Holding

Rejection of a duly approved technical bid without assigning any reason is illegal, arbitrary, and the Evaluation Committee must consider the appellant’s bid along with other bidders.

Summary

The Ministry of Railways invited a tender for thick web switches, requiring ISO 9001 certification and ROSO approval. Ganpati RV‑Talleres Alegria Track Pvt. Ltd. submitted a technical bid that was initially approved, but its commercial bid was later rejected on the ground that the eligibility criteria were not met, without any reason being given. The appellant filed a writ petition; the Delhi High Court dismissed it, holding the eligibility criteria were not satisfied. On appeal, the Supreme Court held that a technical bid once approved cannot be arbitrarily rejected without assigning reasons, and that the joint‑venture experience and certifications submitted were sufficient to meet the eligibility requirements. The Court directed the Evaluation Committee to consider the appellant’s bid along with the other successful bidders, and allowed the appeal.

Issues considered

The legality of rejecting a technically approved bid without assigning any reason.
Whether the eligibility criteria (ISO 9001 certification, ROSO approval) can be invoked after a technical bid has been approved.
Whether experience of a joint‑venture partner can be taken into account to satisfy eligibility requirements.
Whether the tender evaluation process complied with principles of natural justice and fairness.

Subjects

tendertechnical bidcommercial bideligibility criteriaISO 9001ROSO approvaljoint venturenatural justicearbitrary rejectionprocurement law

Judgment

I

[2008] 17 S.C.R. 215

M/S GANPATI RV-TALLERES ALEGRIA TRACK PVT. A
..... LTD.
,,,.. v.
UNION OF INDIA AND ANR.
(Civil Appeal No. 7168 of 2008)
B
DECEMBER 8, 2008
[DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM
SHARMA, JJ.]

Tender - Invitation for - · Technical bid of tender in c
- question approved and intimation regarding opening of
commercial bid conveyed - Subsequent rejection of technical
bid - Propriety of- Held: Rejection of duly approved technical
bid without assigning any reason, is illegal, malicious,
' arbitrary, irrational and unjustified - Direction to Evaluation D
Committee to consider the bid of the tenderer in question
alongwith other tenderers.
""
Respondent invited tender for 'Thick Web Switches'.
As per the tender document, tenderer was required to be E
ISO 9001 certified and ROSO approved for 1 in 12 curved
switch manufacturers on the date of opening of tender.
·- Tenders were to be opened in two stages i.e. (i) Technical
Bid and (ii) Commercial bid. Commercial Bid was to be
opened in respect of the tenderers found successful in
F
the Technical Bid. Appellant, one of the tenderers was
4 4- intimated by the respondent about the date for opening
his commercial bid. He was further intimated twice about
postponement of the Commercial bid. Thereafter,
respondent intimated the appellant that his tender was
rejected as it did not meet the eligibility criteria. Appellant G
filed writ petition challenging the rejection of the tender.
~ High Court dismissed the petition accepting the stand of
... the respondent that the appellant !did not meet the
eligibility criteria indicated in the tender. Hence, the
215 H
New Horizons Ltd. and Anr. v. Union of India and Ors.
1995 (1) sec 478, relied on.
D Case Law Reference:
1995 (1) sec 478 Relied on. Para 6
CIVIL APP ELLATE JURISDICTION : Civil Appeal No.
7168 of 2008.
E
From the Judgment and final Order dated 26.05 . 2008 of
the High Court of Delhi at New Delhi in Writ Petition No. 2012
of 2008.

F P.S. Patwalia, Tushar Bakshi, Devesh Kumar Tripathi,
Naresh Bakshi, Sunita Sharma, Amaanpreet Singh Rahi for the
Appellant. · --+· .
A Sharan, A.S.G., Asha G. Nair, Anil Katiyar for the
Respondents.
G
The Judgment of the Court was delivered by

DR. ARIJIT PASAYAT, J. 1. Leave granted.

