IRCTC vs Doshion Veolia Water Solutions (P) Ltd.

Corporation Limited & Anr. ...... Appellants

Versus

M/s. Doshion Veolia Water Solutions (P)

Limited & Ors. ...... Respondents

WITH

CIVIL APPEAL NOs.8547-8548___ of 2010

(Arising out of S.L.P. (C) Nos. 14996-14997 of 2010)

M/s. Ion Exchange India Limited ...... Appellant

Versus

M/s. Doshion Veolia Water Solutions (P)

Limited & Ors. ...... Respondents

AND

CIVIL APPEAL NO._8549_______of 2010

(Arising out of S.L.P. (C) No. 17471 of 2010)

M/s. Doshion Veolia Water Solutions (P)

Limited ...... Appellant

Versus

M/s. Indian Railway Catering & Tourism

Corporation Limited & Ors. ...... Respondents

2

J U D G M E N T

A. K. PATNAIK, J.

Leave granted.

2. These Appeals are against the judgment and order dated

29.04.2010 passed by the Division Bench of the Madras High

Court in Writ Appeal Nos. 726 and 727 of 2010.

3. The relevant facts very briefly are that M/s Indian

Railway Catering and Tourism Corporation Limited (for short

`IRCTC') planned to set up a packaged drinking water bottling

plant at Palure, near Chennai, to produce drinking water

under the brand name "Rail Neer" for railway passengers. In

November 2008, the civil work for construction of the plant

building was started. In February 2009, IRCTC published a

tender notice for turnkey project for design, engineering,

supply, installation, commissioning, operation and

maintenance of the packaged drinking water bottling plant.

Pursuant to the tender notice, three tenderers, namely, M/s

Thermax, M/s Ion Exchange (I) Ltd. and M/s. Doshion Veolia

Water Solutions (P) Limited submitted their offers, but as the

3

offers were conditional, it was not possible to evaluate them

and to decide the inter-se position of the three tenderers in an

objective manner and therefore the Tender Committee of the

IRCTC recommended for discharge of the tender and to invite

fresh tenders after incorporating all the relevant revisions in

the tender document to avoid anomalies. On 04.08.2009, a

fresh tender notice was advertised by IRCTC and in response

to this fresh tender notice M/s Ion Exchange (I) Limited (for

short `Ion Exchange') and M/s. Doshion Veolia Water

Solutions (P) Limited (for short `Doshion') submitted their

technical and financial bids in separate sealed covers. The

technical bids were opened on 24.08.2009 and both Ion

Exchange and Doshion were informed on 26.08.2009 that

their financial bids would be opened on 27.08.2009. When on

27.08.2009 the financial bids of Ion Exchange and Doshion

were opened, it was found that Doshion had quoted a total

price of Rs. 18.65 Crores, whereas Ion Exchange had quoted a

total price of Rs. 18.66 Crores and had also quoted a discount

of 1% on the quoted price. The result was that the net price

quoted by Ion Exchange after deducting the discount of 1%

4

worked out to Rs.18,47,34,000/- as against the price of

Rs.18,66,00,000/- quoted by Doshion.

