Supreme Court of India
HIGHWAYS AUTHORITY OF INDIAversusGWALIOR JHANSI EXPRESSWAY LIMITED
- Citation
- 2018 INSC 609
- Decided
- 13 July 2018
- Disposal
- Appeal(s) allowed
- Bench
- DIPAK MISRA
Holding
A party may exercise ROFR or match the lowest bid only if it participates in the tender process as required by the tender documents; the tribunal’s and High Court’s orders allowing otherwise are set aside.
Summary
The National Highways Authority of India (NHAI) entered into a concession agreement with Gwalior Jhansi Expressway Limited (GJEL) to widen NH‑75. GJEL failed to complete the work, leading to arbitration. Both parties filed Section 17 applications before the arbitral tribunal seeking interim relief. The tribunal allowed GJEL to exercise a right of first refusal (ROFR) and match the lowest bid without participating in the tender process. NHAI appealed; the Delhi High Court upheld the tribunal’s order. The Supreme Court held that the tender documents expressly required any party wishing to claim ROFR to submit a sealed technical and financial bid, and no express exemption was granted. Consequently, GJEL could not claim ROFR without participating, and the tribunal’s and High Court’s orders were set aside. The appeal was allowed and the respondent’s Section 17 application dismissed.
Issues considered
- Whether a party can exercise the Right of First Refusal and match the lowest bid without participating in the tender process as per the tender documents.
- Whether the arbitral tribunal was empowered to grant such relief under Section 17 of the Arbitration and Conciliation Act, 1996.
- Whether the High Court erred in upholding the arbitral tribunal’s order.
- Interpretation of the tender documents and the fundamental policy of Indian law on competitive bidding.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 17, s. 37(2)(b), s. 9
- National Highways Authority of India Act, 1988
Subjects
Tender processRight of First RefusalArbitrationSection 17Public procurementCompetitive biddingExpress exemptionNHAIConcession agreement
Judgment
1024 [2018]REPORTS
SUPREME COURT 9 S.C.R. 1024 [2018] 9 S.C.R.
A NATIONAL HIGHWAYS AUTHORITY OF INDIA
v.
GWALIOR JHANSI EXPRESSWAY LIMITED
(Civil Appeal No. 3288 of 2018)
B JULY 13, 2018
[DIPAK MISRA, CJI, A. M. KHANWILKAR AND
DR. D. Y. CHANDRACHUD, JJ.]
Tenders – Agreement between the appellant and the
respondent for widening the existing two-la ne portion of National
C
Highway No.75 to four lanes – Appellant alleged breaches on part
of the respondent – Arbitral Tribunal constituted – Appellant moved
application u/s.17 of the 1996 Act before the Tribunal seeking
permission to complete the balance work of the project in view of
loss to the public at large – Respondent also filed application u/
D s.17 – Arbitral Tribunal disposed of the applications by common
interim order dtd. 23rd July 2016 – Appellant issued a tender for
the balance work – In consonance with the tender documents,
technical and financial bids were opened – Respondent moved
application before the Tribunal u/s.17, seeking, inter alia, permission
of the Tribunal to complete the balance work at its risk and cost–
E
Tribunal allowed the application – Appeal filed by appellant before
the High Court, dismissed – Plea of appellant that the respondent
cannot be permitted to exercise Right Of First Refusal (ROFR)
without participating in the bidding process – On appeal, held:
Right of the respondent to match the bid of L-1 or to exercise ROFR
F would come into play only if the respondent was to participate in
the tender process pursuant to the notice inviting tenders from the
interested parties – Respondent was required to participate in the
tender process by submitting its sealed bid (technical and financial)
– Having failed to participate in the tender process, despite the
express terms in the tender documents, validity whereof was not
G
challenged, the respondent cannot be heard to contend that it had
acquired any right whatsoever – There was nothing in the
application (filed by the respondent u/s.17) to even remotely suggest
that the respondent had prayed that it be exempted from participating
in the proposed tender process as such, and could yet exercise ROFR
H before the letter of intent was to be issued to the lowest bidder –
1024
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1025
JHANSI EXPRESSWAY LIMITED
Exemption in this regard cannot be inferred and has to be express – A
No express exemption was granted to the respondent vide order of
the Tribunal dtd. 23rd July, 2016 to exercise ROFR or match the
lowest bid without participating in the bidding process – Decision
of the Tribunal as confirmed by the High Court cannot be
countenanced – Arbitration and Conciliation Act, 1996 – ss.9, 17
B
and 37(2)(b).
Allowing the appeal, the Court
HELD: 1.1 By the terms and conditions in the tender
documents, the right of the respondent to match the bid of L-1 or
to exercise ROFR would come into play only if the respondent C
was to participate in the tender process pursuant to the notice
inviting tenders from the interested parties. The objective of
tender process is not only to adhere to a transparent mechanism
but to encourage competition and give equal opportunity to all
tenderers with the end result of getting a fair offer or value for
money. The plain wording of the eligibility clause in the tender D
documents and the incidental stipulations make it explicit that
the respondent was required to participate in the tender process
by submitting its sealed bid (technical and financial). The fact
that a deeming clause has been provided in the tender document
that if the respondent was to participate in the bidding process, it E
shall be deemed to fulfill all the requirements of the tender clauses
3 to 6 of the RFP, being the existing concessionaire of the Project,
does not exempt the respondent from participating in the tender
process; rather the tenor of the terms of the documents made it
obligatory for the respondent to participate in the tender process
to be considered as a responsive bidder, along with others. F
Having failed to participate in the tender process and, more so,
despite the express terms in the tender documents, validity
whereof has not been challenged, the respondent cannot be heard
to contend that it had acquired any right whatsoever. Only the
entities who participate in the tender process pursuant to a tender G
notice can be allowed to make grievances about the non-fulfillment
or breach of any of the terms and conditions of the concerned
tender documents. The respondent who chose to stay away from
the tender process, cannot be heard to whittle down, in any
manner, the rights of the eligible bidders who had participated in
H
1026 SUPREME COURT REPORTS [2018] 9 S.C.R.
A the tender process on the basis of the written and express terms
and conditions. At the culmination of the tender process, if the
respondent had not participated, in law, the offer submitted by
the eligible bidders is required to be considered on the basis of
the stated terms and conditions. Thus, if the claim of the
respondent was to be strictly adjudged on the basis of the terms
B
and conditions specified in the subject tender document, the
respondent has no case whatsoever. [Para 18] [1046-C-H; 1047-
A]
1.2 There is nothing in the entire application (filed by the
respondent under Section 17 of the Arbitration and Conciliation
C Act, 1996) to even remotely suggest that the respondent had
prayed that it be exempted from participating in the proposed
tender process as such, and could yet exercise ROFR before the
letter of intent was to be issued to the lowest bidder. The
exemption in this regard cannot be inferred. It has to be an
D express exemption sought and so granted and disclosed in the
tender documents. Such exemption ought to have been prayed
and expressly granted by the Court. In absence of such express
exemption, the respondent was obliged to comply with the terms
and conditions of the tender documents publicly notified by the
appellant as per its understanding of the order of the High Court.
