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Relcon Infraprojects Ltd. v/s Life Insurance Corporation of India, Through its Deputy Chief Engineer, Engineering Department & Another

    Writ Petition (L) No. 1817 of 2022

    Decided On, 21 February 2022

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MR. JUSTICE G.S. PATEL & THE HONOURABLE MR. JUSTICE MADHAV J. JAMDAR

    For the Petitioner: Sharan Jagtiani, Senior Advocate with Shweta Sangtani, Aditya Udeshi, Mahesh Londhe, Saurabh Deorukhkar i/b M/s. Sanjay Udeshi & Co., Advocates. For the Respondents: R1, Milind Sathe, Senior Advocate with B. Roop i/b M/s. The Law Point, R2, Dushyant Kumar, Advocates.



Judgment Text

Oral Judgment: (G.S. Patel, J.)

1. The sole Petitioner (“Relcon”) is a construction company. Over the year, on its own or in joint ventures with others, it has undertaken several government and private projects. In this Petition, it says it has been unfairly and illegally disqualified from participating in a tender dated 15th June 2021 floated by the 1st Respondent, the Life Insurance Corporation of India (“LIC”).

2. LIC owns a plot of land at Setalvad Lane, Off Nepean Sea Road at Malabar Hill, Mumbai 400 006. On this, there stands a residential building called “Jeevan Jyot”. It has a podium and six upper floors with 26 large residential apartments. The building is now six decades old. Its condition is said to have deteriorated over time. The LIC now proposes a redevelopment of this structure. The tender was specifically for this purpose.

3. The specific challenge in the Petition is to two LIC orders or communications dated 14th December 2021 and 14th January 2022. By these, LIC said that, having regard to certain tender conditions, the Petitioner stood disqualified. The basis for LIC’s decision was that in a separate and unrelated tender contract between the Municipal Corporation of Greater Mumbai (“MCGM”) and the Petitioner, the Petitioner had not only suffered a black listing that was operative until what is called the date of the NIT or Notice Inviting Tenders, 15th June 2021, but, more directly related to a specific tender condition, that black listing related to substandard or delayed work done in the previous five years.

4. We turn straightaway to the tender condition in question, Clause 3(i)(b). We reproduce whole of this clause.

“3. Disqualification:

i) Even if the Bidder meets the Qualification Criteria, he shall be subject to disqualification if he or any one of the constituent partner/Director is found to have:

(a) Made misleading or false representations in the forms, statements, affidavits and attachments submitted in proof of the qualification requirements and/or

(b) Records of poor performance during the last five years as on the date of NIT, such as abandoning the work, rescission of the contract for reasons which are attributable to non-performance of the contractor, inordinate delays in completion, consistent history of litigation resulting in awards against the Bidder or any of the constituents, or financial failure due to bankruptcy and so on.”

(Emphasis added)

5. Even at first glance, this tells us that Clause 3 overrides, or is an exception to, the Qualification Criteria; a bidder who is otherwise qualified may yet be disqualified if the conditions in (a) or (b) obtain. A correct reading is to join the words “is found to have” in the controlling part with the opening words of the two sub-clauses, thus: “is found to have ... made misleading or false representations…” or “is found to have … records of poor performance…”. Sub-clause (b) has several components. First, there must be a ‘record’. Second, the record must be of ‘poor performance’. Third, this record must be of the past five years, i.e., it cannot relate to something in the more distant past. Fourth, that period of five years is to be reckoned backwards from the date of the Notice Inviting Tenders, or NIT, accepted as 15th June 2021. The rest of sub-clause (b), from the words “such as” to the words “as so on”, is an illustrative descriptor of what the expression ‘poor performance’ is intended to mean. That descriptor phrase is intended to eliminate any ambiguity, but it does not exhaust the universe of what might constitute a ‘record of poor performance’.

6. Mr Jagtiani’s submission for Relcon is really an attempt to inject a certain level of ambiguity into sub-clause (b), when he argues that the five-year period does not qualify ‘record’ but only qualifies ‘poor performance’. There may be a very recent ‘record’, he argues, well within the five-year period, but if it pertains to ‘poor performance’ more than five years before the date of the NIT, then there can be no disqualification. It is the ‘poor performance’ that must be within five years, not just its record.

