CENTRAL COALFIELDS LIMITED & ANR.versusSLL-SML (JOINT VENTURE CONSORTIUM) & ORS.

                             [2016) 4 S.C.R. 890


A              CENTRAL COALFIELDS LIMITED & ANR.
                                      v.
         SLL - SML (JOINT VENTURE CONSORTIUM) & ORS.
                        (Civil Appeal No. 8004of2016)
B                             AUGUST 17, 2016
            [MADAN B. LOKUR AND R.K. AGRAWAL, JJ.]
          Contract: Bidding process - Terms of NIT - Deviation from,
     permissibility - Held: Whether a term of NIT is essential or not is a
C decision taken by employer which should be respected - Even if the
     term is essential, the employer has inherent authority to deviate from
     it provided the deviation is made applicable to all bidders and
     potential bidders - However, if the term is held by the employer to
     be ancillary or subsidiary even that decision should be respected -
     In the instant case, the employer prescribed a particular format of
D -· bank guarantee to be furnished - Jn such case, bidder ought to
    -have submitted bank guarantee in that particular format only and
     nqt in any other format.
          Administrative law: Administrative action - Judicial review,
     scope - Held: There must be judicial restraint-in interfering with
E    administrative action - Ordinarily, the soundness of the decision
     taken by the authority ought not to be questioned but the decision
     making process can certainly be subject to judicial review.
          Doctrines/Principles: Privilege-of-participation principle - Ap-
     plicability of
F         Allowing the appeals, the Court
          HELD: The deviation from the terms and conditions is per-
     missible so long as the level playing field is maintained and it
     does not result in any arbitrariness or discrimination. It was held
     in *Ramana case that if other bidders were aware that non-fulfill-
G    ment of the eligibility condition would not be a bar for consider-
     ation, they too would have submitted a tender but were prevented
     from doing so due to the eligibility condition. In the instant case,
     the other bidders and those who had not bid could very well con-
     tend that if they had known that the prescribed format of the
H
                                      890
   CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                     891
           (JOINT VENTURE CONSORTIUM)

bank guarantee was not mandatory or that some other terms of           A
the NIT or GTC were not mandatory for compliance, they too
would have meaningfully participated in the bidding process. In
other words, by re-arranging the goalposts, they were denied
the privilege of participation. [Paras 36, 38] (899-E, H; 900-A, E]
     2. The decision taken by CCL to adhere to the terms and           B
conditions of the NIT and the GTC was certainly not irrational in
any manner whatsoever or intended to favour anyone. The deci-
sion was lawful and not unsound. [Para 44] [904-A-B)
     *Ramana Dayaram Shetty v. International Airport Authority
of India (1979) 3 SCC 489 : 1979 (3) SCR1014; GJ. Fernandez v.         c
State of Karnataka (1990) 2 SCC 488 : 1990 (1) SCR 229; Tata
Cellular v. Union of India (1994) 6 SCC 651 : 1994 (2) Suppl.
SCR 122; Jagdish Manda! v. State of Orissa (2007) 14 SCC 517 :
2006 (10) Suppl. SCR 606; Michigan Rubber (India) Limited "
State of Karnataka. (2012) 8 SCC 216 : 2012 (8) SCR128; Nazir
Ahmad v. King Emperor AIR 1936 PC 253 - relied on.                     D

    Rashmi Metaliks Ltd. v. Ko/kata Metropolitan Development
Authority (2013) 10 SCC 95 : 2013 (17) SCR 345 - Distinguished.
     Poddar Steel Corporation v. Ganesh Engineering Works (1991)
3 SCC 273 : 1991 (2) SCR 696; Bakshi Security and Personnel            E
Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd. (2007) 14 SCC
517 : 2006 (10) Suppl. SCR 606 - referred to.
                      Case Law Reference
   1991 (2) SCR 696            referred to        Para 25
                                                                       F
   2013 (17) SCR 345           distinguished      Para 25
   1979 (3) SCR 1014           relied on          Para35
   1990 (1) SCR 229            relied on          Para 38
   1994 (2) Suppl. SCR 122      relied on         Para 42
                                                                       G
   2006 (10) Suppl. SCR 606 relied on             Para 42
   2006 (10) Suppl. SCR 606 referred to           Para 46
   2012 (8) SCR 128             relied on         Para 46
   AIR 1936 PC 253              relied on         Para 52
                                                                       H
892            SUPREME COURT REPORTS                           [2016) 4 S.C.R.



