The Supreme Court of India made a significant ruling in the case of Sippi Constructions Contractors v. High Court of Kerala regarding the interpretation of eligibility criteria in contract awarding processes. The case involves crucial considerations surrounding the selection of contractors and the application of eligibility standards. Stay updated on this crucial legal development!
Facts
- The petitioner, ‘The Sippi Constructions Contractors’, filed competitive bids for two works at Kochi.
- Petitioner’s tenders were rejected for not meeting eligibility criteria.
- Estimated costs of the works were Rs. 53 crores and Rs. 72 crores.
- Petitioner filed appeals which were rejected by the appellate authority.
- Petitioner then filed a writ petition in the High Court of Kerala.
- Main ground of the petition was lack of reasons given for rejection of tender and appeals.
- Technical bids of the petitioner were rejected on 28.03.2019.
- The original writ petitioner’s appeal was allowed by a learned single judge due to lack of a speaking order from the appellate authority.
- The adverse remarks against the sister company were deemed inadmissible as evidence against the petitioner’s firm.
- The single judge found the remarks against the sister company unjustified.
- Later, writ appeals filed by Respondent Nos. 1 and 2 were allowed by a division bench, emphasizing limited interference in contractual matters.
- The division bench reasoned that the single judge should not have intervened in the decision regarding the sister company without proof of malice.
- The direction given by the single judge to consider the financial bid implied acceptance of the petitioner’s technical bid.
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Issue
- Whether the petitioner firm and the sister company are considered ‘Related Firms’
- Relevance of Clause 1.19 of the Manual of Contracts, 2007 in determining the relationship between the firms
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Arguments
- Division Bench of the High Court erred in holding that the writ petition was not maintainable without making all the tenderers parties to the petition.
- Reasonable grounds for extension of the project existed and this ground should not have been used to reject the technical bid.
- In a previous contract awarded to the sister company, the sister company failed to perform its part leading to cancellation of the contract.
- The respondents claimed that the award in favor of the sister company was under challenge before the Court.
- The petitioner argued that once an award has been passed in their favor, that issue could not be used against them.
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Analysis
- The court’s interference in technical evaluation or comparison matters should be minimal.
- Courts should not examine details of contracts entered into by public bodies or the State but focus on decision-making processes for judicial review.
- Contracts need not always be awarded to the lowest tenderer; the employer is the best judge of the selection.
- Judges lack expertise in technical matters; hence, their involvement in contracts with technical issues should be limited.
- Superior courts should only interfere in tender matters if substantial public interest is at stake or if there is evidence of mala fide actions.
- Judicial intervention in contracts involving the State and its instrumentalities should require overwhelming public interest.
- The owner or employer, who authored the tender documents, is best suited to interpret the requirements and documents of the project.
- Courts should only intervene in contract matters sparingly, primarily focusing on public interest rather than legal points.
- Interference by the Court in contract awards is restricted unless the State’s actions are unreasonable, unfair, or against public interest.
- The Courts generally refrain from interfering in policy decisions or challenges to contract awards by State or public authorities.
- A significant threshold of mala fides, favoritism, arbitrariness, or irrationality must be met for constitutional courts to interfere in decision-making processes.
- Poor quality of work or goods can result in substantial public hardship and financial repercussions, warranting cautious judicial intervention.
- Special skills are essential for interpreting tender documents in technical projects, requiring a different approach compared to standard contract interpretation.
- The authority selecting a person or company for a contract is best positioned to determine suitability and cannot be compelled by the Court to choose otherwise.
- Judicial review of government contracts is allowed to prevent arbitrariness or favouritism.
- Courts should exercise restraint when a decision aligns with the tender’s language or objectives, to avoid unnecessary scrutiny and potential harm to government bodies.
- Interference in contractual matters should be limited unless clear instances of arbitrariness, mala fides, bias, or irrationality are present.
- Public sector undertakings competing with private industries add complexity to contract evaluations, requiring judicial restraint unless illegal actions by the employer are evident.
- Unnecessary loss to the public exchequer should be avoided when courts consider interference in contract matters.
- The court does not agree that firms can be enlisted as ‘SS’ Class contractors, only incorporated companies are eligible.
- The petitioner firm, being not an enlisted contractor, needed to meet the eligibility criteria for other contractors.
- Adverse remarks against the sister concern can be used against the petitioner firm as they are related firms.
- The petitioner was not eligible to submit the tender as per the eligibility criteria for MES enlisted contractors.
- The court emphasized the need for minimal interference in purely administrative decisions and commercial matters.
- The sister company had adverse remarks in its Work Load Return (WLR) indicating acceptance of those remarks.
- The petitioner challenging the rejection of its technical bid did not automatically make other tenderers necessary parties.
- The court opined that the sister company’s lack of tender renewal can impact the petitioner’s eligibility.
- Eligibility criteria for contractors require them to meet the enlistment criteria of Class ‘SS’ MES Contractors.
- Limiting enlisted contractors to only be limited companies would be a travesty of justice.
- The purpose of the criteria is not to restrict contractors to only limited companies, but to ensure they meet certain standards.
Decision
- No merit found in the petitions
- Petitions dismissed vide order dated 21.06.2019
- Any applications also dismissed
Case Title: THE SILPPI CONSTRUCTIONS CONTRACTORS Vs. UNION OF INDIA
Case Number: SLP(C) No.-013802-013805 / 2019