7. Unfortunately for Relcon, this fine distinction Mr Jagtiani commends, even if seemingly attractive at first, is wholly scuttled by the facts on record — including, as we shall presently see, Relcon’s (or its then joint venture partner’s) submission to MCGM.

8. There is no dispute that amongst the obligations of every bidder was to disclose whether the bidder had suffered any blacklisting from a public authority. Relcon did indeed make this disclosure. There were, in fact, many blacklisting orders against Relcon by the MCGM; the Petition discloses only a few, but we will let that pass. Expanding on his argument, Mr Jagtiani submits that the disqualification clause does not automatically trigger merely because there is a blacklisting within the past five years. That blacklisting order is indeed a ‘record’ and it may well be an order within the five-year period. But even that is not enough to trigger the disqualification. Sub-clause (b) requires that the blacklisting order, albeit within the last five years, should be related to poor performance also within the last five years. If the blacklisting order relates to any previous period that ended beyond five years’ past, then there is no disqualification. In the present case, he says, the MCGM blacklisting order or orders relate to old contracts and work done beyond the five-year period.

9. According to Mr Jagtiani, if LIC’s disqualification is founded on, and only on, the MCGM records pertaining to another contract, then the result is an absurdity, for it means that while Relcon is not disqualified from participating in tenders by MCGM, the blacklisting order issuing authority itself, it is prohibited from participating in tenders by LIC.

10. On law, the submission is that LIC’s conduct cannot be irrational. There cannot be a greater punishment for a lesser infraction, pertaining to an older period. Even viewed through the lens of proportionality, Mr Jagtiani submits, LIC’s impugned action is unsustainable.

11. The construct of this argument requires us to access LIC’s impugned communications at two levels. First, we must test whether LIC’s disqualification of the Petitioner is facially arbitrary, unreasonable or irrational. The test is not simply to see whether there are ‘reasons’, properly so-called, for we find no authority for the proposition that a tendering authority is required to ‘give reasons’ as might be necessary in an adjudication. Relcon must show that on the face of it, with or without reasons, the disqualification applied unambiguously violates the tender condition. Indeed, that is the whole of it. But while reasons by the tendering authority are not necessary, and their absence does not per se invalidate its action, the existence of reasons, however brief, might well be a powerful and even determinative factor against the party seeking to impeach the action in question.

12. It is not in dispute that LIC did give reasons, albeit brief, for its decision. The first communication of 14th December 2021 from LIC is at Exhibit “E” at page 156. In this, one date is important. Relcon submitted its bid on 31st August 2021. Technical bids were opened on 1st September 2021 and there was a preliminary scrutiny. During this exercise, LIC examined the documents Relcon submitted. LIC found that Relcon had disclosed that it had been blacklisted in the past by the MCGM. The blacklisting was of a joint venture of which Relcon was a partner. This was with effect from 22nd March 2017. That blacklisting was — and this is important — for a period of five years. Relcon appealed that order. That appeal was decided on 1st October 2021. By its letter of 7th October 2021, i.e., well after the online bid and the date of the NIT, Relcon submitted a copy of the MCGM’s speaking appellate order. LIC took that into account as well and found that while the period of blacklisting had been reduced to two years, penalties had been imposed by the MCGM for not maintaining the thickness of the road under the MCGM contract. MCGM blacklisted Relcon on proven non-performance and deviations in performance. LIC therefore held that this was a case of poor performance that falls within Clause 3(1)(b) extracted above. Consequently, the Petitioner stood disqualified.

13. Relcon made a representation on 23rd December 2021, a copy of which is at Exhibit “F”. LIC considered this representation and, by its second impugned communication of 14th January 2022 (copy at Exhibit “G”), rejected that representation after saying that the matter had been reviewed further. It went on to say that the price bid submitted by Relcon would not and could not be considered.

14. This takes us to the second level of inquiry, an assessment of whether Relcon can show that LIC has been so egregiously unreasonable in assessing the material as to justify the intervention of this Court in exercise of its powers under Article 226. As a general principle, we do not sit in appeal over these decisions. It is for Relcon to establish that there is no possibility at all of LIC’s decision being sustained. The decision must therefore be shown to be one that falls afoul of the well-established standard of Wednesbury unreasonableness. It must be demonstrated to be a decision that no rational person could ever have arrived at.

15. At page 137, we find a copy of the 2nd November 2019 MCGM speaking order. The operative portion of this order is at page 154. It deregisters the JV of which the Petitioner was a partner for a period of five years from the date of service of the show-cause notice of 22nd March 2017.