A          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8004 of
      2016.
           From the Judgment and Order dated 26.10.2015 of the High Court
      of Jharkhand at Ranchi in L. P.A. No. 625 of 2015
                                       WITH
B
           C.A. No. 8005 of2016.
           Mukul Rohatgi, AG, Jagdeep Dhankhar, Dhruv Mehta, Dr. A. M.
      Singhvi, Sr. Advs., Rajiv S. Roy, Avrojyoti Chatterjee, Abhijit S. Roy,
      Aditya Mehrotra, Pranab Kumar Mullick, M. R. Sukumar, M. Chandola,
C     Rajesh Kumar, Ananya Kumar, Divyam Agarwal, Ms. Sneha Sheth,
      Akhil Bhardwaj, M. C. Dhingra, Kaushik Poddar, Deepak Sabharwal,
      Chandra Shekhar Biswas, Advs. for the appearing parties.
           The Judgment of the Court was delivered by
           MADAN B. LOKUR, J. 1. The first appeal is that of the Central
D     Coalfields Limited. The first respondent in the appeal is SLL-SML a
      Joint Venture Consortium whose bid in response to a Notice Inviting
      Tender issued by the Central Coalfields Limited was rejected.
           2. The second appeal is by PLR-RPL-SMASL a Joint Venture
      whose bid was the lowest in response to the same Notice Inviting Tender
E     issued by the Central Coalfields Limited and that bid was accepted.
           3. Both the Central Coalfields Limited and PLR-RPL-SMASL are
      aggrieved by judgment and order dated 26'h October, 2015 passed by
      the Division Bench of the Jharkhand High Court whereby the rejection
      of the bid of SLL-SML by Central Coalfields Limited was set aside.
 F          4. The question for our consideration is generally whether furnishing
      a bank guarantee in the format prescribed in the bid documents is an
      essential requirement in the bidding process of the Central Coalfields
      Limited and specifically whether a bid not accompanied by a bank
      guarantee in the format prescribed in the bid documents of the Central
G     Coalfields Limited could be treated as non-responsive in view of Clause
      15 .2 of the General Terms and Conditions governing the bidding process.
      The answer to the general and the specific question is in the affirmative.
      The facts
           5. On 5'h August, 2015 the Central Coalfields Limited (for short
H
   CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                            893
 (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

CCL) issued a Notification Inviting Tenders (for short NIT). The name         A
of the work was: "Out sourcing for Overburden Removal (I 050.00 L.
CuM) and Coal Extraction (975.00 L. Te) and transportation by deploying
surface miner at Ashok OCP, Piparwar Area for a period of 8 years."
    6. The notice mentioned that for detaih of the NIT and online
submissions, an interested person could visit https://eps.buxjunction.in.     B
     7. On a visit to the aforesaid website, details of the e-tender were
made available including further details of the work. It was stated that
tenders could be submitted by experienced contractors having a Digital
Signature Certificate issued from any agency authorized by the Controller
of Certifying Authority, Government oflndia. This is being mentioned          C
because anybody having a Digital Signature Certificate cannot be
computer illiterate.
     8. Clause 3 of thee-tender carried the heading "Deposit of EMO"
and the relevant portion of this reads as follows:
      "Earnest Money can be deposited in the form of Demand Draft             D
      (DD)/Banker's Cheque (BC)/Banker's payorder (BPO) from any
      scheduled Bank drawn in favour of"Central Coalfields Limited"
      payable at "Ranchi".
      EMO can also be deposited in the form of irrevocable Bank
      Guarantee (BG) from any scheduled Bank in the format given in           E
      the bid document. Bank guarantee issued by outstation bank shall
      be operative at their local branch i.e. at Ranchi. The validity of
      such BG should be minimum 90 days beyond the validity of the
      bid. BG shall be acceptable only when value of Earnest money
      (EMO) exceeds Rs. 5.00 Lakhs."
                                                                              F
     9. What is of significance from the above is that the earnest money
deposit was required to be made in the form of an irrevocable bank
guarantee from any scheduled bank "in the format given in the bid
document".
      I 0. Clause 4 of the e-tender mentioned that for a clarification of     G
the bid, a bidder may seek clarification on-line from the Service Provider
Mis mjunction services limited whose address, contact person and email
were given in the document.
    11. The General Terms and Conditions (for short GTC) for the NIT
were also made available to a visitor and prospective bidder on the           H
894            SUPREME COURT REPORTS                           [2016] 4 S.C.R.