4. On 28.08.2009, Doshion submitted a letter to IRCTC

saying that the offer of discount on the quoted price made by

Ion Exchange was in violation of Clause 1.10 of the

Instructions to Bidders. Again on 03.09.2009, Doshion

submitted a letter reiterating its objection to the offer of

discount made by Ion Exchange and also saying that the

excise duty amount had not been indicated in rupees by Ion

Exchange in its financial bid contrary to the terms and

conditions of the tender. On 18.10.2009, the Tender

Committee of IRCTC met and made its first recommendation

to the Accepting Authority of IRCTC. In the recommendation,

the two members of the Tender Committee gave their opinion

that the discount of 1% offered by Ion Exchange was not valid

and that the non-mentioning of the excise duty amount in

Rupees by Ion Exchange was a major deviation. The third

member gave his dissent in the recommendation saying that

the excise duty could be easily ascertainable by applying the

normal methodology of calculation and so calculated the

5

excise duty amount in the bid of Doshion was Rs.69,26,080/-

and that of Ion Exchange was Rs.55,12,050/-. The third

member also gave his opinion that the bid amount of Ion

Exchange was Rs.17 Lacs lesser and if the set off received in

service tax for operation and maintenance part of the contract

is taken into account, then the additional benefit of MODVAT

would get neutralized and therefore even if excise duty amount

was not quoted by Ion Exchange in its financial bid, this was

not a material deviation. On 13.10.2009, the Accepting

Authority of IRCTC directed the Tender Committee to look into

the financial implications of excise duty on plant and

equipment/ MODVAT credit. Regarding the discount of 1%,

the Accepting Authority directed the Tender Committee to look

into the prevalent practice being followed by Government

Departments and Public Sector Undertakings regarding

discount and thereafter make their recommendations. On

02.11.2009, the Tender Committee made its second

recommendation. In this recommendation, all the three

members of the Tender Committee were of the unanimous

view that excise duty should not be taken into account for

6

tender evaluation because if the offer of Ion Exchange in

totality was considered, there was no adverse financial

implication to IRCTC. Regarding discount, the Tender

Committee could not find any instruction relating to the

prevalent practice followed by Government Departments and

Public Sector Undertakings. On 13.11.2009, the Accepting

Authority considered the second recommendation of the

Tender Committee and asked the Tender Committee for

further clarification on excise duty and to make a review of the

cases of Central Vigilance Commission, Chief Technical

Examiner's Organization and Stores Directorate Compendium,

Railway Board on the discount aspect. On 20.11.2009, the

Tender Committee made its third recommendation. In the

third recommendation, the members of the Tender Committee

were of the unanimous view that taxes and duties (excise duty

in particular) had no adverse financial implication to IRCTC.

Two of the three members of the Tender Committee after

taking into consideration the guidelines/observations in the

Railway Stores Directorate Compendium, Central Vigilance

Commission, Chief Technical Examiner's Organization, the bid

7

documents of other Public Sector Undertakings in respect of

discounts and after verification from Railways and Railway

Public Sector Undertakings, took the view that unconditional

discount available alongwith the offer should be considered.

The third member of the Tender Committee, however, did not

agree with this view and maintained his earlier view that

unconditional discount offers should not be considered when

price bid does not speak of discount as part of the bid

conditions. The Accepting Authority of the IRCTC accepted

the unanimous recommendation of the Tender Committee that

taxes and duties (including the excise duty) had no financial

implication on IRCTC. The Accepting Authority also accepted

the majority recommendation of the Tender Committee that

the 1% discount offered in the bid of Ion Exchange can be

considered. Accordingly, the Accepting Authority decided to

accept the offer of Ion Exchange and on 17.12.2009 letter of

acceptance was issued to Ion Exchange.

5. On 21.12.2009, Doshion filed Writ Petition No. 27074 of

2009 in the Madras High Court praying for a writ of

mandamus restraining IRCTC from taking any step in

8

furtherance of the tender. On 23.12.2009, learned Single

Judge of the Madras High Court issued an interim injunction

till 15.01.2010 and posted the matter for 05.01.2010. On

05.01.2010, IRCTC filed its detailed counter affidavit in reply

to the writ petition. On 17.01.2010, Doshion filed Writ

Petition No. 1059 of 2010 praying for quashing the letter of

acceptance dated 17.12.2009 issued in favour of Ion

Exchange. IRCTC and Ion Exchange filed their respective

counter affidavits in reply to the Writ Petition and Doshion

also filed its rejoinder affidavit. After hearing, the learned

Single Judge of the Madras High Court dismissed the two Writ

Petitions on 16.02.2010. On 08.04.2010, Doshion filed Writ

Appeal Nos. 726-727 of 2010 before the Division Bench of the

Madras High Court and on 12.04.2010 the Division Bench

passed the order of status quo while admitting the appeals.

After hearing the appeals, the Division Bench passed the

impugned judgment and order dated 29.04.2010 setting aside

the order dated 16.02.2010 of the learned Single Judge in Writ

Petition Nos. 27074 of 2009 and 1059 of 2010 and allowed the

Writ Petitions of the appellant and quashed the acceptance of

9

the offer of Ion Exchange. The Division Bench, however,

refused to grant the prayer in the Writ Petition to award the

contract to Doshion and instead observed in the impugned

judgment and order that it is for IRCTC to take a decision in

the light of the findings in the impugned judgment. Aggrieved,

the IRCTC and Ion Exchange have filed appeals against

quashing of acceptance of the offer of Ion Exchange by the

Division Bench of the High Court and Doshion has filed the

appeal against the refusal of the Division Bench of the High

Court to grant the prayer in the writ petition to award the

contract to Doshion.

