Judicial Interference in Foreign-Funded Project Tender Process

In a recent case, the High Court’s intervention in a foreign-funded project’s tender process raised questions about judicial oversight in such intricate matters. The court’s legal analysis delved into the nuances of foreign funding agreements, highlighting the importance of adhering to set terms and conditions. This blog will delve deeper into the implications of court interference in critical infrastructural projects with international financing, shedding light on the complexities of upholding contractual obligations and project timelines.

Facts

• The High Court allowed the writ petition filed by the original writ petitioner and quashed the communications and notification rejecting their Bid.
• The High Court mentioned Clauses 28.1 and 42.5 of ITB, stating that not giving reasons for rejection would deprive bidders of the opportunity to approach the Court.
• The High Court considered the reasons for the Bid being technically non-responsive and overruled the objections raised by NHSRCL.
• The High Court directed NHSRCL to reconsider and evaluate the Bid of the original writ petitioner alongside bids from four other bidders.
• Appellant NHSRCL is a Government Company incorporated under the Companies Act, 2013.
• NHSRCL is involved in financing, constructing, maintaining, and managing the upcoming High-Speed Rail Corridor in India.
• Unsuccessful bidders have the right to request a debriefing to understand the grounds for bid rejection.
• NHSRCL informed the original writ petitioner and four other bidders that their bids were rejected at the technical stage.
• The original writ petitioner was informed that their bid was not substantially responsive.
• The rejection was in accordance with clauses ITB 28.1 and 42.5 of the tender process.
• Tender notice was issued on 22.10.2020 for the Design and Construction of Civil and Building Works for the Depot on a Double Line High-Speed Railway in Gujarat.
• Technical bids were opened by NHSRCL on 19.02.2021.
• Information on bid evaluation and contract award is not disclosed until communicated to all bidders as per clause 28.1.
• Unsuccessful bidders can request debriefing after the notification of award as per clause 42.5.

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Issue

• The issue before the Court is whether the High Court was justified in interfering with the tender process of a foreign funded project without specific allegations of mala fides or favoritism
• The Court must determine if the interference was warranted given the circumstances of the case
• The key question is whether the High Court’s actions were justified in this particular context

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Arguments

• The appellant has exercised discretion in allowing Bidder No.7/9 (L1) to rectify defects in their bid, demonstrating fairness in the process.
• The High Court’s interference in tender process for foreign-funded infrastructural projects is contended to be beyond its jurisdiction.
• The distinction between Foreign Sovereign Funded Contracts and contracts funded by the Consolidated Fund of India is emphasized, highlighting the unique nature of foreign-funded contracts.
• The significance of adhering to the terms and conditions set forth by the foreign funding party in foreign-funded contracts is stressed.
• The potential repercussions of altering the tendering rules as per JICA guidelines, including delays in projects and renegotiations, are pointed out.
• The impact of judicial interference on foreign-funded contracts, in contrast to contracts funded domestically, is discussed.
• The role of investor nations in financing and implementing projects in developing countries is delineated as key to the decision-making in such contracts.
• Concerns about delays caused by legal challenges affecting the completion of mega projects are raised.
• The reliance on specific clauses and protocols established by JICA in the tender evaluation process is highlighted.
• The objections to granting unrestricted liberty to unsuccessful bidders to challenge decisions in court are put forth as detrimental to project timelines and objectives.
• The High Court observed that the appellant engaged in ‘changing the goal posts’ and favored other Bidders.
• The appellant displayed an ‘allergic attitude’ towards the respondent during the bidding process.
• The respondent specifically alleged ‘mala fide’ intentions on the part of the appellant.
• The argument regarding a cascading effect of the impugned order was deemed unsustainable as the appellant had continued to award contracts totaling about Rs. 5,000 crores post the impugned order.

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Analysis

• The Bullet Train Project is a fully foreign-funded project, agreed upon in a Memorandum of Understanding between the Japanese and Indian Governments, with funding provided by the Japan International Cooperation Agency (JICA).
• The JICA Consultant(s) and the Ministry of Railways (MOR) played key roles in the study and procurement process of the project.
• The technical bid evaluation was conducted by the JICC consultant appointed by JICA, following international guidelines.
• The evaluation process involved four stages: Evaluation of Administrative Requirements, Evaluation of Compliance and Responsiveness, Evaluation of Compliance with Qualification Requirements, and Technical Evaluation.
• A conscious decision was taken by the JICC/JICA to reject the Bid of the original petitioner as non-responsive or non-compliant.
• The loan agreement with JICA included provisions for technology transfer, Indian human resource development, and ‘Make in India’ principles for the bullet train project.
• The Bidding Documents were prepared in accordance with JICA’s Standard Bidding Documents and procurement guidelines.
• The High Court’s interference in the rejection of the Bid was questioned, as it was based on the decisions made by JICC/JICA unless there were allegations of mala fides or favoritism.
• The involvement of JICA at all stages of the tender process, as a funding agency, was deemed essential for the project’s transparency and fairness.
• Court decisions on the involvement of financial institutions in high-cost projects and adherence to bid specifications were referenced to support the appellant’s decision-making process.
• The decision-making authority rested with the JICC/JICA as per the loan agreement terms, and deviations were not permissible without their concurrence.
• The employer must have the right to enforce the terms of the tender punctiliously and rigidly.
• Courts should avoid a construction that renders the words in the tender document meaningless.
• Public interest should be prioritized in decision-making processes.
• Court interference should be limited to cases of mala fide actions or irrational decisions affecting public interest.
• The authority’s decision-making process should be valid and not whimsical or arbitrary.
• Deviation from tender terms is permissible, but the level playing field for all bidders must be maintained.
• Courts should defer to the employer’s understanding of tender documents unless there is mala fide intent or perversity in interpretation.
• Essential conditions of tenders must be adhered to unless relaxation powers exist.
• Constitutional courts should only interfere if mala fides, favoritism, arbitrariness, irrationality, or perversity are present.

Decision

• The respondent’s bid should be further evaluated in accordance with the terms of the Bid Document.
• The appeal should be dismissed.

Case Title: NATIONAL HIGH SPEED RAIL CORPORATION LIMITED Vs. MONTECARLO LIMITED (2022 INSC 124)

Case Number: C.A. No.-006466-006466 / 2021

Click here to read/download original judgement