E Having failed to participate in the bidding process in consonance
with such notified terms and conditions, the respondent lost the
opportunity granted under the order dated 23rd July, 2016 to match
the lowest bid or to exercise ROFR. Any other view would fall
foul of the fundamental policy of the Indian law and cannot be
F countenanced. [Para 19] [1047-C-G]
1.3 It is not the case of the respondent that an express
exemption has been granted to the respondent, from participating
in the bidding process. In the matter of tender process, there
can be no tacit or implied exemption from participating. In the
G first place, whether such direction can be issued by the Arbitral
Tribunal under Section 17 of the Act itself is debatable. However,
since the order dated 23rd July, 2016 has remained unchallenged,
one does not wish to dilate on that aspect. Indeed, the appellant
accepted the order with a sanguine hope that a proper tender
process can be resorted to, wherein the respondent would also
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1027
JHANSI EXPRESSWAY LIMITED
participate, for awarding the contract of unfinished and balance A
works of the subject Project. For effectuating that order, tender
documents were issued by the appellant on 28th November, 2016
which, as aforesaid, explicitly stipulated that the respondent was
expected to submit its bid within the specified time. Admittedly,
the fact that tender notice was issued, came to be disclosed before
B
the Arbitral Tribunal on 10th December, 2016. Surprisingly, the
respondent neither took any clue nor bothered to follow up the
tender documents which were placed in public domain (as is done
in respect of any other tender process). Further, the respondent
waited till the opening of technical bids on 5th January, 2017 and
financial bids on 29 th March, 2017 and rushed to the Arbitral C
Tribunal by way of an application under Section 17 of the Act,
only on 25th April, 2017 stating that on the previous day, it had
come to its notice that the appellant was likely to issue letter of
intent to the lowest bidder, without giving opportunity to the
respondent to match the lowest bid or exercise ROFR. To oppose
D
the said application, the appellant in the reply affidavit had asserted
that the respondent was fully aware about the terms and conditions
of the tender documents and yet chose not to participate in the
bidding process. The respondent did not think it necessary to
counter the said assertion by filing any rejoinder thereto.
Notwithstanding that, the Arbitral Tribunal was impressed by the E
plea taken by the respondent and allowed the application of the
respondent vide order dated 24th May, 2017. The Arbitral Tribunal
was more impressed by the fact that the respondent had completed
substantial works of the Project and it would be just and proper
to allow the respondent to complete the balance work. The
F
Arbitral Tribunal made no effort to ascertain as to whether the
order dated 23rd July, 2016 was a blanket and unconditional order
entitling the respondent to straightaway exercise ROFR without
participating in the bidding process. The Arbitral Tribunal merely
adverted to the objection of the appellant and rejected the same
on the finding that involvement of a third party in the Project G
would create serious problems. It took the view that giving option
to the respondent to match the lowest bid and to complete the
balance work, with a condition to periodically submit the progress
report to the Arbitral Tribunal for monitoring whether the balance
work was successfully completed to the satisfaction of the NHAI,
H
1028 SUPREME COURT REPORTS [2018] 9 S.C.R.
A would be a proper and equitable arrangement. This approach is
not in conformity with the fundamental policy of Indian law. [Para
20] [1047-G-H; 1048-A-H; 1049-A]
1.4 The approach of the High Court in the appeal preferred
by the appellant was no different. The High Court did not find
B any error, much less manifest error, in the view taken by the
Arbitral Tribunal. Further, the High Court was more eager to
know as to what prejudice would be caused to the appellant if the
respondent had not participated in the bidding process. This query
of the High Court is begging the question. For, that cannot be
the primary basis to answer the relief claimed by the respondent
C in the application under Section 17 of the Act. An entity who stays
away from the bidding process and fails to comply with the express
terms and conditions of the tender documents cannot claim any
right to match the lowest bid or exercise ROFR. Only a
responsive bidder could do so. The High Court overlooked the
D fact that the appellant is a body corporate under the 1988 Act. It
has to act in a just and fair manner in the matter of allocation of
contract albeit the balance and unfinished work of the Project.
No express exemption has been granted to the respondent vide
order of the Arbitral Tribunal dated 23rd July, 2016 – to exercise
ROFR or match the lowest bid without participating in the bidding
E process. The respondent had the option to participate in the
bidding process which was not availed of for reasons best known
to the respondent. The High Court also overlooked the fact that
the tender process was not an empty formality and with the
initiation of the same, third parties, who participated in the bidding
F process, were likely to be prejudiced by allowing the respondent
to match the lowest bid or exercise ROFR, without participating
in the bidding process despite the express stipulation in that
behalf in the tender documents. The High Court committed the
same error as committed by the Arbitral Tribunal in not examining
the core issues for grant or non-grant of the relief to the
G respondent, in conformity with the fundamental policy of Indian
law. [Para 21] [1049-B-G]
1.5 The decision of the Arbitral Tribunal as confirmed by
the High Court, falls foul of the fundamental policy of Indian law
and cannot be countenanced. [Para 24] [1051-A]
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1029
JHANSI EXPRESSWAY LIMITED
M/s. Raj West Power Limited & Anr. vs. Rajasthan A
Electricity Regulatory Commission & Ors. 2013 SCC
Online APTEL 46 – held inapplicable.
VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd. & Anr.
vs. Union of India & Ors. 2010 SCC Online Del 2687
– referred to. B
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3288
of 2018
From the Judgment and Order dated 21.08.2017 of the High Court
Delhi at New Delhi in ARB. A. (Comm.) No. 20 of 2017
C
K. K. Venugopal, AG, Ms. Kanika Tandon, Ms. Madhu Sweta,
Rohit Bhat, Ms. Astha Tyagi, Advs. for the appellant.
Mukul Rohatgi, Sr. Adv., Deepak Khurana, Ms. Manali Singhal,
Tejasv Anand, Umesh Kumar Khaitan, Advs. for the respondent.
The Judgment of the Court was delivered by D
A. M. KHANWILKAR, J. 1. This appeal emanates from the
decision of the High Court of Delhi at New Delhi dated 21st August,
2017 in Appeal ARB.A (Comm.) No.20 of 2017 whereby the appeal
filed by the appellant under Section 37(2)(b) of the Arbitration and
Conciliation Act, 1996 (for short, “the Act”) seeking to quash the order E
dated 24th May, 2017 passed by the Arbitral Tribunal under Section 17 of
the Act came to be dismissed. The Arbitral Tribunal vide order dated
24th May, 2017 allowed the application preferred by the respondent
(claimant) under Section 17 of the Act seeking a direction to the appellant
to allow the respondent to exercise an option to match the lowest bid in
F
terms of the order dated 23rd July, 2016 passed by the Arbitral Tribunal
and including to exercise Right of First Refusal (“ROFR”) and for other
consequential reliefs.