A     website. The GTC bore the heading "Governing Hiring of Equipment
      for removal of Overburden, Extraction of Coal, Transportation and loading
      in Areas of Central Coalfields Limited".
            12. In paragraph 11 of the GTC it was specifically mentioned that
      the bid security of earnest money was required to be deposited in the
B     appropriate fonn and in paragraph 15.2 thereof it was specifically stated
      that any bid not accompanied by an acceptable bid security/earnest money
      deposit shall be rejected as non-responsive.
            13. According to CCL it received 11 bids in response to the     e-
      tender including that of SLL-SML a Joint Venture Consortium (for short
c     JVC). One of the bids was apparently rejected. Nine of the bidders
      submitted a bank guarantee strictly in accordance with the pro Jonna
      provided in the GTC. A bank guarantee was provided by JVC - not in
      the prescribed pro forina but in another format in respect of some other
      contract provided in the GTC of which bore the heading "Governing
      Contractual Transportation & Loading in Areas of Central Coalfields
D     Limited".
            14. Under the circumstances, an email was sent on behalf of CCL
      on l J 'h September, 2015 to JVC rejecting its bid on the ground that the
      documents were incomplete. JVC was informed that it would not be
      allowed to participate in the price bid opening.
E
           15. In response, JVC sent an email on 15'h September, 2015 to
      CCL that all documents as prescribed under the NIT had been submitted.
      Therefore, JVC was unable to understand the reason for rejection of its
      bid. The email was replied to on behalf of CCL on the same day in
      which it was stated that the bid given by JVC was cancelled as the bank
 F    guarantee submitted was not in the format given in the NIT read with
      the GTC.
      Proceedings before the learned Single Judge
            16. Feeling aggrieved by the rejection of its bid and CC L's response,
      JVC preferred a writ petition in the Jharkhand High Court being W.P
G
      (C) No.4559 of2015. By a judgment and order dated 7'h October, 2015
      a learned Single Judge of the High Court dismissed the writ petition.
           17. Before the learned Single Judge two submissions were made
      on behalf of JVC. They were:
 H         (i) The NIT did not prescribe a format for the bank guarantee.
    CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                             895
  (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

Moreover, the bank guarantee pro Jonna for earnest money deposit/bid           A
security in the GTC is almost similar to the bank guarantee furnished by
JVC and therefore, its bid was wrongly rejected by CCL.
     (ii) The bank guarantee fonnat and the condition in Clause 3 in the
e-tender mandated that the bank guarantee should be irrevocable and
payable at Ranchi and the minimum validity period should be beyond 90           B
days. These conditions were met by JVC.
      18. It was also contended that not only was the bank guarantee in
conformity with the basic requirements but that its tenns were stricter
than the bank guarantee prescribed by CCL. It was further contended
that in any event furnishing a bank guarantee in the prescribed format          c
was a non-essential condition of the contract and therefore the rejection
of JVC's bid only on the ground that the bank guarantee was not in the
prescribed format was arbitrary and unreasonable.
     19. The learned Single Judge considered the submissions of JVC
and concluded that furnishing a bank guarantee in a different fonnat            D
other than the one prescribed would cause multiple problems and this
was certainly not advisable.
      20. It was also held by the learned Single Judge that it was necessary
to adhere to the strict terms of the NIT as well as the prescribed fonnat
for the bank guarantee.                                                         E
      21. With regard to the contention that the NIT did not prescribe
any fonnat, the learned Single Judge was of the view that if JVC had
any doubt in this regard it should have sought a clarification as mentioned
in the NIT. Since JVC did not do so, it was too late in the day to raise an
objection about any doubt relating to the fonnat of the bank guarantee.         F
     22. Considering all the submissions of NC, the learned Single Judge
held that there was sufficient reason to dismiss the writ petition.
     23. Feeling aggrieved, JVC preferred a Letters Patent Appeal before
the Division Bench of the High Court being L.P.A. No. 625of2015. By
the impugned judgment and order dated 261h October, 2015 the Division           G
Bench of the Jharkhand High Court allowed the appeal.
Proceedings before the Division Bench
     24. It was contended by JVC before the Division Bench that the
NIT is ambiguous and that there was no clarity with regard to the fonnat
                                                                                H
896            , SUPREME COURT REPORTS                        [2016] 4 S.C.R.


A     in which the bank guarantee was required to be furnished. Additionally,
      it was contended that in any event there was substantial compliance
      with the essential terms of the bank guarantee as required by CCL. Jn
      this regard, it was submitted that there were five requirements for the
      bank guarantee to be acceptable to CCL and JVC met all these
      requirements. The requirements, as submitted by JVC in the High Court
B
      were:
              (a) The bank guarantee should be irrevocable.
              (b)The bank guarantee should be from any scheduled bank.
           (c)The bank guarantee should be payable at the local branch of the
c     issuing bank, that is at Ranchi.
          (d)The validity of the bank guarantee should be minimum 90 days
      beyond the validity of the bid.
          (e)The bank guarantee shall be acceptable only when value of
D
      Earnest Money Deposit exceeds Rs. 5 lakhs.
           25. The High Court concluded, reversing the view of the learned
      Single Judge that the submission of the bank guarantee in the prescribed
      format was a non-essential term of the NIT. Reliance was placed by
      the High Court on Podtktr Steel Corporation v. Ga11esli E11gineeri11g
      Works and Raslimi Meta/iks Ltd. v. Kolkata Metropolitan
                1

E
      Development Authority~ to conclude that since the submission of the
      bank guarantee in the prescribed format was a non-essential term of the
      NIT, the bid of JVC ought to be entertained.
           26. Additionally, it was held that since there was substantial
      compliance with the requirement of the bank guarantee being in the
F
      fonnat prescribed by CCL, the rejection of JVC's bid was unjustified.
      This was more so since the bank guarantee furnished by JVC had stricter
      terms than the bank guarantee in the form prescribed by CCL.
            27. In view of the above considerations, the High Court was of
       opinion that the learned Single Judge had erred in dismissing the writ
G petition filed by JVC. The High Court also quashed the communications
       sent by CCL rejecting the bid of JVC and permitted it to participate in
·- - - the reverse bidding process.

