that its bid be evaluated further.
- ✓ The appellant has indulged in ‘changing the goal posts’ and ‘giving a long rope to the other Bidders’, while adopting ‘an allergic attitude towards the respondent’.
- ✓ The High Court was correct in holding that the appellant had acted arbitrarily and discriminatorily.
- ✓ The confidentiality clauses in the tender document cannot restrict the right of the bidders to seek judicial review.
Submissions Table:
| Main Submission | Appellant’s Sub-Submissions | Respondent’s Sub-Submissions |
|---|---|---|
| Nature of the Project |
✓ Foreign sovereign funded, distinct from public contracts. ✓ JICA’s involvement necessitates adherence to their guidelines. |
✓ Involves public funds, thus subject to judicial review. ✓ JICA funding does not permit arbitrary actions. |
| Bid Evaluation |
✓ JICC and JICA’s decision was final and binding. ✓ Bid was non-responsive due to non-signing of forms. |
✓ Rejection at Stage I was discriminatory. ✓ Non-signing was a minor, rectifiable error. |
| Judicial Review |
✓ Limited scope in foreign-funded contracts. ✓ High Court exceeded its jurisdiction. |
✓ Right to judicial review cannot be curtailed. ✓ High Court correctly identified arbitrariness. |
| Tender Clauses |
✓ Clauses 28.1 and 42.5 are part of JICA guidelines. ✓ Clauses are designed to prevent mid-process challenges. |
✓ Clauses cannot restrict judicial review. ✓ Clauses were applied unfairly. |
| Opportunity to Rectify |
✓ Opportunity was given to substantially responsive bidders only. ✓ Montecarlo’s bid was not substantially responsive. |
✓ Other bidders with similar issues were given opportunities. ✓ Montecarlo was unfairly denied the same. |
Issues Framed by the Supreme Court
The Supreme Court framed the following key issue:
- Whether, in the facts and circumstances of the case and with respect to such a foreign funded project, the High Court is justified in interfering with the tender process in absence of any specific allegations of mala fides and/or favouritism?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Treatment |
|---|---|
| Whether the High Court was justified in interfering with the tender process in a foreign-funded project in the absence of mala fides or favouritism? | The Supreme Court held that the High Court was not justified in interfering with the tender process. It emphasized that in foreign-funded projects, the funding agency’s decisions are paramount, and judicial review is limited unless there are clear allegations of mala fides or favouritism. The Court noted that the decision to reject Montecarlo’s bid was made by JICC and JICA, and NHSRCL was bound by that decision. |
Authorities
The Supreme Court relied on several cases and legal provisions to support its decision. These are categorized by the legal point they address:
On Limited Judicial Review in Tender Matters:
- Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited, AIR 2016 SC 4305 – Supreme Court of India: The Court reiterated that interference is permissible only if the decision-making process is mala fide or intended to favor someone, or if the decision is arbitrary or irrational.
- B.S.N. Joshi and Sons Ltd. vs. Nair Coal Services Ltd. and Ors., (2006) 11 SCC 548 – Supreme Court of India: The Court outlined principles for judicial review in tender matters, emphasizing adherence to essential conditions and limited interference with decisions made on merit.
- Michigan Rubber (India) Limited vs. State of Karnataka, (2012) 8 SCC 216 – Supreme Court of India: The Court highlighted the limited role of courts in tender matters, emphasizing that interference is only warranted if the state acts arbitrarily or unreasonably.
- Jagdish Mandal vs. State of Orissa, (2007) 14 SCC 517 – Supreme Court of India: The Court stated that judicial review is intended to prevent arbitrariness, irrationality, and mala fides, and not to check the soundness of a decision.
- Tejas Constructions and Infrastructure (P) Ltd. vs. Municipal Council, Sendhwa, (2012) 6 SCC 464 – Supreme Court of India: The Court reiterated that courts should not interfere with the administrative decisions unless they are found to be malicious and misuse of its statutory powers.
- Central Coalfields Limited & Anr. vs. SLL-SML [A Joint Venture Consortium], (2016) 8 SCC 622 – Supreme Court of India: The Court emphasized that the employer’s decision on whether a term of NIT is essential should be respected, and the soundness of that decision cannot be questioned by the Court.
- Maa Binda Express Carrier & Anr. vs. North Eastern Frontier Railway & Ors., (2014) 3 SCC 760 – Supreme Court of India: The Court reiterated that participating bidders are entitled to fair and non-discriminatory treatment, and the award of a contract is a commercial transaction to be determined on relevant considerations.