16. This is important. If this order of a five-year ban was operative from 22nd March 2017, then it would run until 21st March 2022. The date of the NIT is 15th June 2021. This would mean that there was a blacklisting order operative as of the date of the NIT. But, to reiterate, Mr Jagtiani’s submission is that a mere blacklisting in itself is not a ground for disqualification and therefore, the subsistence of the blacklisting order even on the date of the NIT is inconsequential. He would have us consider the period for that poor performance. According to him, it must be shown that the poor performance was within the five years preceding 15th June 2021.

17. For completeness, we note that the appellate order of the MCGM is at page 117. This is dated 1st October 2021. It reduced the period of blacklisting to two years from the date of the showcause notice in the phase I inquiry. But the appellate order came only in October 2021.

18. According to the Petitioners, the road contract in question, as can be seen from page 138, was for a period from 2013 to 2018, but the show-cause notice was for the 2013 to 2016 period. The entire exercise of inquiry, the record indicates, was because there was a Mayoral directive to inquire into poor construction of roads and shoddy performance in road construction contracts. Page 129 of the Petition paper-book indicates that an argument was advanced that both phases of the MCGM contract had to receive a single punishment.

19. Dr Sathe, learned Senior Advocate for LIC, takes serious exception to what Relcon demands of this Court. He submits, and we believe quite correctly, that it is not the scope of a Writ Court to demand reasoned orders for rejection in government tenders. Therefore, had LIC passed even the most cryptic of orders, this Court could not in law have intervened. He goes on to say that, in any case, demonstrably there is no ground made out for interference.

20. It is not in dispute that there were not one, not two, but as many as 10 blacklisting orders against Relcon with effective dates running from 2016 to March 2017. These pertained to work orders of 2014 and 2015. One blacklisting order was operational for three years from 22nd March 2017. There is no point, he argues, in talking about the MCGM ‘contract period’. What is relevant is the period during which the work was actually done. For instance, for one work order from the MCGM, Work Code AC113, the contract period was 2013 to 2015, but the execution was from 2013 to 2018. On this, there was a show-cause notice for two phases. One showcause notice was of 16th May 2016. The other show-cause notice was of 22nd March 2017. There followed a blacklisting deregistration order of 2nd November 2019 (page 137) effective for five years from 22nd March 2017. The reasons for this blacklisting included discrepancies in work, failure to carry out work, and, more importantly, a case of defrauding MCGM. What is however critical is that the date of completion of work was 2018 (page 160). These are all matters of record, Dr Sathe says, and there is no point in now trying to interpret these unambiguous dates in some other form. What is required to be seen is whether on these accepted dates LIC’s action could conceivably ever be said to be so utterly unreasonable as to warrant Writ Court interference.

21. But this is not the only work order in question. There is a Work Code No. AE-51, dated 12th November 2014. A show-cause notice followed on 16th May 2016. The blacklisting order was of 22nd October 2021 for a period of three years from 16th May 2016. This blacklisting was inter alia because of submission of false documents with an intention to obtain payment for work not actually done. There was also an allegation of defrauding MCGM and causing loss to the public exchequer as also the use of deficient quantities (pages 229 and 216). There is no reason, Dr Sathe submits, that a contractor with this track record should be forced upon LIC when it is undertaking a major redevelopment of one of its properties in an extremely high value locality.

22. For completeness, we note the dates in a third work order which was for 12 months from 26th February 2014, excluding the monsoon. On this, there was a show-cause notice of 22nd March 2017. The blacklisting order was of 22nd October 2021 for three years from 22nd March 2017. The reasons for blacklisting were irregularities in execution deficient quantities and defrauding.

23. What is important, therefore, is that in all three of these cases there are blacklisting orders. Indeed, there are 10 blacklisting orders. At least one was current on the date of the NIT. In at least one of these — and even a solitary one is sufficient — the period of poor performance work was within the previous five-year period.

24. This, Dr Sathe submits, is more than sufficient to dislodge the Petitioner’s case of unfair treatment, irrationality or unreasonableness.