6. Mr. Goolam E. Vahanvati, learned Attorney General for

India appearing for IRCTC, submitted that the Division Bench

of the High Court quashed the acceptance of the offer of Ion

Exchange by IRCTC on the ground that the offer of discount of

1% over the quoted price and the non-mentioning of excise

duty amount in rupees in the offer of Ion Exchange were

contrary to the provisions of the tender notification and the

tender format and, therefore, the acceptance of the offer of Ion

10

Exchange was unfair and arbitrary and violative of Article 14

of the Constitution.

7. He argued that the terms and conditions of the tender

documents did not contain any express provision prohibiting a

tenderer from quoting a discount on the price offered by him

and in the absence of an express provision in this regard, an

implied provision cannot be read into the terms and conditions

of the tender documents prohibiting a tenderer from quoting a

discount on the quoted price. He urged that in the facts of the

present case, the majority of the members of the Tender

Committee, after taking into consideration the guidelines/

observations in the Railway Stores Directorate Compendium,

Central Vigilance Commission, Chief Technical Examiner's

Organization and the bid documents of other Public Sector

Undertakings in respect of discounts and after verification

from Railways and Railway Public Sector Undertakings, had

given the opinion in their third recommendation on

20.11.2009 that unconditional discount along with the offer

should be considered and the Accepting Authority had

accordingly considered the 1% discount offered on the quoted

11

price of Ion Exchange and accepted the offer of Ion Exchange.

He cited the decision of this Court in Kanhaiya Lal Agrawal v.

Union of India and Others [(2002) 6 SCC 315] in which rebates

offered by a tenderer as an additional inducement to accept

his offer was not treated as breach of the terms and conditions

of the invitation to tender.

8. Regarding the non-mentioning of excise duty in rupees in

the offer of Ion Exchange, Mr. Vahanvati contended that the

members of the Tender Committee in their third

recommendation made on 20.11.2009 were unanimous in

their view that taxes and duties including excise duty had no

adverse financial implication on IRCTC and this

recommendation of the Tender Committee was accepted by the

Accepting Authority. He submitted that the Division Bench of

the High Court has acted as an appellate court over the

Tender Committee and the Accepting Authority by holding that

the non-mentioning of excise duty in rupees in the offer of Ion

Exchange amounted to breach of the essential terms and

conditions of the tender notification and tender format and

has exceeded the power of judicial review in matters relating to

12

tenders and award of contracts. He cited the decision of this

Court in Tata Cellular v. Union of India [(1994) 6 SCC 651] in

which it has been held that it is not the function of the Judge

to act as Super Board over the decisions of the administrator

in matters relating to tenders.

9. Dr. Abhishek Manu Singhvi, learned senior counsel

appearing for Ion Exchange, submitted that in the impugned

judgment and order, the Division Bench of the High Court has

referred to Clause 1.10 of the Instructions to Bidders which

provides that rates are to be quoted in the prescribed price

schedule format only and has also referred to Clause 1.12 of

the Instructions to Bidders which states that failure to comply

with either of the conditions will render the tender void. He

submitted that the Division Bench of the High Court appears

to have taken the view that Clause 1.12 is attracted in case of

failure of the tenderer to comply with Clause 1.10, but a

careful reading of Clause 1.12 would show that it will apply

when the tenderer fails to comply with either of the two

conditions in Clause 1.11 of the Instructions to Bidders and

will not apply when the tenderer does not comply with Clause

13

1.10 of the Instructions to Bidders. He contended that excise

duty rate is 8.24% on the value of the plants and equipments

and therefore the excise duty amount in rupees can always be

calculated by IRCTC and it made no difference whether the

excise duty was quoted in rate or in rupees. He submitted

that for these reasons, mentioning of excise duty in rupees for

the plants and equipments cannot constitute an essential term

of the tender notification or tender format as held by the

Division Bench of the High Court.