      1
          (1991) 3 sec 213
H     '(2013) 10 sec 95
    CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                            897
  (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

     28. It is under these circumstances that the present appeals have         A
been filed before us.
Discussion
      29. What is extraordinary about this case is that the employer, that
is CCL, seeks to adhere to the terms of the NIT and the GTC issued by
it, but the submission of JVC is that CCL should actually deviate from         B
the terms of these documents so as to benefit JVC. Indeed, in spite ofa
specific requirement that the bank guarantee should be submitted in the
prescribed format, JVC claims an entitlement to a deviation in this regard
on the ground that the prescribed format was a non-essential term of the
NIT and the GTC. Who is to decide this issue of essentiality? Does             c
CCL with whom the contract has to be entered into by the successful
bidder have no say in the matter? Before adverting to this, it is necessary
to get clarity on some circumstances.
       30. The first and the foremost aspect of the case that must be
appreciated is that, as mentioned above, JV C was certainly not computer       D
illiterate. Like every bidder, it was required to have a Digital Signature
Certificate which clearly indicates that any bidder (including JVC) had
some degree of comfort with e-tenders and the use of computers for
bidding in an e-tender. It is this familiarity that enabled JVC to access
the "incorrect" format of a bank guarantee. Under these circumstances,
it is extremely odd that JVC was not able to access the correct and            E
prescribed format of the bank guarantee. The excuse given by JVC that
the NIT was vague and that it was not clear which was the prescribed
format of the bank guarantee appears to be nothing but a bogey. A simple
reading of the GTC and the terms of the bank guarantee would have
been enough to indicate the correct prescribed format and the "incorrect"      F
format.
     31. Secondly, the heading mentioned in both the GTCs was different.
The correct GTC bore the heading "Governing Hiring of Equipment for
removal of Overburden, Extraction of Coal, Transportation and loading
in Areas of Central Coalfields Limited" while the not relevant GTC bore        G
the heading "Governing Contractual Transportation & Loading in Areas
of Central Coalfields Limited". There is a substantial difference between
the two GTCs and anyone bidding for the work "Out sourcing for
Overburden Removal (1050.00 L. CuM) and Coal Extraction (975.00
L. Te) and transportation by deploying surface miner at Ashok OCP,
                                                                               H
898             SUPREME COURT REPORTS                            [2016) 4 S.C.R.



A     Piparwar Area for a period of 8 years" could immediately see which
      GTC is relevant and which is not.
            32. In this context and thirdly, it is important to note that if JVC had
      any doubt with regard to the format of the bank guarantee to be furnished,
      it could have and ought to have sought a clarification from the concerned
B     authority as mentioned in the NIT. Moreover, JVC could have and
      ought to have at least made a representation to CCL that the prescribed
      format for the bank guarantee was either not available or that the NIT
      was ambiguous or that it lacked clarity with regard to the prescribed
      format of the bank guarantee. JVC neither sought any clarification nor
      did it make any representation to CCL. It is difficult to understand the
c     conduct of JVC in the situation presented before us, particularly with
      reference to a contract for about Rs. 2000 crores for eight years.
             33. We were informed by the learned Attorney General that 9 of
      the 11 bidders furnished a bank guarantee in the prescribed and correct
      format. Under these circumstances, even after stretching our credulity,
D     it is extremely difficult to understand why JVC was unable to access the
      prescribed format for the bank guarantee or furnish a bank guarantee in
      the prescribed format when every other bidder could do so or why it
      could not seek a clarification or why it could not represent against any
      perceived ambiguity. The objection and the conduct of JVC regarding
E     the prescribed format of the bank guarantee or a supposed ambiguity in
      the NIT does not appear to be fully above board.
           34. The core issue in these appeals is not of judicial review of the
      administrative action of CCL in adhering to the terms of the NIT and the
      GTC prescribed by it while dealing with bids furnished by participants in
 F    the bidding process. The core issue is whether CCL acted perversely
      enough in rejecting the bank guarantee of JVC on the ground that it was
      not in the prescribed format, thereby calling for judicial review by a
      constitutional court and interfering with CCL's decision.
          35. In R"nu11w Dayar"m Slietty v. /1ttemation"l Airport
 G    Authority ofllu/i(l3 this Court held that the words used in a document
      are not superfluous or redundant but must be given some meaning and
      weightage:
             "It is a well-settled rule of interpretation applicable alike to