2. Challenge in this appeal is to the judgment of a Division
H Bench of the Delhi High Court dismissing the writ petition filed
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 217
UNION OF INDIA AND ANR. [DR. ARIJIT PASAYAT, J.]

by the appellant. The writ petition was filed challenging the A
~ order dated 7.3.2008 issued by the respondents by which the
. appellant was communicated that he had not met the eligibility
criteria of the tender quoted by the respondents and, therefore,
its commercial bid will not be considered.
B
3. Background facts in a nutshell are as follows:

On 7.11.2007 a tender for thick web switches was invited
by the Ministry of Railways. The details of the tender items were
given in the Schedule of Quantities. As per Clause 2.8 of the
terms and instructions mentioned in the tender document, the c
tender was to be in two packets systems i.e. (i) Technical Bid ·
(ii) Commercial Bid, and that the commercial bid will be opened
subsequently only for those tenderers who have been found
successful in the technical bid as per clause 4.0.
... D
As per Clause 4.1.1 of the tender document the tenderer

. must be ISO 9001 certified, ROSO approved, for 1 in 12
curved switch manufacturers on the date of opening of tender.

The Executive Director Track (P) Railway Board, Delhi,
vide his letter dated 14.11.2007 sought for various clarifications E
and document from the appellants. The reply to aforesaid letter
was ,given by the appellant along with relevant documents on
..... 22. ~ 1.2007. The appellant pursuant to telephonic conversation
on 21.1.2008 submitted a copy of inspection certificate of
ROSO and also certified about its composition i.e. joint venture F
.~ (in short 'JV') partners. Another representation was made on
31.1.2008. The appellant received a letter dated 7.2.2008
intimating that in terms of para 2.8 the appellant's commercial
bid will be opened on 22.2.2008. The respondents vide its letter
dated 13.2.08 informed the three of the other bidders whose G
technical bids were dis-approved and they were requested to
,.. collect their unopened commercial bids and bid guarantee
bonds amounting to rupees one crore. In continuation of the
.- aforesaid letter another letter dated 20.02.2008 was received
by the appellant informing that the opening of commercial bid H
218 SUPREME COURT REPORTS [2008) 17 S.C.R.
e
A stands postponed to 03.03.2008 due to administrative
reasons. Again a similar letter dated 28.02.08 was received ~
by the appellant intimating that the commercial bid which was '•

scheduled for opening on 03.03.08 is postponed till further
notice. The respondents vide letter dated 07.03.2008 stated
B that appellant's offer does not meet the eligibility criteria and
hence the commercial bid could not be opened. Therefore,
office letter of even no. dated 07.02.2008 issued by the ._
respondents earlier stands cancelled. No.reason for rejection ~ ...
~

was specified. The appellant filed the Writ Petition before the
c High Court on 11.3.2008 and the court issued notice and stayed
the supply of order on 12.3.2008. On 28.3.2008 the counter
affidavit was filed by the respondents stating therein the false
'
and unbelievable story of misrepresentation made by the
appellant. The respondents' contention was that the case of the
appellant was wrongly approved by the respondents in the first
D
chance due to misrepresentation made by the appellatlt and
.,..
l
only later on was mistake corrected. According to the appellant, I,...

respondents have not disclosed anywhere in the counter
affidavit as to what was misrepresented and what was false in
~
r
the appellant's representations which was only made pursuant .--
E
to the telephonic discussion with the respondents. The appellant
brought to the notice of the High Court the cartel formation by
filing the rejoinder affidavit on 7.4.2008. The appellant also
stated before the High Court about the various gross
...'
irregularities overlooked by the respondents by filing CM ,
F Application no. 5639 Of 2008. The High Court did not consider
them holding that these allegations are not part of pleading. -~

The High Court accepted the stand of the respondents that
the appellant does not meet the eligibility criteria indicated in
G the tender. With reference to Clause 2.8, 4.1.1, 4.1.2, 4.2 and
4.3 it was held that the view of the respondents that the
appellant did not fulfil the eligibility criteria cannot be faulted.
Accordingly, the writ petition was dismissed .. 1' 'f 1

...,_
'
4. In support of the appeal, learned counsel for the I
H I
i
1

-?
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 219
UNION OF INDIAANDANR. [DR. ARIJIT PASAYAT, J.]