10. Dr. Singhvi argued that the fact remains that the price

offered by Ion Exchange with 1% discount is less than that of

Doshion and for this reason was accepted by IRCTC and hence

the Division Bench of the High Court should not have quashed

the acceptance of the offer of Ion Exchange. He cited Jagdish

Mandal v. State of Orissa and Others [(2007) 14 SCC 517] in

which this Court has held that so long as a decision relating to

award of contract is bona fide and is in the public interest,

courts will not interfere by exercising power of judicial review

even if a procedural aberration or error in assessment or

prejudice to a tenderer is made out.

14 11. Mr. Jaideep Gupta, learned senior counsel appearing for

Doshion, on the other hand, supported the impugned

judgment and order of the Division Bench of the High Court

quashing the acceptance of offer of Ion Exchange by IRCTC.

He submitted that when IRCTC published the first notice

inviting tenders in February, 2009, the bid of Doshion was the

lowest and yet IRCTC cancelled the tender process on the

ground that the offer made by the three tenderers were

conditional and it was not possible to evaluate them. He

submitted that when the fresh tender notice was advertised on

04.08.2009 for the very same work, IRCTC revised the tender

conditions and the tender format and in Clause 1.10 of the

Instructions to Bidders clearly stipulated that rates are to be

quoted in the Prescribed Price Schedule only. He submitted

that the IRCTC further stipulated in Clause 1.12 of the

Instructions to Bidders that failure to comply with either of the

conditions in Clauses 1.10 or 1.11 of the Instructions to

Bidders will render the tender void. He contended that on a

reading of these two tender conditions, it will be clear that

rates were to be quoted in the Prescribed Price Schedule only

15

and no tenderer could quote any discount on the quoted price,

and further any offer of discount on the quoted price would be

in breach of Clause 1.10 of the Instructions to Bidders and the

tender would be rendered void under Clause 1.12 of the

Instructions to Bidders. He submitted that it would be also

clear from Clause 2.1 of the Special Terms and Conditions of

the tender documents that the vendor was required to quote a

lump sum price along with detailed break-up as per price

schedule enclosed with the bid documents and Clause 9.0 of

the Special Terms and Conditions stated that the vendor

should clearly spell out in his offer his acceptance of the

Special Terms and Conditions and in case of deviation, his

offer may be rejected. He also referred to the Prescribed Price

Schedule to show that there was no scope for a bidder to quote

any discount. Mr. Gupta next submitted that Note (ii) at the

bottom of the price schedule provides that the vendor should

indicate total excise duty amount included in the price for

plants and equipments, and yet Ion Exchange did not mention

the total excise duty amount in its offer. He argued that since

Ion Exchange quoted a discount on the price and did not

16

indicate the excise duty amount in its offer, the Division

Bench of the High Court rightly held that the offer of Ion

Exchange did not comply with the essential terms and

conditions of the tender notification and tender format and

was ought to have been rejected by IRCTC.

12. Mr. Gupta relied upon the observations of this Court in

W.B. State Electricity Board v. Patel Engineering Co. Ltd. and

Others [(2001) 2 SCC 451] that the very purpose of issuing

Rules/Instructions to bidders is to ensure their enforcement

lest the rule of law should be a casualty and relaxation or

waiver of a rule or condition, unless provided in the

Instructions to Bidders, by the State or its agencies in favour

of one bidder would create justifiable doubts in the minds of

the other bidders and would impair the rule of transparency

and fairness and provide room for manipulation to suit the

whims of the State agencies in picking and choosing a bidder

for awarding contracts. He also relied upon Kanhaiya Lal

Agrawal v. Union of India and Others (supra) for the

proposition that if the consequence of non-compliance of a

condition in the notice inviting tenders is rejection of the

17

tender, then the condition is an essential condition of the

invitation to tender. Mr. Gupta submitted that the Division

Bench of the High Court therefore was right in quashing the

offer of Ion Exchange on the ground that it was in breach of

the essential terms and conditions of the tender notification

and the tender format. He submitted that as the tender of

Doshion was the only other valid tender, the High Court

should have directed IRCTC to award the contract to Doshion.

He urged that we should allow the appeal of Doshion on this

point and direct IRCTC to award the contract to Doshion.

13. The first question that we have to decide in this case is

whether the offer of 1% discount on the quoted price made by

Ion Exchange was in breach of any essential term of the tender

notification or the tender format as held by the High Court.