      '(1979) 3 sec 489
 H
   CENTRAL COALFIELDS LIMITED & ANR. v. SLL- SML                                 899
 (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

      documents as to statutes that, save for compelling necessity, the           A
      Court should not be prompt to ascribe superfluity to the language
      ofa document "and should be rather atthe outset inclined to suppose
      every word intended to have some effect or be of some use". To
      reject words as insensible should be the last resort of judicial
      interpretation, for it is an elementary rule based on common sense
                                                                                  B
      that no author of a formal document intended to be acted upon by
      the others should be presumed to use words without a meaning.
      The court must, as far as possible, avoid a construction which
      would render the words used by the author of the document
      meaningless and futile or reduce to silence any part of the
      document and make it altogether inapplicable."                              c
     In that case, the expression "registered Ilnd Class hotelier" was
recognized as being inapt and perhaps ungrammatical; nevertheless
common sense was not offended in describing a person running a
registered II grade hotel as a registered II Class hotelier. Despite this
construction in its favour, respondents 4 in that case were held to be            D
factually ineligible to participate in the bidding process.
      36. It was further held that if others (such as the appellant in that
case) were aware that non-fulfillment of the eligibility condition of being
a registered II Class hotelier would not be a bar for consideration, they
too would have submitted a tender, but were prevented from doing so               E
due to the eligibility condition, which was relaxed in the case of respondents
4. This resulted in unequal treatment in favour of respondents 4 -
treatment that was constitutionally impermissible. Expounding on this, it
was held:
       "It is indeed unthinkable that in a democracy governed by the rule         F
       of law the executive Government or any of its officers should
       possess arbitrary power over the interests of the individual. Every
       action of the executive Government must be informed with reason
       and should be free from arbitrariness. That is the very essence of
       the rule of law and its bare minimal requirement. And to the
       application of this principle it makes no difference whether               G
       the exercise of the power involves affectation of some right
       or denial of some privilege." (Emphasis given)
      Applying this principle to the present appeals, other bidders and
those who had not bid could very well contend that if they had known
that the prescribed format of the bank guarantee was not mandatory or             H
900              SUPREME COURT REPORTS                             [2016] 4 S.C.R.



A     that some other term(s) of the NIT or GTC were not mandatory for
      compliance, they too would have meaningfully participated in the bidding
      process. In other words, by re-arranging the goalposts, they were denied
      the "privilege" of participation.
           37. For JVC to say that its bank guarantee was in terms stricter
B     than the prescribed format is neither here nor there. It is not for the
      employer or this Court to scrutinize every bank guarantee to determine
      whether it is stricter than the prescribed format or less rigorous. The
      fact is that a format was prescribed and there was no reason not to
      adhere to it. The goalposts cannot be re-arranged or asked to be re-
      arranged during the bidding process to affect the right of some or deny
c     a privilege to some.
            38. In GJ. Fern"11dez v. Sf(lfe of K"rn"t"k", both the principles
      laid down in Ranum" Day(lmm Slietty were reaffirmed. It was
      reaffirmed that the party issuing the tender (the employer) "has the right
      to punctiliously and rigidly" enforce the terms of the tender. If a party
D     approaches a Court for an order restraining the employer from strict
      enforcement of the terms of the tender, the Court would decline to do
      so. It was also reaffirmed that the employer could deviate from the
      terms and conditions of the tender ifthe "changes affected all intending
      applicants alike and were not objectionable." Therefore, deviation from
 E    the terms and conditions is permissible so long as the level playing field
      is maintained and it does not result in any arbitrariness or discrimination
      in the Ranuma Day(lram Slietty sense.
           39. Poddar Steel was a rather interesting case and added a new
      dimension to the discourse. The decision of the Allahabad High Court
 F    records that the relevant clause in the NIT gave the bidder the option of
      depositing the earnest money in cash or by a "demand draft drawn on
      DLW Branch of SB! in favour of Assistant Chief Cashier, DLW/-
      Varanasi."; As many as 21 parties had responded to the NIT, but 8 of
      them had not deposited any earnest money at all and the remaining 13
      bidders had "deposited the earnest money by one mode or the other but
 G    not necessarily in the manner provided in the NIT except perhaps a
      few." The Tender Committee deviated from the tenns of the NIT and
      considered the bids of these 13 bidders and accepted the bid of Poddar

      • ( t 990) 2 sec 488
 H    'Ganesh Engineering Works v. Union oflndia and others. 1990 All. LJ 1140
    CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                            901
  (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