appellants submitted as follows: A
~
The appellant is the pioneer in manufacturing of tendered
item which is a modern technology item. The appellant's
manufacturing facility and prototype sample of the thick web
switches have been approved by RDSO as intimated by the
B
RDSO vide their letter dated 23.10.2007. The said letter was
annexed with tender offer and was also subsequently supplied
again. It is a practice that the firm can proceed for bulk
~ production only after prototype samples are approved. In the
instant case subsequently RDSO, Lucknow has carried out the
inspection of more than 350 sets of thick web switches .
c
.... Moreover, as per clause 1.5 of the tender document, those
.successful bidders who will install CNC machine and will
produce at least 75 ThicK Web Switches will qualify to be in
---\
the approved list of vendors for future tenders. Therefore, it D
4
clearly implies that the appellant is RDSO approved

• manufacturer on two fronts i.e. for Conventional curved switches
in the name of the JV partner and for the Thick Web Switches
(new technology) in the tendered item.
E
It is not out of place to mention that material produced for
RVNI, as per their specification was exactly the same as instant
tender specification .
•
llf The appellant has a CNC Plano-milling machine at its
premises. CNC Machine is must for· manufacturing of TWS and F
4 it involves investment of about Rs. 5-6 crores. As per
respondents' admission only two other bidders have CNC
Machine. All other bidders have not even set up this machine.
As per Clause 4.1.4 (c) the government has given 270 days
time to them. Thus the bids of those bidders who have not even G
produced a single TWS have been approved and bid of the
;

~
appell;:int has be.en rejected.

.... '
The action of the respondents in subsequently rejecting the
duly approved·technical bid of the appellant without assigning
H

•
220 SUPREME COURT REPORTS [2008] 17 S.C.R.
e
A any reasons is highly illegal, malicious, arbitrary, irrational and
unjustified. ~
It is pointed out that the bid was initially accepted, but on
the basis of the representation of two of the competitive
bidders, totally different views were taken. It is pointed out that
B
in view of what has been stated by this Court in New Horizons
Ltd. and Anr. v. Union of India and Ors. (1995 (1) sec 478)
the view taken by the respondents is erroneous.

5. Learned counsel for the Union of India, on the other
t
c hand, submitted that New Horizon's case (supra) related to the
experience of the joint venture partners and that logic cannot
be applied to the present case where the parameters are
different. So far as the factual position is concerned, it is to be
noted that the appellant annexed ISO 9001 certification of joint
0 venture partners with the tender offer. Though the ISO 9001
certification of the joint venture company prior to the date of
opening of tender existed, the same was not annexed with the
tender as the appellant was under the impression that ...
subm'ission of certificate in the name of individual partners is
E sufficient and the respondents had also never demanded the
same. In respect of ROSO approval it was pointed out that one
of the joint venture partners i.e. M/s R.V. Rail Products Pvt. Ltd.
is also an existing ROSO approved manufacturer of
conventional curved switches i.e. 1 in 12 curved switches. The
F said certificate was enclosed with the appellant's offer.
6. The concept of joint venture has been highlighted in -~
paras 21, 22, 23, 24, 25 and 41 of New Horizon's case (supra)
as follows:

G "21. The requirement with regard to experience, as stated
in the advertisement dated 22-4-1993 for inviting tenders,
as noticed earlier was in the following terms :
'pt
"The tenderer should have the experience in
~
compiling, printing and cupply of telephone
H
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 221
UNION OF INDIA AND ANR. [DR. ARIJIT PASAYAT, J.]

directories to the large telephone systems with the A
-"· capacity of more than 50,000 lines. The tenderer
should substantiate this with documentary proof. He
should also furnish credentials in this field."

The requirement of experience was, however, differently B
worded in the notice for inviting sealed tenders dated 26-
4-1993 which was attached to the tender documents which
prescribes the conditions to be fulfilled for submission of
·1 tenders and wherein it was stated as under :

"The successful tenderer will also submit copies of c
telephone directories printed and supplied by them
to the telephone systems of capacity more than
50,000 lines as credentials of his past experience."