2. Shorn of unnecessary details, some of the relevant facts are
that the appellant (a body corporate, constituted under the National
Highways Authority of India Act, 1988) entered into a Concession G
Agreement dated 17th December, 2006 with the respondent (a consortium
comprising of Apollo Enterprises Limited and D.S. Construction Limited)
for works of widening the existing two-lane portion of Km 16.000 to Km
96.127 on National Highway No.75 to four lanes in the States of Uttar
Pradesh and Madhya Pradesh on the terms and conditions specified H
1030 SUPREME COURT REPORTS [2018] 9 S.C.R.
A therein. The appellant asserts that the respondent failed to undertake
the project work at the requisite pace, inter alia, due to inadequate
deployment of machinery, plant, material and manpower. The respondent
had merely achieved 62% progress and eventually abandoned the project
site in March, 2012. The appellant, therefore, had to issue a Cure Period
Notice dated 19th October, 2013 requiring the respondent to cure the
B
breaches within 30 days from receipt of the notice, failing which the
appellant may be forced to initiate further action to terminate the contract
in terms of the Concession Agreement. The respondent denied the
correctness of the stated notice by a written reply. The appellant then
issued letters dated 27th February, 2014 and 7th March, 2014 expressing
C its intention to issue termination notice of the Concession Agreement.
The respondent immediately rushed to the court by filing a petition under
Section 9 of the Act seeking stay of the Cure Period Notice dated 19 th
October, 2013 as well as the notice expressing the intention to issue
termination notice. The High Court of Delhi passed an interim stay on
12th March, 2014 restraining the appellant from taking any coercive action.
D
The petition under Section 9 of the Act was finally disposed of on 22nd
April, 2015 with a direction to the Arbitral Tribunal, which was already
constituted in the meantime, that the interim order dated 12th March,
2014 would continue during the pendency of the arbitral proceedings
with liberty to the parties to seek its modification or revocation before
E the Arbitral Tribunal.
3. The appellant accordingly moved an application dated 8th April,
2016 under Section 17 of the Act before the Arbitral Tribunal seeking
permission to complete the balance works of the project as it was causing
huge distress due to traffic congestion, unsafe highway, increase in
F expenditures, higher wear and tear of the vehicles and, in particular,
national loss to the public at large. The respondent also filed an application
under Section 17 of the Act on 17th May, 2016 seeking interim directions
against the appellant to pay Rs.400 crores to the respondent at the risk
and costs of the respondent for completing the balance works of the
project. The reliefs claimed in the application filed by the respondent
G read thus:
“a) Allow the present application and as an interim measure
direct the Respondent to pay a sum of Rs.400 Crores to the
Claimant at the risk and cost of the Claimant so as to complete
balance/remnant works of the project;
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1031
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
b) In the alternative and strictly without prejudice to the A
prayer (a), as an interim measure permit the Respondent
to invite tender/bid for executing the balance work under
the Concession Agreement on Engineering Procurement
and Construction basis subject to Claimant being granted
the right of First Refusal for matching the lowest bid and
B
in the event the Claimant matches the said lowest bid
permit the Claimant to complete the said balance/remnant
works on the terms and conditions of the tender/bid invited
on Engineering Procurement and Construction basis
except for the provision, if any, for furnishing Bank
Guarantees; C
c) In alternative and strictly without prejudice to the prayer (a)
& (b), direct the Respondent to act in terms of their letter dated
19.01.2016 and the Circular dated 09.06.2015 in the event prior
to the award of contract of the balance work on Engineering
Procurement and Construction basis the Project Lenders of the D
Claimant agree to provide first charge to the Respondent;
d) Pass such further order and other relief(s) as this Hon’ble
Tribunal may be deem fit, just, necessary and appropriate in the
facts and circumstances of the case.”
(emphasis supplied) E
4. During the pendency of the aforementioned proceedings before
the Arbitral Tribunal, a meeting was held on 19th April, 2016 in the
Chamber of Member (P) at NHAI – HQ to discuss and conclude the
issues of Gwalior-Jhansi project pursuant to Ministers’ meeting dated
15th March, 2016 in order to get the work restarted without further F
delay. Another meeting was convened on 27th April, 2016 before the
said Authority, as a result of which the hearing of the matter was deferred
till 18th May, 2016. On the adjourned date, the advocate appearing for
the appellant placed reliance on the minutes of the meetings held on 19 th
April, 2016 and 27th April, 2016. The hearing of the applications was G
then deferred till 29th May, 2016, as the respondent submitted a
construction-linked financial plan for completing the balance work within
a maximum period of 24 months from the date of receipt of advance
payment from the appellant. The appellant filed its response on 28th
May, 2016 to the proposal submitted by the respondent. The appellant
H
1032 SUPREME COURT REPORTS [2018] 9 S.C.R.
A asserted that the financial plan submitted by the respondent was not in
accord with the NHAI Circular dated 19th June, 2015. In the meantime,
on 25th May, 2016, the respondent filed its reply to the application filed
by the appellant under Section 17 of the Act. The appellant had stated
that it was agreeable to infuse funds for completion of the project as per
the policy with condition of first charge of NHAI, considering the larger
B
public interest. The respondent accepted the offer given by the appellant
including the conditions specified by the appellant. The conditions
suggested by the appellant have been noted by the Arbitral Tribunal as
under:
“(i) As the Respondent is a public body, in the event of the
C lowest bidder being denied the work, it will require to be
compensated. For this purpose Claimant/Concessionaire shall
pay to the authority a sum of Rs.2% of the bid amount, out of
which 75% shall be paid to the lowest bidder. This is on the lines
agreed by the parties and provided in the Concession Agreement
D based on Model Concession Agreement (MCA).
(ii) The Respondent shall not pay any ‘Mobilization Advance’
without Bank Guarantee being furnished for the equivalent
amount. The advance shall be at the interest at the rate of 2%
more than the prevailing bank interest.
E (iii) The work shall be completed by the Claimant in a period of
24 months from the date of LOA for the Construction Contract.
(iv) The terms and conditions of the Construction Agreement
shall be in addition to and not in substitution of any terms and
condition of the Concession Agreement. In the event of any
F disparity the terms of the Concession Contract shall prevail.
(v) The specifications and quality of construction shall not be
lower than stipulated in the Concession Agreement.
(vi) The Respondent shall be free to bring forward consequential
additional claims for the expenses incurred and damages
G
suffered.”
The respondent, through counsel, informed the Arbitral Tribunal that the
respondent would accept the aforementioned conditions except condition
No.(ii).
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1033
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
5. The arguments were heard by the Arbitral Tribunal on 28th A
May, 2016. Before the application filed by the parties under Section 17
of the Act could proceed further, the appellant filed an application under
Section 23 of the Act for amendment of its reply dated 25th May, 2016
so as to withdraw its acceptance of prayer (b) for modification of
procedure order No.9 dated 28th May, 2016, for the reasons mentioned
B
therein. Finally, the Arbitral Tribunal disposed of the applications by a
common order dated 23rd July, 2016. It accepted the relief claimed by
the respondent in terms of prayer clause (b) of its application, reproduced
in paragraph 3 above.
6. The Arbitral Tribunal rejected the plea of the appellant to
withdraw from its earlier offer noted in the reply affidavit. The Arbitral C
Tribunal inter alia observed thus:
“.....