Steel, who had given the earnest money not by cash or a demand draft           A
but by "a loose cheque drawn on its CID account in the Union Bank of
India, Sonarpura, Varanasi." On the issue of discriminatory treatment,
the contention of the employer was that since all the 13 bidders who had
made the earnest money deposit were treated equally, there was no
issue of any discriminatory treatment.
                                                                               B
      40. However, the High Court took the view, following Ramana
Dayaram Slletty and the privilege-of-participation principle, that it was
possible that if those who did not deposit any earnest money had known
that a crossed cheque (drawn on a bank other than SBI) towards earnest
money was acceptable to the employer, they too could have been in the
fray. Under these circumstances, the High Court held that excluding
                                                                               c
them from competition, through this unannounced deviation affecting
bidders and potential bidders alike, rendered the bidding process unfair.
The High Court introduced an "essential term" concept and held that
the clause in the NIT relating to deposit of earnest money was an essential
term thereof and could not be deviated from. The Allahabad High Court          D
held:
       "The mere fact that all the tenderers who had deposited the earnest
       money, whether in terms of Clause 6 or not had been treated alike
       cannot make any difference. It is quite possible to visualise that
       the parties who had failed to deposit the earnest money may also
                                                                               E
       have been in the fray had they known that earnest money through
       cheque was also acceptable. Thus they have obviously been
       deprived from competing with others and this makes the action of
       Respondents 1 to 5 unfair when condition No. 6 of the NIT so
       specifically points out that deposit of earnest money in any other
       mode except in cash or by demand draft would not be acceptable.         F
       It leads us to think that this was an essential precondition for
       submitting tenders and the Respondents were not entitled to deviate
       from this. All tenders which were not accompanied by deposit of
       earnest money strictly in the manner indicated in the NIT deserved
       to be rejected. We reject the contention of the Respondents that
                                                                               G
       the earnest money could be accepted even when it was deposited
       by some mode other than those in NIT. We also hold that Clause
       6 of NIT is not merely ancillary or subordinate condition but in
       view of the language in which is couched the same was a.crucial
       and essential terms of the tender which could not be deviated
       from."                                                                  H
902             SUPREME COURT REPORTS                          [2016] 4 S.C.R.



A           41. Jn appeal, this Court accepted the theory of essential and non-
      essential or ancillary or subsidiary terms of an NIT. It was held that the
      cheque of the Union Bank of India issued by Poddar Steel (though a
      deviation from the terms of the NIT) was sufficient for meeting the
      conditions of the NIT, the condition being ancillary or subsidiary to the
      main object to be achieved by the condition and that the employer could
B
      waive the "technical literal compliance" of the earnest money clause of
      the NIT "specially when it was in its interest not to reject the said bid
      which was the highest." In other words, this Court concluded that an
      essential term of the tender document could not be deviated from but an
      ancillary or subsidiary or non-essential term could be deviated from, and
c     that the deviation could be without any reference to potential bidders.
           42. Unfortunately, this Court did not at all advert to the privilege-
      of-participation principle laid down in Ranuma Dayaram Shelly and
      accepted in G J. Femmulez. In other words, this Court did not consider
      whether, as a result of the deviation, others could also have become
D     eligible to participate in the bidding process. This principle was ignored
      in Poddar Steel.
            43. Continuing in the vein of accepting the inherent authority of an
      employer to deviate from the terms and conditions of an NIT, and re-
      introducing the privilege-of-participation principle and the level playing
E     field concept, this Court laid emphasis on the decision making process,
      particularly in respect of a commercial contract. One of the more
      significant cases on the subject is the three-judge decision in Tata
      Cellular v. Union of India 6 which gave importance to the lawfulness
      of a decision and not its soundness. If an administrative decision, such
      as a deviation in the terms of the NIT is not arbitrary, irrational,
 F    unreasonable, malafide or biased, the Courts will not judicially review
      the decision taken. Similarly, the Courts will not countenance interference
      with the decision at the behest of an unsuccessful bidder in respect of a
      technical or procedural violation. This was quite clearly stated by this
      Court (fqJlowing Tata Cellular) in Jllgdish Manda/ v. State of Orissa1
G     in the following words:
             "Judicial review of administrative action is intended to prevent
             arbitrariness, irrationality, unreasonableness, bias and mala fides.
             Its purpose is to check whether choice or decision is made
      '· ( 1994) 6 sec 651
H     '(2007J 14 sec 517
   CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                                 903
 (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.]

      "lawfully" and not to check whether choice or decision is "sound".           A
      When the power of judicial review is invoked in matters relating
      to tenders or award of contracts, certain special features should
      be borne in mind. A contract is a commercial transaction.
    · Evaluating tenders and awarding contracts are essentially
      commercial functions. Principles of equity and natural justice stay
                                                                                   B
      at a distance. If the decision relating to award of contract is bona
      fide and is in public interest, courts will not, in exercise of power
      ofjudicial review, interfere even if a procedural aberration or error
      in assessment or prejudice to a tenderer, is made out. The power
      of judicial review will not be permitted to be invoked to protect
      private interest at the cost of public interest, or to decide contractual    c
      disputes. The tenderer or contractor with a grievance can always
      seek damages in a civil court. Attempts by unsuccessful tenderers
      with imaginary grievances, wounded pride and business rivalry, to
      make mountains out of molehills of some technical/procedural
      violation or some prejudice to self, and persuade courts to interfere
                                                                                   D
      by exercising power of judicial review, should be resisted. Such
      interferences, either interim or final, may hold up public works for
      years, or delay relief and succour to thousands and millions and
      may increase the project cost manifold."
     This Court then laid down the questions that ought to be asked in
such a situation; It was said:                                                     E

      "Therefore, a court before interfering in tender or contractual
      matters in exercise of power of judicial review, should pose to
      itselfthe following questions:
      (i) Whether the process adopted or decision made by the authority            F
      is mala fide or intended to favour someone;
      OR
      Whether the process adopted or decision made is so arbitrary and
      irrational that the court can say: "the decision is such that no
      responsible authority acting reasonably and in accordance with               G
      relevant law could have reached";
      (ii) Whether public interest is affected.
      If the answers are in the negative, there should be no interference
      under Article 226."
                                                                                   H
904            SUPREME COURT REPORTS                           [2016] 4 S.C.R.