22. In the said notice the expressions 'tenderer' and D
"successful tenderer" have been used. While the
expression 'tenderer' has been used in paragraphs 5, 7,
11 and 14, the expression "successful tenderer" is used·
in paragraphs 7, 9(a), 10 and 12. Since paragraph 10 ·
provides for execution of the agreement by the successful
E
., tenderer, the said expression is intended to mean the
tenderer whose tender has been found suitable for
acceptance. The use of the expression "successful
tenderer" instead of the expression 'tenderer' in paragraph
12, therefore,. indicates that the documentary proof, by way
F
of credentials of past experience, has to be submitted after
"
-+ the tender has been considered and is found suitable for
acceptance by the concerned authorities. This would mean
that the past experience is a matter which is to be
considered after the tender has been examined and
evaluated and the tenderer whose tender is found G
acceptable is required to submit documentary proof regardin
~ his past experience. In other words, a tender is not liable
to be excluded from consideration on the ground of non-
• eligibility on account of lack of past experience .
H
222 SUPREME COURT REPORTS [2008] 17 S.C.R.
e
A This inference is strengthened by paragraphs 8 and 11 of
the notice dated 26-4-1993. In paragraph 8 it is provided
that a tender is liable for summary rejection if it is submitted
without the Demand Draft of Rs 5,00.000. Similarly in
paragraph 11 it is provided that tender is liable to be
B excluded from consideration if the income tax clearance
certificate is not furnished with the tender. There is no
similar provision for excluding from consideration a tender
on the ground of failure to furnish with the tender the -).

required material by way of credentials of past experience.
It means that the matter of past experience has to be
"
c
considered after the tender has otherwise been found to
,_
be suitable for acceptance and a tender is not liable to be
rejected at the threshold withou~ consideration on the
ground that the tenderer lacks experience. The decision
of the Tender Evaluation Committee to exclude the tender
D
of NHL from consideration was, therefore, not warranted
by the terms and conditions for submission of tender as
;..__
contained in the notice for inviting sealed tenders dated
26-4-1993.
..__
E 23. Even if it be assumed that the requirement regarding
.v
experience as 'set out in the advertisement dated 22-4-
1993 inviting tenders is a condition abqut eligibility for
consideration of the tender, though we find no basis for the
same, the said requirement regarding experience cannot
F be construed to mean that the ~aid experience should be
of the tenderer in his name only. It is possible to visualise _,,t(
_

a situation where a person having past experience has
entered into a partnership and the tender has been
submitted in the name of the partnership firm which may
G not have any past experience in its own name. That does
not mean that the earlier experience of one of the partners
of the firm cannot be taken into consideration. Similarly, a y
company incorporated under the Companies Act having
past experience may undergo reorganisation as a result ..
of merger or amalgamation with another company which
H
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 223
UNION OF INDIA AND ANR. [DR. ARIJIT PASAYAT, J.]
may have no such- past experience and the tender is A
""- submitted in the name of the reorganised company.

It could not be the purport of the requirement about
experience that the experience of the company which has
merged into the reorganised company cannot be taken B
into consideration because the tender has not been
submitted in its name and has been submitted in the name
of the reorganised company which does not have
experience in its name. Conversely there may be a split
in a company and persons looking after a particular field
of the business of the company form a new company after
c
... leaving it. The new company, though having persons with
experience in the field, has no experience in its name while
the original company having experience in its name lacks
persons with experience. The requirement regarding
experience does not mean that the offer of the original D
company must be considered because it has experience
in its name though it does not have experienced persons
with it and ignore the offer of the new company because it
does not have experience in its name though it has persons
having experience in the field. While considering the E
requirement regarding experience it has to be borne in
mind that the said requirement is contained in a document
inviting offers for a commercial transaction. The terms and
conditions of such a document have to be construed from
the stanapoint of a prudent businessman. When a F
businessman enters into a contract whereunder some work
-' is to be performed he seeks to assure himself about the
credentials of the person who is to be entrusted with the
performance of the work. Such credentials are to be
examined from a commercial point of view which means that i G
the contract is to be entered with a company he will I
ok into the background of the company and the p
-,., rsons who are in control of the same and their capacity to
...... execute the work. He would go not by the name of the
company but by the persons behind the company. While H
224 SUPREME COURT REPORTS [2008] 17 S.C.R.
e
,-·

A keeping in view the past experience he would also take
note of the present state of affairs and the equipment and
resources at the disposal of the company. The same has
to be the approach of the authorities while consid~ring a
tender received in response to the advertisement issued
B on 22-4-1993.