Mr. Gupta, learned counsel for Doshion, has relied upon

Clauses 1.10, 1.11 and 1.12 of the Instructions to Bidders and

Clauses 2.1 and 9.0 of the Special Terms and Conditions of

the tender documents to support this finding of the High

Court, which are quoted hereinbelow:

18 "Instructions to Bidders:

1.10 Rates are to be quoted in the prescribed

price schedule format only and it shall be

inclusive of all taxes, levies and duties.

1.11 Every page of the tender document shall be

signed on the left hand side bottom corner

and stamped properly by the authorized

person or persons submitting the tender in

token of his/their having acquainted

himself/themselves with the general

conditions of contract, technical

specifications etc. as laid down. Any

tender is liable to be treated as defective

and is liable to be rejected if any of the

documents is not signed. The initials of

the tenderer must attest all erasures and

alterations made while filling the tender.

Over-writing of figures is not permitted.

1.12 Failure to comply with either of these

conditions will render the tender void. No

advice of any change in rate after opening

of the tender will be entertained.

Special Terms & Conditions:

2.1 Vendor shall quote for lump sum price

along with detailed break-up as per price

schedule enclosed with this bid document.

The cost of plants and equipments as

quoted in the price schedule will constitute

contract price/contract value.

9.0 Deviation to Terms and Conditions:

The vendor should clearly spell out in his

offer his acceptance of the terms &

19

conditions indicated above. In case of

deviation, his offer may be rejected.

Deviations proposed, if any, should be

raised in pre-bid meeting and decision

taken there and conveyed to all parties will

be final and binding."

14. Clause 1.10 of the Instructions to Bidders quoted above

states that rates are to be quoted in the Prescribed Price

Schedule format only and it shall be inclusive of all taxes,

levies and duties. This clause does not say that the tenderer

will not quote any discount on the price. Clause 1.11 of the

Instructions to Bidders states that every page of the tender

document shall be signed and properly stamped by the

authorized person or persons submitting the tender and no

over-writing will be permitted. Clause 1.12 of the Instructions

to Bidders states that failure to comply with either of these

conditions will render the tender void. Since there is no

condition either in Clause 1.10 or Clause 1.11 that the

tenderer will not quote discount on the price, in case a

tenderer offers a discount on his quoted price his tender will

not be rendered void under Clause 1.12 of the Instructions to

20

Bidders. Clause 2.1 of the Special Terms and Conditions

quoted above states that the vendor shall quote for lump sum

price along with detailed break-up as per price schedule

enclosed with the bid document and the cost of plants and

equipments as quoted in the price schedule will constitute

contract price/contract value. This clause also does not say

that the vendor will not quote a discount on the lump sum

price. Clause 9.0 of the Special Terms and Conditions states

that the vendor should clearly spell out in his offer his

acceptance of the terms and conditions as indicated in the

Special Terms and Conditions and in case of deviation, his

offer may be rejected. There is nothing in this clause also to

show that the vendor cannot quote a discount on the price. In

the Prescribed Price Schedule also there is no mention

anywhere that the tenderer will not offer any discount on his

quoted price. In the absence of any express stipulation in the

Instructions to Bidders or the Special Terms and Conditions or

in the Prescribed Price Schedule prohibiting the tenderer from

quoting a discount on the price offered by him, the High Court

could not have come to the conclusion that by offering a

21

discount of 1% on the quoted price Ion Exchange has

committed a breach of the essential terms of the tender

notification or the tender format.

15. For this conclusion, we are supported by a direct

authority of this Court in Kanhaiya Lal Agrawal v. Union

of India and Others (supra) cited by Mr. Vahanvati. In

this case, the conditions in the tender notice required

that the rates at which the supply was to be made had to

be stated in words as well as in figures against each item

of work as per Schedule attached thereto and that the

tenders submitted with any omissions or alteration of the

tender document were liable to be rejected, but

permissible corrections could be attached with due

signature of the tenderers. Kanhaiya Lal Agrawal

submitted along with his tender a covering letter that if

his offer was accepted within the stipulated time the

following rebates would be offered by him:

(a) 5% reduction in rates if the contract is given to

him within 45 days,

(b) 3% reduction in rates if the contract is given

within 60 days, and

22

(c) 2% reduction in rates if the contract is given

within 75 days."