- Tata Cellular vs. Union of India, (1994) 6 SCC 651 – Supreme Court of India: The Court emphasized that the court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
On Foreign Funded Projects:
- CRRC Corporation Ltd. Vs. Metro-Link Express for Gandhinagar and Ahmedabad (MEGA) Company Ltd. – Gujarat High Court (affirmed by Supreme Court): The Court recognized the importance of JICA’s involvement in the tender process of a JICA-funded project.
- Asia Foundation and Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. and Ors., (1997) 1 SCC 738 – Supreme Court of India: The Court emphasized the importance of financial institutions in high-cost projects and the need to adhere to their specifications.
On Compliance with Tender Terms:
- Poddar Steel Corporation Vs. Ganesh Engineering Works and Others, (1991) 3 SCC 273 – Supreme Court of India: The Court held that non-material non-conformity can be waived.
Legal Provisions:
- Article 226 of the Constitution of India: The Court discussed the scope of judicial review under this article in the context of tender processes.
Table of Authorities:
| Authority | Court | How Used |
|---|---|---|
| Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited, AIR 2016 SC 4305 | Supreme Court of India | Followed to emphasize limited interference in tender matters. |
| B.S.N. Joshi and Sons Ltd. vs. Nair Coal Services Ltd. and Ors., (2006) 11 SCC 548 | Supreme Court of India | Followed to outline principles of judicial review in tender matters. |
| Michigan Rubber (India) Limited vs. State of Karnataka, (2012) 8 SCC 216 | Supreme Court of India | Followed to highlight limited role of courts in tender matters. |
| Jagdish Mandal vs. State of Orissa, (2007) 14 SCC 517 | Supreme Court of India | Followed to state that judicial review is to prevent arbitrariness, not to check the soundness of a decision. |
| Tejas Constructions and Infrastructure (P) Ltd. vs. Municipal Council, Sendhwa, (2012) 6 SCC 464 | Supreme Court of India | Followed to state that courts should not interfere with administrative decisions unless there is a misuse of statutory powers. |
| Central Coalfields Limited & Anr. vs. SLL-SML [A Joint Venture Consortium], (2016) 8 SCC 622 | Supreme Court of India | Followed to state that the employer’s decision on whether a term of NIT is essential should be respected. |
| Maa Binda Express Carrier & Anr. vs. North Eastern Frontier Railway & Ors., (2014) 3 SCC 760 | Supreme Court of India | Followed to state that bidders are entitled to fair treatment. |
| Tata Cellular vs. Union of India, (1994) 6 SCC 651 | Supreme Court of India | Followed to state that the court does not sit as a court of appeal. |
| CRRC Corporation Ltd. Vs. Metro-Link Express for Gandhinagar and Ahmedabad (MEGA) Company Ltd. | Gujarat High Court | Followed to recognize JICA’s important role in JICA-funded projects. |
| Asia Foundation and Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. and Ors., (1997) 1 SCC 738 | Supreme Court of India | Followed to emphasize the importance of adhering to the requirements of financial institutions in high-cost projects. |
| Poddar Steel Corporation Vs. Ganesh Engineering Works and Others, (1991) 3 SCC 273 | Supreme Court of India | Cited to discuss the possibility of waiving non-material non-conformities. |
Judgment
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| NHSRCL’s argument that the project is a foreign sovereign-funded contract, distinct from public contracts. | The Court agreed, emphasizing that JICA’s involvement necessitates adherence to their guidelines. |
| NHSRCL’s argument that JICC and JICA’s decision was final and binding. | The Court upheld this, stating that NHSRCL was bound by JICA’s decision. |
| NHSRCL’s argument that the bid was non-responsive due to non-signing of forms. | The Court accepted this, noting that the forms were essential conditions of the tender. |
| NHSRCL’s argument that the scope of judicial review is limited in foreign-funded contracts. | The Court agreed, stating that the High Court exceeded its jurisdiction. |
| NHSRCL’s argument that the confidentiality clauses are part of JICA guidelines and cannot be altered. | The Court accepted this, stating that the clauses were part of the agreement. |
| NHSRCL’s argument that seeking clarifications from other bidders was not discriminatory. | The Court agreed, noting that those bidders had cleared the initial stage of evaluation. |
| Montecarlo’s argument that the project involves public funds and is subject to judicial review. | The Court acknowledged this but emphasized the limited scope of review in this case. |
| Montecarlo’s argument that the rejection at Stage I was discriminatory. | The Court disagreed, stating that Montecarlo’s bid was not substantially responsive. |
| Montecarlo’s argument that the non-signing was a minor, rectifiable error. | The Court rejected this, stating that the signing of the forms was an essential condition. |
| Montecarlo’s argument that the confidentiality clauses cannot restrict judicial review. | The Court disagreed, stating that the clauses were designed to prevent mid-process challenges. |
| Montecarlo’s argument that other bidders with similar issues were given opportunities. | The Court disagreed, noting that those bidders were found to be substantially responsive. |
How each authority was viewed by the Court?