NHAI had taken a specific stand before us that it would not
agree to prayer (a) made by the Claimant. Tribunal therefore D
granted time to NHAI to examine and come out with concrete
proposals in respect of prayer (b) and on the unilateral conditions
suggested by NHAI itself, an order to that effect was passed by
the Tribunal on May 18, 2016. Conditions stipulated by NHAI, it
is seen, are more stringent than what were suggested by CCEA
in its meeting held on May 13, 2015, particularly in the CCEA E
decision made on October 14, 2015, where in CCEA stated that
after the constructions, loans can be recovered bi-annually
through execution of a tripartite agreement between NHAI,
lender and concessionaire. Policy endorsed by CCEA takes note
of the comfort level of not only that of NHAI, citizens and F
travellers, but also of the concessionaire. We have to take it, that
it was after taking into consideration all those aspects including
the policy decisions taken by CCEA and the Claimant’s eligibility
for one time fund infusion in terms of the Circular dated June 9,
2015, the NHAI suggested various conditions and all those
conditions were accepted by the Claimant including the furnishing, G
of Bank Guarantee for the mobilization advance to be made by
NHAI. We are of the view that by furnishing the unconditional
Bank Guarantee, the interest of NHAI is also protected.
H
1034 SUPREME COURT REPORTS [2018] 9 S.C.R.
A We find that NHAI has no case that the Claimant has been
blacklisted or that it is incapable of completing the balance work.
In our view, it would not be in public interest if the remaining
work is allotted to a third party and in the facts and circumstances,
one cannot rule out the possibility of passing the same order,
even if NHAI is allowed to withdraw the unilateral conditions
B
suggested by it.
The Tribunal in its order dated May 25, 2016, also made it clear
that only if the Claimant would agree to all the conditions stipulated
by NHAI, the Claimant would be granted permission to complete
the balance work. The Claimant has now filed an affidavit before
C the Tribunal that all the conditions stipulated by NHAI are
acceptable to it, that being the factual position, we find no reason
to entertain the application preferred by NHAI under Section 23
of the Act seeking amendment in its reply dated May 25, 2016,
to the Claimant’s Sec 17 application, so as to withdraw the
D conditions unilaterally suggested by it.
We are also of the view that the reasons stated for modification
of Procedural Order No.9 dated May 28, 2016, cannot be
sustained in the facts and circumstances of the case and we find
it difficult to accept the contention that the specific conditions
E stipulated by NHAI to the alternative prayer (b) made by the
Claimant in Sec 17 Application have been made without application
of mind or that the so called ‘higher management’ was unaware
of the pendency of this arbitration proceedings as well as the
pendency of the Sec 17 applications filed by the parties and the
various meetings held in respect of this matter at HQ of NHAI
F and the participation of Lead Bank, the Claimant and the officials
of NHAI and the meaning and content of the policy laid down
by CCEA. Sec 17 Application preferred by NHAI would
therefore stand dismissed and prayer (b) made by the Claimant
in its Sec 17 Application stands allowed subject to the conditions
G stipulated by NHAI.
NHAI is directed to take up follow up action on the basis of this
order, within two weeks from today and submit a report to that
effect within a month. Claimant is directed to scrupulously follow
the conditions imposed by NHAI for accepting prayer (b).
H Claimant is further directed to submit quarterly reports before
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1035
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
the Tribunal of the progress of the balance work undertaken by A
it on the basis of the order of this Tribunal. The Claimant is
directed to furnish Bank Guarantee from a nationalised bank on
the mobilization advance to be made by NHAI within the time
stipulated. Both sec 17 Applications and the Application made
by NHAI under Sec 23 of the Act are disposed of as above,
B
reserving all the contentions raised by the parties in the main
matter.
This order as well as the observations and findings recorded will
have no bearing on the ultimate disposal of the main matter.”
7. The appellant acquiesced to the aforementioned interim order C
passed by the Arbitral Tribunal and allowed it to attain finality. For, the
subject project was on Build Operate and Transfer (“BOT”) basis, any
amount incurred by the Authority with regard to the project or in relation
to the completion of the balance work was liable to be reimbursed by the
Concessionaire (respondent).
D
8. The appellant accordingly issued a tender for the balance work
vide Notice dated 28th November, 2016 which fact was brought to the
notice of the Arbitral Tribunal during the hearing on 10th December,
2016. The tender notice was placed in the public domain, as is done in
the case of other tender process. Some of the pertinent clauses of the
tender documents may be appositely reproduced for considering the E
matter in issue before us. In the bidding document, Volume I, regarding
Invitation for Bids (“IFB”), it was noted that sealed bids were invited
(technical and financial) from eligible bidders for the construction and
completion of the balance work detailed in the table given in the said
document. Clause (1) postulated that eligibility of bidders would be F
assessed on post qualification basis, amongst others. The financial bid in
the second part would be opened of only those bidders whose technical
bids were responsive to eligibility and qualification requirements as per
the Request for Proposal (“RFP”). Further, clause (7) of the IFB reads
thus:
G
“7. The Bidders may take notice of the following:
Notwithstanding anything to the contrary contained in this RFP,
as per the direction of Hon’ble Arbitral Tribunal, if the BOT-
Annuity concessionaire (M/s Gwalior Jhansi Expressway
Ltd.) of Four lane project (Gwalior-Jhansi section of NH-
H
1036 SUPREME COURT REPORTS [2018] 9 S.C.R.
A 75, is also a responsive bidder, the Concessionaire shall
have the option of matching the lowest bid in terms of the
selection criteria, subject to payment of 2% (two per cent) of
the bid amount to the Authority and thereupon becomes the
selected Bidder. ……………...”
B (emphasis supplied)
In Section I of the bid document providing for procedure for tender
document of the Instructions to Bidders, the eligibility of bidders has
been specified in clause (3) thereof which reads thus:
“3. Eligible Bidders
C
3.1 Eligibility of bidders is based on bidder meeting the pass/
fail criteria regarding their general and particular experience,
financial position, personnel and equipment capabilities and other
relevant information as demonstrated by the applicant’s responses
on the forms attached.
D
3.2. This invitation for bids is open to bidders meeting the
following requirements:-
a) xxx xxx xxx
b) xxx xxx xxx
E c) xxx xxx xxx
d) xxx xxx xxx
“(e) Notwithstanding anything to the contrary contained in
this REP, as per the direction of Hon’ble Arbitral Tribunal, if the
F BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to payment
of 2% (two per cent) of the bid amount to the Authority and
G thereupon becomes the selected Bidder. Out of the amount so
received by the Authority (ILLEGIBLE) 5% of the amount shall
be paid by the Authority to the lowest bidder. For the avoidance
of doubt, it is clarified that no claim for compensation, damages,
loss of profits etc. by the lowest bidder for unbecoming selected
H bidder, shall be admissible from the Authority.
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1037
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
(f) Notwithstanding anything to the contrary contained in A
this RFP, for the purposes of eligibility and qualification of the
BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.), if it has participated in the bidding
process, it shall be deemed to fulfill all the requirements
of Clauses 3 to 6 of the RFP, being the existing concessionaire
B
of the Four lane project (Gwalior-Jhansi section of NH-75.”
(emphasis supplied)
Again in clause 26, it is stated thus:
“26. Examination of Technical Bids and Determination of
Responsiveness of Technical Bids C
xxx xxx xxx xxx
26.8 Notwithstanding anything to the contrary contained in this
RFP, as per the direction of Hon’ble Arbitral Tribunal, if the
BOT-Annuity concessionaire (M/s Gwalior Jhansi D
Expressway Ltd.) of Four Lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to payment
of 2% (two per cent) of the bid amount to the Authority and
thereupon becomes the selected bidder, Out of the amount so E
received by the Authority, 75% of the amount shall be paid by
the Authority to the lowest bidder. For the avoidance of doubt, it
is clarified that no claim for compensation, damages, loss of profits
etc. by the lowest bidder for unbecoming selected bidder, shall
be admissible from the Authority. F
26.9 Notwithstanding anything to the contrary contained in this
RFP, for the purposes of eligibility and qualification of the BOT-
Annuity concessionaire (M/s Gwalior Jhansi Expressway
Ltd.), if it has participated in the bidding process, it shall
be deemed to fulfill all the requirements of Clauses 3 to 6
G
of the RFP, being the existing concessionaire of the Four lane
project (Gwalior -Jhansi section of NH-75).