This would require that first the terms of the offer must be
examined and if they are found satisfactory the next step .J
would be to consider the credentials of the tenderer and t
his ability to perform the work to be entrusted. For judging
c the credentials past experience will have to be considered
. along with the present state of equipment and resources
available with the tenderer. Past experience may not be
of much help if the machinery and equipment is outdated.
Conversely lack of experience may be made good by
D improved technology and better equipment. The
advertisement dated 22"4-1993 when read with the notice
for inviting tenders dated ~6-4-1993 does not preclude _,,..
adoption of this course of action. If the Tender Evaluation
Committee had adopted this approach -and had examined
E the tender of NHL i[l this perspectiv._e it would have found
that NHL, being a joint venture, has access to the benefit
of the resources and strength of ifs parent/owning
companies as well as to the experien~e in database
management, sales and publishing of its parent group
F companies because after reorganisation-Of t~e Company
in 1992 60% of the share capital of NHL is owned by -f-
!I
Indian group of companies namely, TPI, LMI, WML, etc. and
Mr Aroon Purie and 40% of the share capital is owned by
llPL: a wholly-owned subsidiary of Singapore Telecom
G which was established in 1967 and is having long
experience in publishing the Singapore telephone directory
with yellow pages and other directories. Moreover in the
tender it was specifically stated that llPL will be providing
,_.-
its unique integrated directory management system along
~
with the expertise of its managers and that the managers
H

,,..
t
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 225
" UNION OF INDIA AND ANR. [DR. ARIJIT PASAYAT, J.]

will be actively involved in the project both out of Singapore A
~ and resident in India.

24. The expression "joint venture" is more frequently used
in the United States. It connotes a legal entity in the nature
of a partnership engaged in the joint undertaking of a B
particular transaction for mutual profit or an association of
persons or companies jointly undertaking some
commercial enterprise wherein all contribute assets and
·~
share risks. It requires a community of interest in the
performance of the subject-matter, a right to direct and
c
.. govern the policy in connection therewith, and duty, which
may be altered by agreement, to share both in profit and
losses. (Black's Law Dictionary, 6th Edn., p.839)
According to Words and Phrases, Permanent Edn., a joint
venture is an association of two or more persons to carry
out a single business enterprise for profit (p.117, Vol. 23). D
A joint venture can take the form of a corporation wherein
two or more persons or companies may join together. A
joint venture corporation has been defined as a
corporation which has joined with other individuals or
corporations within the corporate framework in some E
specific undertaking commonly found in oil, chemicals,
electronic, atomic fields. (Black's Law Dictionary, 6th Edn.,
p. 342) Joint venture companies are now being
increasingly formed in relation to projects requiring inflow
of foreign capital or technical expertise in the fast F
.
..,, . developing countries in East Asia, viz., Japan, South
Korea, Taiwan, China, etc. [See Jacques Buhart: Joint
Ventures in East Asia - Legal Issues (1991 ).] There has
been similar growth of joint ventures in our country wherein
foreign companies join with Indian counterparts and G

"
_..,'-y
contribute towards capital and technical know-how for the
success of the venture. The High Court has taken note of
this connotation of the expression "joint venture". But the
High Court has held that NHL is not a joint venture and that
~
H
A
226 SUPREME COURT REPORTS [2008] 17 S.C.R.

there is only a certain amount of equity participation by a
-
foreign company in it. We are unable to agree with the said ~

view of the High Court.