A          44. On asking these questions in the present appeals, it is more
      than apparent that the decision taken by CCL to adhere to the terms and
      conditions of the NIT and the GTC was certainly not irrational in any
      manner whatsoever or intended to favour anyone. The decision was
      lawful and not unsound.
8           45. Raslmri Metaliks was a comparatively different case inasmuch
      as clause G) of the NIT was the subject matter of consideration. This
      clause required a bidder to submit "Valid PAN No., VAT No., copy of
      acknowledgment oflatest income tax return and professional tax return."
      The employer interpreted this to be an essential term for qualifying in
      the bidding process. This view was upheld by a learned Single Judge
c     and the Division Bench of the Calcutta High Court. This Court reversed
      in the foliowing words:
            "We think that the income tax return would have assumed the
            character of an essential term if one of the qualifications was
            either the gross income or the net income on which tax was
D           attracted. In many cases this is a salutary stipulation, since it is
            indicative ofthe commercial standing and reliability ofthe tendering
            entity. This feature being absent, we think that the filing of the
            latest income tax return was a collateral term, and accordingly
            the Tendering Authority ought to have brought this discrepancy to
E           the notice of the appellant Company and if even thereafter no
            rectification had been carried out, the position may have been
            appreciably different."
            Essentially therefore, this Court substituted its view for that of the
      employer who interpreted this term of the NIT to be mandatory for
 F    compliance. Raslimi Metaliks followed Poddar Steel and apparently
      overlooked the dictum laid down in Ramana Dayaram Slietty, Ci J.
      Fernandez, Tata Cellular and Jagdis/1 Manda/ and must be confined
      to its own peculiar facts. In any event, this decision does not advance
      the case of any of the parties before us.

 G          46. It is true that in Poddar Steel and in Raslimi Meta/iks a
      distinction has been drawn by this Court between essential and ancillary
      and subsidiary conditions in the bid documents. A similar distinction was
      adverted to more recently in Bakshi Security and Personnel Services
      Pvt. Ltd. v. Devkislian Computed Pvt. Ltd. 8 through a reference made
 H    ' 2016 (7) SCALE 425
    CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                              905
  (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR. J.)

to Poddar Steel. In that case, this Court held a particular term of the          A
NIT as essential (confirming the view of the emp toyer) and also referred
to the "admonition" given in Jagdislt Manda/ followed in Michigan
Rubber (India) Limited v. State of Karnataka. 9 Thereafter, this Court
rejected the challenge to the employer's decision holding Bakshi Security
and Personnel Services ineligible to participate in the tender.
                                                                                 B
      47. The result of this discussion is that the issue of the acceptance
or rejection of a bid or a bidder should be looked at not only from the
point of view of the unsuccessful party but also from the point of view of
the employer. As held in Ramana Dayaram Shelly the terms of the
NIT cannot be ignored as being redundant or superfluous. They must be
given a meaning andthe necessary significance. As pointed out in Tata
                                                                                 c
Cellular there must be judicial restraint in interfering with administrative
action. Ordinarily, the soundness of the decision taken by the employer
ought not to be questioned but the decision making process can certainly
be subject to judicial review. The soundness of the decision may be
questioned if it is irrational or ma/a fide or intended to favour someone        D
or a decision "that no responsible authority acting reasonably and in
accordance with relevant law could have reached"as held in Jagdis/1
Manda/ followed in Michigan Rubber.
      48. Therefore, whether a term of the NIT is essential or not is a
decision taken by the employer which should be respected. Even ifthe             E
term is essential, the employer has the inherent authority to deviate from
it provided the deviation is made applicable to all bidders and potential
bidders as held in Ramana Dayaram Sltetty. However, if the term is
held by the employer to be ancillary or subsidiary, even that decision
should be respected. The lawfulness of that decision can be questioned
on very limited grounds, as mentioned in the various decisions discussed         F
above, but the soundness of the decision cannot be questioned, otherwise
this Court would be taking over the function of the tender issuing authority,
which it cannot.
      49. Again, looked at from the point of view of the employer if the
Courts take over the decision-making function of the employer and make           G
a distinction between essential and non-essential terms contrary to the
intention of the employer and thereby re"write the arrangement, it could
lead to all sorts of problems including the one that we are grappling with.

• (2012)   s sec 216
                                                                                 H
906               SUPREME COURT REPORTS                       [2016] 4 S.C.R.