The Union of India accepted the tender offered by Kanhaiya

Lal Agrawal on the rates subject to the rebate. Another

tenderer, whose rates would have been the lowest if the

rebates offered by Kanhaiya Lal Agrawal would not have been

considered, filed a writ petition in the Madhya Pradesh High

Court contending that the offer of Kanhaiya Lal Agrawal was

conditional and not valid and succeeded both before the

learned Single Judge and before the Division Bench of the

High Court. Kanhaiya Lal Agrawal carried an appeal to this

Court and this Court held that the offer of rebates made by

Kanhaiya Lal Agrawal "did not militate against the terms and

conditions of inviting tender". From the decision of this Court

in Kanhaiya Lal Agrawal v. Union of India (supra), therefore, it

is clear that unless the offer of rebate or discount is in breach

of the clear stipulations in the notice inviting tenders it cannot

be held that such offer is in breach of the essential terms and

conditions of the notice inviting tenders.

23 16. The observations of this Court in W.B. State Electricity

Board v. Patel Engineering Co. Ltd. and Others (supra), on

which Mr. Gupta relied upon, is of no assistance to Doshion.

In that case the West Bengal State Electricity Board invited

bids for the Purulia Pumped Storage Project and the bids,

which were submitted, were opened on 08.09.1999 and while

the details of the bids were under scrutiny, respondents 1 to 4

in the appeal before this Court informed the State Electricity

Board that there was a repetitive systematic computer

typographical transmission failure on account of which there

were errors in their bid and requested that the errors be

corrected. On 17.12.1999, they sent another letter stating

that they had reason to believe that the State Electricity Board

was evaluating their price bid by an incorrect application of

the Instructions to Bidders and that their bid was the lowest.

The State Electricity Board evaluated their bid and on

18.12.1999 sent a letter to them saying that during checking

of their bid documents a good number of arithmetical errors

were discovered. Respondents 1 to 4 challenged the validity of

the letter dated 18.12.1999 of the State Electricity Board in a

24

writ petition filed in the High Court at Calcutta. Learned

Single Judge of the High Court directed the State Electricity

Board to consider the representation of Respondents 1 to 4

and to communicate a reasoned order to them. Against the

order of the learned Single Judge, the State Electricity Board

filed appeals. Cross-objections were also filed by Respondents

1 to 4. The Division Bench of the High Court dismissed the

appeals and the cross-objections upholding the order of the

learned Single Judge and directed the State Electricity Board

to permit Respondents 1 to 4 to correct the errors in the bid

documents and then consider their bid along with the other

bids and take a decision objectively and rationally. On these

facts, this Court held that Respondents 1 to 4 in that appeal

were bound by the Instructions to Bidders which should be

complied with scrupulously and adherence to the instructions

cannot be given a go-by by branding it as a pedantic approach,

otherwise it will encourage and provide scope for

discrimination, arbitrariness and favouritism which are totally

opposed to the rule of law and constitutional values. This

Court further observed that the very purpose of issuing

25

rules/instructions is to ensure their enforcement lest the rule

of law should be a casualty and relaxation or waiver of a rule

or condition, unless so provided under the Instructions to

Bidders, by the State or its agencies in favour of one bidder

would create justifiable doubts in the minds of other bidders,

would impair the rule of transparency and fairness and

provide room for manipulation to suit the whims of the State

agencies in picking and choosing a bidder for awarding

contracts.

17. These observations made by this Court in W.B. State

Electricity Board v. Patel Engineering Co. Ltd. and Others

(supra) rather come to the aid of Ion Exchange in this case.

Since IRCTC did not clearly stipulate in the Instructions to

Bidders or in the Special Terms and Conditions or in the

Prescribed Price Schedule or in any other part of the tender

documents that a tenderer will not offer any discount on the

prices quoted by him and if any such discount is offered the

tender will be rejected, the offer of discount on the price made

by Ion Exchange cannot be treated to be in breach of the

essential term or condition of the tender documents. To hold

26

that the State or its agencies can reject a tender for breach of

a term or condition in the tender document, which is not

explicit in the tender documents, is to give room to the State

or its agencies to arbitrarily reject tenders even where the clear

terms or conditions of the tender documents are complied

with. In Dutta Associates Pvt. Ltd. v. Indo Merchantiles Pvt.