27. Opening of Financial Bids.
xxx xxx xxx xxx
H
1038 SUPREME COURT REPORTS [2018] 9 S.C.R.
A 27.5 Notwithstanding anything to the contrary contained in this
RFP, as per the direction of Hon’ble Arbitral Tribunal, if the
BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
B
lowest bid in terms of the selection criteria, subject to payment
of 2% (two per cent) of the bid amount to the Authority and
thereupon becomes the selected Bidder. Out of the amount so
received by the Authority, 75% of the amount shall be paid by
the Authority to the lowest bidder. For the avoidance of doubt, it
C is clarified that no claim for compensation, damages, loss of profits
etc. by the lowest bidder for unbecoming selected bidder
admissible from the Authority.
27.6 Notwithstanding anything to the contrary contained in this
RFP, for the purposes of eligibility and qualification of the BOT-
D Annuity concessionaire (M/s Gwalior Jhansi Expressway Ltd.),
if it has participated in the bidding process, it shall be deemed
to fulfill all the requirements of Clauses 3 to 6 of the RFP, being
the existing concessionaire of the Four lane project (Gwalior-
Jhansi section of NH-75).”
E (emphasis supplied)
In clause 30, it is observed thus:
“30. Examination of Financial Bids and Determination of
Responsiveness of Financial Bids
F xxx xxx xxx xxx
30.4 Notwithstanding anything to the contrary contained in this
RFP, as per the direction of Hon’ble Arbitral Tribunal, if the
BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior Jhansi section
of NH-75, is also a responsive bidder, the Concessionaire shall
G
have the option of matching the lowest bid in terms of the selection
criteria, subject to payment of 2% (two per cent) of the bid amount
to the Authority and thereupon becomes the selected Bidder.
Out of the amount so received by the Authority, 75% of the
amount shall be paid by the Authority to the lowest bidder. For
H the avoidance of doubt, it is clarified that no claim for
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1039
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
compensation, damages, loss of profits etc. by the lowest bidder A
for unbecoming selected bidder, shall be admissible from the
Authority.
30.5 Notwithstanding anything to the contrary contained in this
RFP, for the purposes of eligibility and qualification of the BOT-
Annuity concessionaire (M/s Gwalior Jhansi Expressway B
Ltd.), if it has participated in the bidding process, it shall
be deemed to fulfill all the requirements of Clauses 3 to 6
of the RFP, being the existing concessionaire of the Four lane
project (Gwalior-Jhansi section of NH-75).”
(emphasis supplied) C
9. In consonance with the tender documents as uploaded on E-
Tender Portal 2016, technical bids were opened on 5th January, 2017
and financial bids were opened on 29th March, 2017. It is only thereafter
on 25th April, 2017, the respondent moved an application before the
Arbitral Tribunal under Section 17 of the Act, seeking, inter alia, D
permission of the Arbitral Tribunal to complete the balance work at its
risk and cost. In the said application, it was asserted that the respondent
verily believed that it would get an opportunity to exercise the option of
ROFR and match the lowest bid, in terms of the order dated 23rd July,
2016. However, to its utter shock, surprise and dismay, it was reliably
learnt on the previous day (to the filing of the application) that the E
appellant was proceeding to conclude the tender process by issuing LOI/
LOA in favour of the L-1 bid behind the back of the respondent and in a
highly surreptitious and opaque manner. On the basis of the said
assertions, the respondent in its application filed under Section 17 of the
Act prayed thus: F
“a) Allow the present application and direct the respondent
to grant first right of refusal to the claimant for matching the
lowest bid, in terms of the order dated 23.07.2016 passed by this
Hon’ble Tribunal;
b) Pending hearing and disposal of the present Application, pass G
an ex-parte ad-interim Order, directing the Respondent to not
issue LoI/LoA or award the works or take any further steps, in
any manner, directly or indirectly, in favour of any party, pursuant
to the Notice Inviting Tender published by the Respondent on
28.11.2016;
H
1040 SUPREME COURT REPORTS [2018] 9 S.C.R.
A c) Confirm prayer (b) upon issuance of notice;
d) Pass such further order and other relief(s) as this Hon’ble
Tribunal may be deemed fit, just, necessary and appropriate in
the facts and circumstances of the case.”
10. This application was resisted by the appellant by filing a reply
B affidavit. The appellant asserted that the respondent chose to remain
silent during the entire period and only at the belated stage when the
tender process was nearing completion, it has chosen to file the application
with the intention of stalling the entire process. This approach cannot be
countenanced. The appellant also asserted that it was unfathomable that
C the respondent would get the right to match the lowest bid without
participating in the bidding process. Further, an application such as this
would delay the progress of the main arbitration proceedings which was
required to be completed within one year. It was thus asserted by the
appellant that the ROFR could be invoked by the respondent only if it
had participated in the bidding process. The appellant adverted to the
D terms and conditions of the tender documents which unambiguously
mandated the respondent to participate in the tender process, coupled
with the fact that there was no express direction given by the Arbitral
Tribunal so as to give any right or cause of action to the respondent to
contend to the contrary. The appellant beseeched the Arbitral Tribunal
E to allow it to take the tender process to its logical end.
11. Admittedly, no rejoinder was filed by the respondent to the
specific plea taken by the appellant in the reply affidavit that despite
having knowledge of the condition in the tender documents requiring the
respondent to participate in the tender process, it failed to do so for
F reasons best known to the respondent.
12. The Arbitral Tribunal vide order dated 24th May, 2017 allowed
the application preferred by the respondent by inter alia observing as
follows:
“The Tribunal while examining both the 17 Applications preferred
G by the parties specifically noticed that the Claimant had completed
more than 65% of the work though, NHAI took the stand that
the physical progress was only 62.13%. Claimant took the stand
that it had completed more than 73% work. Considering the fact
that so much of money and labour had been invested by the
Claimant, and at the same time safeguarding the interest of NHAI,
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1041
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
the Tribunal passed the order dated 23.7.2016 directing the A
Respondent to grant the Claimant the right of first refusal for
matching the lowest bid. The Tribunal also felt that involvement
of third parties would also create more problems. The Tribunal,
therefore, ordered in the event Claimant matches the lowest bid,
Claimant be permitted to complete the balance work that too by
B
periodically submitting reports before the Tribunal so that the
Tribunal can examine whether the Claimant is successfully
completing the balance work to the satisfaction of NHAI. In our
view, the stand taken by the Respondent that the first right of
refusal can be granted to the Claimant only if it had participated
in the bidding process cannot be sustained. Accordingly, reliefs C
sought for by the Claimant in the Application dated 25.4.2017
are granted”.