25. As noticed earlier, in its tender NHL had stated that it
is a joint venture company established by TPI, LMI and
B
WML and llPL wherein TPI, LMI and WML and other
companies in the same group as well as Mr Aroon Purie
own 60% shares and llPL owns 40% shares. It was also
stated that the joint venture has received approval of the
Government of India and is currently in operation and that
c the promoter will increase their capital/contribution to
commensurate with the project need and that the company , ~

has been established as an information and database
management company with expertise in database
processing, publishing, sales/marketing and the
D dissemination of related information. In the tender it is also
stateD that as a joint venture in the true sense of the
phrase, the company will have access to expertise in ~
data.base management, sales and publishing of its parent
group companies. It would thus appear that the Indian
E group of companies (TPI, LMI and WML) and the
Singapore-based company (llPL) have pooled together
their resources in the sense that TPI, LMI and WML have
made available their equipment and organisation at
various places in the country while llPL has made available
F its wide experience in the field as well as the expertise of
its managerial staff. All the constituents of NHL have thus -y •
contributed to the resources of the\company
\
(NHL). This
shows that NHL is an association of companies jointly
undertaking a commercial enterprise W,herein they will all
G contribute assets and will share risks and have a
)
community of interest. We are, therefore, of the view that
NHL has been constituted as a joint venture by the group
of Indian companies and UPL, the Singapore-based y-.._
company and it would not be correct to say that llPL which
H has a substantial stake in the success of the venture, ""'
GANPATI RV-TALLERES ALEGRIA TRACK PVT. v. 227
UNION OF INDIA AND ANR. [DR. ARIJIT PASAYAT, J.]

having 40% of shareholding, is a mere shareholder in A
...._ NHL.
... xx xx xx

41. We have been informed that while the matter was
pending in the High Court and in this Court the telephone B
directory for the year 1993 has been printed and supplied
to the Department by Respondent 4 as per terms of the
·~ contract. Insofar as the directory for the year 1994 is
concerned we find that, as per the terms of the contract,
the process for preparation of the telephone directory has G
already commenced. We cannot lose sight of the fact that
as a result of quashing of the contract in respect of the
directory for 1994 fresh steps will have to be taken to
award a fresh contract and the said process would take
some time and thereafter the contractor will require time D
to print and publish the telephone directory. It would,
therefore, not be feasible to bring out tRe directory for 1994
-!'
before the close of the year. As a result, the Department
would suffer loss of revenue which it would otherwise earn
by way of royalty from Respondent 4 for the directory for E'
the year 1994. Insofar as the contract in respect of the year
1995 is concerned there is sufficient time for the
) Department to award a fresh contract if the contract
awarded to Respondent 4 is cancelled and the new
contractor will have sufficient time at his disposal to print F
and deliver. the directory as per the time schedule.
~
'f
Moreover, in respect of the directory for the year 1995 the
amount of royalty that is payable by Respondent 4 is Rs
45 lakhs and the amount of royalty offered by NHL for the
dir~ctory for the said year was Rs .291.6 lakhs. Keeping
G
in view the circumstances referred to above, the course
that commends us is that. while maintaining the contract
~ awarded to Respondent 4 in respect of the directories for
the years 1993 and 1994, the said contract may be set
aside insofar as it relates to the directory for the year 1995
H
228 SUPREME COURT REPORTS [2008] 17 S.C.R.

..
A for the direcl5ry for the year 1995. The appeal filed against
~
the judgment and order of the Delhi High Court dismissing
the writ petition of the appellants must therefore, be allowed
in the above terms. The other appeal has been filed by the
appellants against the order of, the Delhi High Court
B dismissing CM No. 6120of1993 which was an application
for. an interim relief during the pendency of the writ petition
in the High Court. In view of the final order that is being
passed in the writ petition the application for interim relief
has become infructuous and the appeal against the order
l
c dismissing CM No. 6120 of 1993 must, therefore, be
dismissed as infructuous."

7. Though the aforesaid case related to experience, the
other essential characteristic of a joint venture has also been
highlighted.
D
8. In that view of the matter the inevitable conclusion is that
the view taken by the High Court that the appellant did not fulfil
the eligibility criteria was not correct. The High Court was not "°"
justified in dismissing the writ petition. We direct the Evaluation
E Committee to consider the bid of the appellant alongwith two
persons who had been selected and take a final decision.

9. The appeal is allowed to the aforesaid extent.

K.K.T. Appeal Partly allowed.

-f' - f--