Ltd. [(1997) 1 SCC 53), this Court found that the offer of the

lowest tenderer for wholesale supply of rectified spirit (Grade

1) to the Excise Department of the Government of Assam was

not accepted on the ground that the price offered did not come

within the "viability range" and this Court held that the tender

process was vitiated for the reason that the tender notice did

not specify the "viability range" nor did it say that only the

tenders coming within the "viability range" will be considered.

The Court further observed that whatever procedure the

Government proposes to follow in accepting the tender must

be clearly stated in the tender notice and the consideration of

tenders received and the procedure to be followed in the

matter of acceptance of a tender should be transparent, fair

and open.

27 18.The next question, which falls for consideration in this

case, is whether the High Court was right in coming to the

conclusion that by not indicating the excise duty amount

in rupees in its offer, Ion Exchange committed breach of an

essential term or condition of the tender notification or the

tender format. Clauses (i) and (ii) of the Note appended to

the Prescribed Price Schedule, which relate to duties and

taxes, are quoted hereinbelow:

"Note:

(i) The prices quoted are lump sum inclusive of all

duties and taxes etc.

(ii) Vendor should indicate total Excise Duty

amount included in above prices (for Plants &

Equipments)"

The language of Clauses (i) and (ii) of the Note quoted above is

clear that the prices quoted are to be lump sum inclusive of all

duties and taxes etc. and the vendor should indicate total

excise duty amount included in the prices for plants and

equipments. The Note does not indicate the consequences

that will follow if the vendor does not indicate the total excise

28

duty amount included in the prices for plants and equipments.

The Note does not say that if the vendor does not indicate the

total excise duty amount included in the prices for plants and

equipments, the offer of the vendor "shall" be rejected. In the

absence of any mention of the consequence of rejection of the

offer for not indicating the total excise duty amount in rupees

included in the price of plants and equipments in the tender

documents, the High Court could not have held that Ion

Exchange had committed breach of an essential term or

condition of the tender notification or the tender format. For

this conclusion, we are again supported by the decision in

Kanhaiya Lal Agrawal v. Union of India and Others (supra) in

which this Court relying on G.J. Fernandez v. State of

Karnataka [(1990) 2 SCC 488] held:

"Whether a condition is essential or collateral

could be ascertained by reference to the

consequence of non-compliance thereto. If non-

fulfillment of the requirement results in rejection

of the tender, then it would be an essential part of

the tender otherwise it is only a collateral term."

Hence, if on the recommendation of the Tender Committee, the

Accepting Authority did not find the deviation from Clause (ii)

29

of the Note by Ion Exchange very material and has accepted

the offer of Ion Exchange, the Division Bench of the High

Court could not have held that Ion Exchange committed a

breach of an essential term by not mentioning the excise duty

amount in rupees in its offer.

19. As the offer of 1% discount on the quoted price and the

non-mentioning of excise duty amount in rupees in the bid of

Ion Exchange were not in breach of the essential terms of the

tender documents, it was for IRCTC to evaluate the valid offers

of Ion Exchange and Doshion on the merits of the two offers.

We find that on the basis of recommendations of the Tender

Committee, the Accepting Authority of IRCTC found the offer

of Ion Exchange at a net price of Rs.18,47,34,000/- to be

better than the offer of Doshion at the price of

Rs.18,66,00,000/- and that tax and duties including excise

duty had no adverse financial implications to IRCTC and

accordingly accepted the offer of Ion Exchange. By reversing

this decision of the Accepting Authority of the IRCTC, the

Division Bench of the High Court, in our considered opinion,

acted as an Appellate Court and exceeded its power of judicial

30

review in a matter relating to award of contract contrary to the

law laid down by this Court in the leading case of Tata Cellular

(supra).

20. In the result, we set aside the impugned judgment and

order of the Division Bench of the High Court and allow the

appeals of IRCTC and Ion Exchange and dismiss the appeal of

Doshion. There shall be no order as to costs.

..........................J.

(Altamas Kabir)

..........................J.

(A. K. Patnaik)

New Delhi,

October 04, 2010.