25. Mr Jagtiani’s second argument is that for a previous LIC tender just the year before, when very nearly the same blacklisting disclosures were made, LIC did not disqualify the Petitioner. That the Petitioner did not gain the bid is a different matter. The previous contract also had a disqualification clause similar to the present one; but a more stringent term in the previous contract does not exist in the current tender. Therefore, the argument goes, if Relcon was not disqualified in the previous tender when a stricter clause operated, it cannot be disqualified under the more liberal regime of the present tender.

26. In the Affidavit in Rejoinder, Relcon sets out the clauses of the 2019 tender and the present tender. We reproduce clause (10) of the 2019 tender:

“Clause No. 10 [Old Tender of Respondent No.1]:-

10) Even if the bidder meets the Pre-Qualification Criteria, he shall be subject to disqualification if he or anyone of constituent partner is found to have:

i. … …

ii. Records of poor performance during the last five years [emphasis supplied by the Petitioner] as on the date of Application such as abandoning the work, rescission of the contract for reasons which are attributable to non-performance of the bidder, inordinate delays in completion, consistent history of litigation resulting in awards against the bidder or any of the constituents, or financial failure due to bankruptcy and so on.

iii. On account of currency of debarment by any Government Agency.

(Emphasis added)

27. Mr Jagtiani’s argument is that the additional and more stringent condition of the previous tender, i.e. the currency of debarment by any government agency, has been taken out of the present tender.

28. Dr Sathe’s answer is brutally simple. There is no principle of precedent or stare decisis that applies to a tendering authority. The fact that LIC may have made a mistake in 2019 is not an argument to compel it to repeat those mistakes forever. We believe this is a good answer. As Ralph Waldo Emerson famously said, “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.” Yesterday’s erroneous decisions ought not to be allowed to triumph over today’s correct ones.

29. To put an end to this controversy, a reference to just one page of the paper-book is sufficient. At page 143 of the paper-book, part of the 2nd November 2019 original blacklisting order, we find mention — as a finding of fact — that one of the works in question (for which there was blacklisting) according to Relcon and its JV themselves, was done between 2013 and 2016. That is a best-case scenario for Relcon, and it means that even this work, with its record of “poor performance”, is within the five-year period that falls under the disqualification clause 3(1)(b). To be abundantly clear, at page 143 what was being noted was the submission of the Petitioner or its JV partner.

30. On this presentation of facts, we see absolutely no ground for interference.

31. Mr Jagtiani refers us to the decision of the Supreme Court in Daffodills Pharmaceuticals Ltd & Anr v State of UP & Anr. (2019) SCC OnLine SC 1607. Other decisions were tendered but not cited. In any case, most have been considered in Daffodills or the other judgments referred to below).This decision has been later affirmed in Vetindia Pharmaceuticals v The State of Uttar Pradesh & Anr. (2021) 1 SCC 804). There can be no quarr

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el with the propositions set out in this judgment. But we do not believe that Daffodills is an authority for the propositions on which Mr Jagtiani rests his case, viz., that even where it is shown that a tendering authority has acted plausibly and reasonably, or, at any rate, that its actions cannot be faulted as being entirely irrational or afoul of Wednesbury unreasonableness, a Court must nonetheless interfere because it might be merely preferable to do so. Daffodills was decided on an issue of a failure of natural justice. That is not the case here. 32. There is perhaps a more important principle before us. What Dr Sathe says is simply this: that LIC does not want anybody bidding who or which has the slightest taint. This is not a case where the Petitioner has been disqualified for some trivial or minor infraction, some irregularities or non-compliance. LIC has taken a conscious decision on a review of the records disclosed by Relcon itself and has done so within a reasonable and plausible reading of the disqualification clause. 33. It is equally well settled — against Mr Jagtiani — that in matters of interpretation of a tender clause and whether a fact situation fits that interpretation it is the author of the tender document who is the best placed to decide: Agmatel India Pvt Ltd v Resoursys Telecom & Ors (2022) SCC OnLine SC 113). The Agmatel decision followed a wellsettled and undisturbed line of authority from Tata Cellular v Union of India (1994) 6 SCC 651)onwards. 34. We do not find LIC’s action to be so totally unreasonable, irrational or implausible as to demand or warrant our interference at all. On the contrary, we believe that the action is entirely justifiable in the facts and circumstances of the cases and on the basis of documents disclosed by Relcon itself. 35. In our view there is no merit whatsoever in the Petition. It is dismissed. There will be no order as to costs. 36. All concerned will act on production of a digitally signed copy of this order.
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