13. Against this decision, the appellant filed an appeal under
Section 37(2)(b) of the Act before the High Court of Delhi at New
Delhi. The same was dismissed on 21st August, 2017. The High Court D
upheld the view taken by the Arbitral Tribunal by inter alia observing
thus:
“12. It is quite clear from a perusal of the earlier order dated
23.07.2016 that the respondent was granted right of first refusal
by matching the lowest bid, and if it matched the bid the E
respondent was to be permitted to complete the balance work
as stated. There was no directions that the respondent was obliged
to participate in the bid. They had been given the right to match
the lowest bidder, subject to terms and conditions and in that
eventuality of their matching the lowest bid, they were to be
given the right to carry out the balance work. The insistence of F
the appellant that the respondent ought to have participated in
the bid floated pursuant to the order of the learned Arbitral
Tribunal dated 23.07.2017 is misplaced.
13. Learned counsel for the appellant was, several times asked
as to what prejudice is caused by the respondent by not G
participating in the bid. The only reply made by the learned counsel
for the appellant was that in the absence of participation in the
bid by the respondent, the appellant is unable to ascertain whether
the respondent was eligible to be a bidder or not. In my opinion
in the light of the orders of the Learned Arbitral Tribunal dated H
1042 SUPREME COURT REPORTS [2018] 9 S.C.R.
A 23.07.2016 the appellant was not to participate in the bid. The
apprehension of the appellant are entirely misplaced.
14. No prejudice is caused to the appellant. It is manifest that
other than insistence on compliance by the respondent of a
procedural requirement, there is no prejudice caused to the
B appellant by non participation of the respondent in the bidding
process. Further the impugned directions are passed in
accordance with the earlier orders of the Learned Arbitral
Tribunal dated 23.07.2016 which has not been challenged and
attained finality. There is no merit in the present appeal and the
same is dismissed.”
C
14. The appellant has assailed the decision of the Arbitral Tribunal
dated 24th May, 2017 and of the High Court dated 21st August, 2017 on
the argument that the respondent cannot be permitted to exercise ROFR
sans participating in the bidding process and in the teeth of the terms
and conditions of the tender documents. According to the appellant, the
D Court cannot interfere with the tender process and in particular with the
modalities adopted for re-tendering of the balance work of the project.
The process of evaluation of tender and awarding the contract are
essentially commercial functions for which reason the Courts should
refrain from exercising judicial review, especially when the decision
E taken by the statutory authority is bona fide and taken in public interest.
Further, the order of the Arbitral Tribunal dated 23rd July, 2016 in no way,
much less expressly, exempts the respondent from participating in the
bidding process nor has any stipulation been placed on the appellant to
refrain from incorporating a condition requiring the respondent to
participate in the tender process along with others. In that case, all
F concerned including the respondent, were bound by the terms and
conditions specified in the tender documents. The fact that the respondent
was deemed to possess technical qualifications would not and does not
do away with the essentiality of participating in the subject bidding
process, the purpose whereof is to ensure a fair competition amongst
G the participants and, more particularly, to get a fair offer and the best
value for money in a scientific and transparent manner, encouraging
competition between the participants and also to give them equal
opportunity. It is contended that the order of the Arbitral Tribunal, be it
dated 23rd July, 2016 or dated 24th May, 2017, is in excess of jurisdiction
as it transcends beyond the purport of Section 17 of the Act. For, it was
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1043
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
not open to the Arbitral Tribunal to pass an interim order concerning a A
separate contract albeit facilitating completion of the unfinished and
incomplete works of the project. It is contended that it is well settled
position that the prerogative to formulate the terms and conditions of the
tender document is that of the employer and the Court cannot sit in
appeal over such conditions. Nor can the same be re-written or modified
B
much less when it has not been challenged by the respondent.
It is contended that the fact that the respondent qualified the technical
bids in 2006, will not by itself qualify it for re-tendering bid process in
2016. Having failed to participate in the bid process in 2016, it was not
possible to examine the eligibility and qualification of the respondent in
the context of tender documents of 2016. Further, a person or entity C
who stands out of the tender process or fails to comply with the terms
and conditions of the tender documents cannot acquire any right or interest
much less actionable claim in respect of such tender process. According
to the appellant, the respondent must take the consequences of non-
participation in the subject tender process and cannot be allowed to D
interdict the same in absence of an express exemption granted by the
competent forum/Authority to the respondent not to participate in the
tender process and yet exercise ROFR. To buttress the aforesaid
submission, reliance has been placed on the decision of the Delhi High
Court in VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd. & Anr. Vs.
Union of India & Ors.1 and on the decision of the Appellate Tribunal E
for Electricity in M/s. Raj West Power Limited & Anr. Vs. Rajasthan
Electricity Regulatory Commission & Ors.2
15. The respondent on the other hand, would contend that no
interference in this appeal is warranted in view of the concurrent view
taken by the Arbitral Tribunal as well as the High Court that it was not F
necessary for the respondent to participate in the tender process to
exercise ROFR. For, the order dated 23rd July, 2016 does not prescribe
such a pre-condition nor does it prohibit the respondent from exercising
the ROFR without participation in the bidding process. It is contended
that the order dated 23rd July, 2016 is based on consent of the parties and G
has never been challenged by the appellant and as such, the appellant
was obliged to comply with the same in its letter and spirit. According to
the respondent, having completed 78% work of the Project (which
1
2010 SCC Online Del 2687
2
2013 SCC Online APTEL 46 H
1044 SUPREME COURT REPORTS [2018] 9 S.C.R.
A according to the appellant, is only around 62%) and having invested
Rs.715 crores on the Project, by no stretch of imagination can the
respondent be termed as a non-serious contender. According to the
respondent, the appellant cannot be heard to challenge the order dated
23rd July, 2016, which confers ROFR, as it was based on consent of the
parties and also attained finality. Further, the purpose of participating in
B
the bidding process was only to ascertain as to whether the offer given
by the bidder was a responsive offer. The respondent having already
completed substantial work of the Project, by no stretch of imagination,
can be said to be incapable of completing the balance work. This aspect
had commended to the Arbitral Tribunal, as can be discerned from the
C order dated 23rd July, 2016. The Arbitral Tribunal in that order also
unambiguously recorded that it was not the case of the appellant herein
that the respondent had been black listed or was incapable of completing
the balance work. Not only that, the Arbitral Tribunal went on to observe
that it would not be in the public interest to allow a third party to take
over the balance work of the project. On that basis, direction was given
D
to the appellant to allow the respondent to exercise ROFR, subject to
certain conditions. The order passed by the Arbitral Tribunal, in essence,
was on the basis of consent of the respondent with unilateral conditions
imposed by the appellant, which the appellant should not be allowed to
resile. According to the respondent, it was impermissible for the appellant
E to incorporate conditions such as clauses 3, 26, 27 and 30 in the tender
documents, as the same are in the teeth of order dated 23rd July, 2016
passed by the Arbitral Tribunal and, more so, without seeking liberty
from the Arbitral Tribunal in that behalf. It is contended that the purpose
of the tender process is only to evoke responsive offers. There would be
no logic or rationale for participation of the respondent in the backdrop
F
of clause 3.2(f) which is a deeming provision virtually declaring the
respondent as eligible and qualified for the work. The capability of the
respondent to complete the balance work was never in doubt as has
been recorded by the Arbitral Tribunal. In any case, in the absence of
liberty given by the Arbitral Tribunal, it was not open to the appellant to
G incorporate such a pre-condition in the tender document. It is contended
that such pre-condition would require the respondent to furnish bid
security amount in which case it would be a fait accompli situation for
the respondent if it were to refuse or fail to match the lowest bid. For, it
would result in forfeiture of its bid security and also entail in black listing.