A     For example, the OTC that we are concerned with specifically states in
      Clause 15.2 that "Any Bid not accompanied by an acceptable Bid
      Security/EMO shall be rejected by the employer as non-responsive."
      Surely, CCL exfacie intended this term to be mandatory, yet the High
      Court held that the bank guarantee in a format not prescribed by it ought
      to be accepted since that requirement was a non-essential term of the
B
      GTC. From the poin't of view of CCL the GTC has been impermissibly
      re-written by the High Court.
           50. Yet another problem could be faced by an employer (such as
      CCL) if the language used in the terms of the NIT or the OTC is not
      adhered to and its plain meaning discarded. A problem could be faced by
c     an employer if every bidder furnishes a bank guarantee in a different
      format or one that it is comfortable with. In such a situation, CCL would
      have to scrutinize each bank guarantee to ascertain whether it meets
      with its requirements and the NIT and the GTC. Apart from the text of
      the bank guarantee, minor changes could be made by a bidder such as
D     enforceability in a place other than Ranchi (but in Jharkhand) etc. This
      would place an avoidable and undue burden on the employer particularly
      ifthere are a large number of bidders.
            51. Not only this, any decision taken by the employer in accepting
      or rejecting a particular bank guarantee in a format not prescribed by it
E     could lead to (avoidable) litigation requiring the employer to justify the
      rejection or acceptance of each bank guarantee. This is hardly conducive
      to a smooth and hassle-free bidding process.
            52. There is a wholesome principle that the Courts have been
      following for a very long time and which was articulated in Nazir Almrad
 F    v. King Emperor 10 namely "Where a power is given to do a certain
      thing in a certain way the thing must be done in that way or not at all.
      Other methods of performance are necessarily forbidden." There is no
      valid reason to give up this salutary principle or not to apply it mutatis
      mutandis to bid documents. This principle deserves to be applied in
      contractual disputes, particularly in commercial contracts or bids leading
 0    up to commercial contracts, where there is stiff competition. It must
      follow from the application of the principle laid down in Nazir Ahmed
      that ifthe employer prescribes a particular format of the bank guarantee
      to be furnished, then a bidder ought to submit the bank guarantee in that

      10
H          AIR 1936 PC 253
       CENTRAL COALFIELDS LIMITED & ANR. v. SLL - SML                           907
     (JOINT VENTURE CONSORTIUM) [MADAN B. LOKUR, J.)

particular format only and not in any other format. However, as mentioned        A
above, there is no inflexibility in this regard and an employer could deviate
from the terms of the bid document but only within the parameters
mentioned above.
      53. Nazir Ahmed has been followed in dozens of decisions rendered
by this Court and by other constitutional Courts in the country. The             B
Central Vigilance Commission has accepted this principle in a modified
form as a guiding principle in its circular dated 31" December, 2007
wherein it is mentioned that all organizations ought to evolve a procedure
for acceptance of bank guarantees that is compatible with the guidelines
of banks and the Reserve Bank oflndia. One such requirement is that
the bank guarantee should be in a proper prescribed format and should
                                                                                 c
be verified verbatim on receipt with the original. Adherence to this
principle of verbatim verification would not only avoid undue problems
for the employer but would also virtually eliminate subjectivity on the
part of the employer.
      54. In this context, and in the present times, it is important to note     D
that the World Bank has ranked India extremely low in matters relating
to enforcement of contracts and ease of doing business. Out of 189
countries worldwide, India is ranked 178 in the matter of enforcement
of contracts and 130 in the matter of ease of doing business 11 • One of
the possible reasons for this extremely low ranking given to our country         E
is the failure of all parties concerned in strictly adhering to the terms of
documents such as the NIT and the GTC. In so far as the present case
is concerned, the NIT was floated on S1h August, 2015 and one year
later, we are still struggling with the issue of acceptance of a bank
guarantee for a contract of about Rs. 2000 crores -certainly not a small
sum.                                                                             F

        Conclusion
     55. On the basis of the available case law, we are of the view that
since CCL had not relaxed or deviated from the requirement of furnishing
a bank guarantee in the prescribed format, in so far as the present appeals      G
are concerned every bidder was obliged to adhere to the prescribed
format of the bank guarantee. Consequently, the failure of JVC to furnish
the bank guarantee in the prescribed format was sufficient reason for
CCL to reject its bid.
11
     mnY.doingbusiness.org/rankings (World Bank Group)                           H
908             SUPREME COURT REPORTS                        [2016] 4 S.C.R.



A           56. There is nothing to indicate that the process by which the
      decision was taken by CCL that the bank guarantee furnished by JVC
       ought to be rejected was flawed in any manner whatsoever. Similarly,
      there is nothing to indicate that the decision taken by CCL to reject the
       bank guarantee furnished by JVC and to adhere to the requirements of
       the NIT and the GTC was arbitrary or unreasonable or perverse in any
B
       manner whatsoever.
            57. The impugned judgment and order passed by the Division Bench
      of the Jharkhand High Court is accordingly set aside and these appeals
      are allowed.
C     Devika Gujral                                            Appeals allowed.