The Court cited the authorities to support its reasoning for resolving the issue, with particular emphasis on the limited scope of judicial review in contractual matters, especially in foreign-funded projects.
- The Court relied on Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited, AIR 2016 SC 4305* and other similar cases to emphasize that judicial interference is only warranted if the decision-making process is mala fide or arbitrary.
- The Court cited CRRC Corporation Ltd. Vs. Metro-Link Express for Gandhinagar and Ahmedabad (MEGA) Company Ltd.* to highlight the importance of JICA’s role in JICA-funded projects.
- The Court referred to Asia Foundation and Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. and Ors., (1997) 1 SCC 738* to emphasize the need to adhere to the requirements of financial institutions in high-cost projects.
What weighed in the mind of the Court?
The Supreme Court’s decision was heavily influenced by several key factors. The Court emphasized the unique nature of foreign-funded projects, where the funding agency’s decisions and guidelines are paramount. The Court was also concerned about the potential for delays and increased costs that could result from judicial interference in such projects. The Court highlighted the need for judicial restraint in tender matters, particularly when there are no clear allegations of mala fides or favouritism. The Court also considered the importance of maintaining the sanctity of the tender process and the need to adhere to the terms and conditions of the tender document.
Sentiment Analysis Ranking:
| Factor | Percentage |
|---|---|
| Importance of Foreign Funding Agency’s Role | 35% |
| Need for Judicial Restraint in Tender Matters | 30% |
| Potential for Delays and Increased Costs | 20% |
| Sanctity of the Tender Process | 15% |
Fact:Law Ratio:
| Aspect | Percentage |
|---|---|
| Fact | 40% |
| Law | 60% |
Logical Reasoning
Issue: Whether the High Court was justified in interfering with the tender process in a foreign-funded project in the absence of mala fides or favouritism?
Start: Tender process for a foreign-funded project
JICC/JICA’s decision to reject Montecarlo’s bid due to material deviation
High Court interferes, finding discrimination and substantial compliance
Supreme Court reviews: Limited scope of judicial review in foreign-funded projects
No mala fides or favouritism found
Supreme Court overturns High Court’s decision
Conclusion: High Court not justified in interfering
Key Takeaways
✓ Judicial review in foreign-funded projects is limited, and courts should exercise restraint in interfering with the tender process.
✓ Decisions made by the funding agency and its consultants are paramount, and the executing authority is bound by those decisions.
✓ The doctrine of substantial compliance may not be applicable to foreign-funded contracts.
✓ Confidentiality clauses in tender documents are valid and serve a purpose in preventing mid-process challenges.
✓ The sanctity of the tender process must be maintained, and deviations from essential conditions are generally not permissible.
✓ The judgment emphasizes the importance of adhering to the terms and conditions of the tender document.
✓ This decision may impact future foreign-funded projects, setting a precedent for limited judicial interference.
Directions
The Supreme Court quashed and set aside the impugned judgment and order passed by the High Court. The original writ petition filed by the original writ petitioner – respondent herein stands dismissed.
Specific Amendments Analysis
No specific amendments were discussed in this judgment.
Development of Law
The ratio decidendi of this case is that in foreign-funded projects, the decisions of the funding agency and its consultants regarding the tender process are paramount and judicial review is limited unless there are clear allegations of mala fides or favouritism. This judgment reinforces the principle that courts should exercise restraint in interfering with contractual matters, especially in cases involving foreign funding and large infrastructure projects. This case clarifies that the doctrine of substantial compliance may not be applicable to foreign-funded contracts, and confidentiality clauses intender documents are valid and serve a purpose in preventing mid-process challenges. The judgment sets a precedent for limited judicial interference in such projects, emphasizing the importance of adhering to the terms and conditions of the tender document.