The order dated 23rd July, 2016, is one of ROFR and not for right to
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1045
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
participate in the bidding process as such. Further, the submission of A
financial bid by the respondent was not to find out whether it is L-1. In
that, all the bidders participating in the subject tender process pursuant
to tender notice, were made fully aware in the bid document itself that
the respondent had ROFR and L-1 would be compensated by the
respondent as provided in the order dated 23rd July, 2016. Therefore,
B
the respondent was not expected to bid with itself by submitting a financial
bid and then matching the same. The respondent would contend that
the appellant has wrongly asserted that the respondent was aware of
the conditions prescribed in the tender documents and yet did not choose
to participate in the bidding process. For, the bid documents were neither
furnished to the respondent nor placed on record before the Arbitral C
Tribunal. Thus, the conditions on which reliance has now been placed by
the appellant were never pointed out to the respondent or to the Arbitral
Tribunal at any point of time. In any case, the appellant had completely
failed to show as to what prejudice would be caused by allowing the
respondent to exercise ROFR without participating in the tender process.
D
The learned Single Judge of the High Court repeatedly made queries in
that behalf which was not explained by the appellant, as is noted in the
impugned judgment. Resultantly, the High Court rejected the plea of the
appellant and held that it was not necessary for the respondent to
participate in the bidding process in terms of order dated 23rd July, 2016,
to exercise ROFR. The respondent has distinguished the two decisions E
relied upon by the appellant and would contend that the same do not lay
down any legal principle that participation in the bidding process is a
condition precedent for exercise of ROFR. It is contended, in the present
case, the ROFR, without condition of participation in the bid, was granted
by the Arbitral Tribunal on the basis of consent of the parties. It is
F
contended that in view of the concurrent view taken by the Arbitral
Tribunal as also the High Court, this Court should be slow in entertaining
this appeal.
16. We have heard Mr. K.K. Venugopal, learned Attorney General
for India and Mr. Mukul Rohatgi, learned senior counsel appearing for
the respondent. G
17. The issue involved in the present appeal ostensibly concerns
the justness of the order passed by the Arbitral Tribunal and affirmed by
the High Court on an application moved by the respondent (claimant)
under Section 17 of the Act in the pending arbitral proceedings. However,
H
1046 SUPREME COURT REPORTS [2018] 9 S.C.R.
A in essence, the subject matter of the application under consideration
relates to the rights and liabilities of the parties in respect of a tender
process for awarding of a contract in relation to the unfinished and balance
work of the Highway Project.
18. While considering the relief claimed by the respondent
B (claimant), the same should have been tested on the touchstone of the
principle governing the tender process, especially when the validity of
the tender document has not been put in issue or challenged before any
competent forum. Going by the terms and conditions in the tender
documents, as already alluded to in paragraph 8 above, there is no tittle
of doubt that the right of the claimant (respondent) to match the bid of
C L-1 or to exercise ROFR would come into play only if the respondent
was to participate in the tender process pursuant to the notice inviting
tenders from the interested parties. The objective of tender process is
not only to adhere to a transparent mechanism but to encourage
competition and give equal opportunity to all tenderers with the end result
D of getting a fair offer or value for money. The plain wording of the
eligibility clause in the tender documents and the incidental stipulations
make it explicit that the respondent was required to participate in the
tender process by submitting its sealed bid (technical and financial). The
fact that a deeming clause has been provided in the tender document
that if the respondent was to participate in the bidding process, it shall be
E deemed to fulfill all the requirements of the tender clauses 3 to 6 of the
RFP, being the existing concessionaire of the Project, does not exempt
the respondent from participating in the tender process; rather the tenor
of the terms of the documents made it obligatory for the respondent to
participate in the tender process to be considered as a responsive bidder,
F along with others. Having failed to participate in the tender process and,
more so, despite the express terms in the tender documents, validity
whereof has not been challenged, the respondent cannot be heard to
contend that it had acquired any right whatsoever. Only the entities who
participate in the tender process pursuant to a tender notice can be allowed
to make grievances about the non-fulfillment or breach of any of the
G terms and conditions of the concerned tender documents. The respondent
who chose to stay away from the tender process, cannot be heard to
whittle down, in any manner, the rights of the eligible bidders who had
participated in the tender process on the basis of the written and express
terms and conditions. At the culmination of the tender process, if the
H respondent had not participated, in law, the offer submitted by the eligible
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1047
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
bidders is required to be considered on the basis of the stated terms and A
conditions. Thus, if the claim of the respondent was to be strictly adjudged
on the basis of the terms and conditions specified in the subject tender
document, the respondent has no case whatsoever.
19. The gravamen of the plea taken by the respondent is on the
assumption that the interim order passed by the Arbitral Tribunal on 23rd B
July, 2016 bestows unconditional right on the respondent to exercise
ROFR, in the event tender process in respect of the balance work is
resorted to. For that, we may straightway advert to the order dated 23rd
July, 2016. That is an order granting prayer clause (b) in the application
preferred by the respondent under Section 17 of the Act. The same has
been reproduced in paragraph 3 above. Notably, there is nothing in the C
entire application (filed by the respondent under Section 17 of the Act)
to even remotely suggest that the respondent had prayed in clause (b)
that it be exempted from participating in the proposed tender process as
such, and could yet exercise ROFR before the letter of intent was to be
issued to the lowest bidder. The exemption in this regard cannot be D
inferred. It has to be an express exemption sought and so granted and
disclosed in the tender documents. The respondent may be right in
contending that the interim order passed by the Arbitral Tribunal dated
23rd July, 2016 neither prescribes that the respondent must participate in
the bidding process as a condition precedent for exercise of ROFR nor
does it prohibit the respondent from exercising ROFR without E
participation in the bidding process. The order is, indeed, silent in that
behalf. But, that will be of no avail to the respondent. For, such exemption
ought to have been prayed and expressly granted by the Court. In absence
of such express exemption, the respondent was obliged to comply with
the terms and conditions of the tender documents publicly notified by the F
appellant as per its understanding of the order of the High Court. Having
failed to participate in the bidding process in consonance with such notified
terms and conditions, the respondent lost the opportunity granted under
the order dated 23rd July, 2016 to match the lowest bid or to exercise
ROFR. Any other view would fall foul of the fundamental policy of the
Indian law and cannot be countenanced. G
20. It is not the case of the respondent that an express exemption
has been granted to the respondent, from participating in the bidding
process. In the matter of tender process, there can be no tacit or implied
exemption from participating. In the first place, whether such direction
H
1048 SUPREME COURT REPORTS [2018] 9 S.C.R.
A can be issued by the Arbitral Tribunal under Section 17 of the Act itself
is debatable. However, since the order dated 23rd July, 2016 has remained
unchallenged, we do not wish to dilate on that aspect. Indeed, the appellant
accepted the order with a sanguine hope that a proper tender process
can be resorted to, wherein the respondent would also participate, for
awarding the contract of unfinished and balance works of the subject
B
Project. For effectuating that order, tender documents were issued by
the appellant on 28th November, 2016 which, as aforesaid, explicitly
stipulated that the respondent was expected to submit its bid within the
specified time. Admittedly, the fact that tender notice was issued, came
to be disclosed before the Arbitral Tribunal on 10th December, 2016.
