Tender Law II

The party issuing a tender (employer) ‘has the right to punctiliously and rigidly’ enforce the terms of the tender. Here is a wholesome principle that the Courts have been following for a very long time and which was articulated in Nazir Ahmad v. King Emperor, (1979) 3 SCC 489: ‘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 tender bid documents. This principle deserves to be applied in contractual disputes, particularly in commercial contracts or bids leading up to commercial contracts, where there is stiff competition.

Thus, If an employer prescribes a particular format of the bank guarantee to be furnished, then a bidder ought to submit the bank guarantee in that particular format only and not in any other format.

My Lord, Can the employer deviate from the terms of the tender and accept a bank guarantee in another format?

Yes.

But 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… 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.

In Poddar Steel, (1991) 3 SCC 273 a distinction has been drawn by this Court between essential and ancillary and subsidiary conditions in tender bid documents. A similar distinction was adverted to more recently in Bakshi Security and Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd., 2016 (7) SCALE 425 through a reference made to Poddar Steel. An essential term of the tender bid documents cannot be deviated from but an ancillary or subsidiary or non-essential term can be deviated from.

Unfortunately, the Court, did not at all advert to the privilege-of-participation principle laid down in Ramana Dayaram Shetty, (1979) 3 SCC 489. In that case, the expression ‘registered IInd 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. It was 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.”

Hon’ble Justice Madan B. Lokur, Central Coalfields Ltd. v. SLL – SML (Joint Venture Consortium), [Civil Appeal No. 8004 of 2016].

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