C Surprisingly, the respondent neither took any clue nor bothered to follow
up the tender documents which were placed in public domain (as is done
in respect of any other tender process). Further, the respondent waited
till the opening of technical bids on 5th January, 2017 and financial bids
on 29th March, 2017 and rushed to the Arbitral Tribunal by way of an
application under Section 17 of the Act, only on 25th April, 2017 stating
D
that on the previous day, it had come to its notice that the appellant was
likely to issue letter of intent to the lowest bidder, without giving
opportunity to the respondent to match the lowest bid or exercise ROFR.
To oppose the said application, the appellant in the reply affidavit had
asserted that the respondent was fully aware about the terms and
E conditions of the tender documents and yet chose not to participate in
the bidding process. The respondent did not think it necessary to counter
the said assertion by filing any rejoinder thereto. Notwithstanding that,
the Arbitral Tribunal was impressed by the plea taken by the respondent
and allowed the application of the respondent vide order dated 24th May,
2017. The relevant extract of the said order has been reproduced in
F
paragraph 12 above. The Arbitral Tribunal was more impressed by the
fact that the respondent had completed substantial works of the Project
and it would be just and proper to allow the respondent to complete the
balance work. The Arbitral Tribunal made no effort to ascertain as to
whether the order dated 23rd July, 2016 was a blanket and unconditional
G order entitling the respondent to straightaway exercise ROFR without
participating in the bidding process. The Arbitral Tribunal merely adverted
to the objection of the appellant and rejected the same on the finding that
involvement of a third party in the Project would create serious problems.
It took the view that giving option to the respondent to match the lowest
bid and to complete the balance work, with a condition to periodically
H
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1049
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
submit the progress report to the Arbitral Tribunal for monitoring whether A
the balance work was successfully completed to the satisfaction of the
NHAI, would be a proper and equitable arrangement. This approach is
not in conformity with the fundamental policy of Indian law.
21. The approach of the High Court in the appeal preferred by
the appellant was no different. The relevant extract of the High Court B
decision has been reproduced in paragraph 13 above. The High Court
did not find any error, much less manifest error, in the view taken by the
Arbitral Tribunal. Further, it can be gleaned from the observations of
the High Court in the impugned judgment that the High Court was more
eager to know as to what prejudice would be caused to the appellant if
the respondent had not participated in the bidding process. This query of C
the High Court is begging the question. For, that cannot be the primary
basis to answer the relief claimed by the respondent in the application
under Section 17 of the Act. An entity who stays away from the bidding
process and fails to comply with the express terms and conditions of the
tender documents cannot claim any right to match the lowest bid or D
exercise ROFR. Only a responsive bidder could do so. The High Court
has overlooked the fact that the appellant is a body corporate under the
1988 Act. It has to act in a just and fair manner in the matter of allocation
of contract albeit the balance and unfinished work of the Project. No
express exemption has been granted to the respondent vide order of the
Arbitral Tribunal dated 23rd July, 2016 – to exercise ROFR or match the E
lowest bid without participating in the bidding process. The respondent
had the option to participate in the bidding process which was not availed
of for reasons best known to the respondent. The High Court also
overlooked the fact that the tender process was not an empty formality
and with the initiation of the same, third parties, who participated in the F
bidding process, were likely to be prejudiced by allowing the respondent
to match the lowest bid or exercise ROFR, without participating in the
bidding process despite the express stipulation in that behalf in the tender
documents. Suffice it to observe that the High Court committed the
same error as committed by the Arbitral Tribunal in not examining the
core issues for grant or non-grant of the relief to the respondent, in G
conformity with the fundamental policy of Indian law.
22. The argument of the respondent that the order dated 23rd July,
2016 passed by the Arbitral Tribunal was based on consent of the parties
and was never challenged by the appellant, does not take the matter any
H
1050 SUPREME COURT REPORTS [2018] 9 S.C.R.
A further. The respondent on the one hand, contends that the said order
was based on consent of the parties and also in the same breath contends
that the respondent consented to the unilateral conditions stipulated by
the appellant, which the appellant should not be allowed to resile as
prayed by it. Be that as it may, on a fair reading of the order dated 23rd
July, 2016, it is noticed that the same is the outcome of a contest and not
B
founded on any concession. In any case, the order makes no express
mention about granting of exemption to the respondent from participating
in the proposed bidding process. The fact that the respondent has already
invested a substantial amount in the subject Project and has also
completed substantial work can be no basis to overlook the fundamental
C policy of Indian law regarding the subject of tender process and the
rights and obligations of the parties involved. We are also not impressed
by the argument of the respondent that the respondent was not expected
to refuse to match its own bid or that if it had participated in the bidding
process and exercised ROFR, then it would have resulted in consequence
of black listing and forfeiture of bid security amount. The fact that the
D
respondent would exercise ROFR would mean that the bid given by the
respondent was not L-1. If it was not L-1, exercising ROFR would
obviously neither entail in forfeiture of the bid security nor would visit the
consequence of black listing. This plea is obviously an argument of desperation
and belated one to justify the failure to participate in the bidding process.
E 23. The appellant invited our attention to the dictum in VHCPL-
ADCC Pingalai Infrastructure Pvt. Ltd., (supra). In that case, the
Court considered the question whether the petitioner had preferential
right to match the lowest bid without pre-qualifying or participating in
the bidding process. In that case, Article 14.1(c) of the concession
F agreement stipulated that the respondent No.1 could invite proposals
from eligible persons for capacity augmentation of the project which
required the petitioner to give an option to submit its proposal. The Court
after noticing the precedents on the relevant aspects, went on to observe
that if the concessionaire chose not to submit its proposal, it did not have
the right to match the preferred offer as would be the case of the
G respondent herein, in view of the express stipulation in the tender
documents requiring the respondent to participate in the bidding process.
The appellant has also placed reliance on the decision in M/s. Raj West
Power Limited, (supra). We agree with the respondent that this decision
does not lay down any principle which may have any bearing on the
H case in hand.
NATIONAL HIGHWAYS AUTHORITY OF INDIA v. GWALIOR 1051
JHANSI EXPRESSWAY LIMITED [A. M. KHANWILKAR, J.]
24. In view of the above, we have no hesitation in concluding A
that the decision of the Arbitral Tribunal as confirmed by the High Court,
falls foul of the fundamental policy of Indian law and cannot be
countenanced.
25. Accordingly, the order passed by the Arbitral Tribunal dated
24 May, 2017 as also the order dated 21st August, 2017 passed by the
th
B
learned Single Judge of the High Court, deserve to be quashed and set
aside and resultantly, the application preferred by the respondent under
Section 17 of the Act dated 25th April, 2017 ought to be dismissed. We
order accordingly.
26. The appeal is allowed in the above terms with no order as to C
costs.
Divya Pandey Appeal allowed.
D
E
F
G
H
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