DELHI HIGH COURT HOLDS THAT GOVERNMENT AUTHORITIES HAVE THE RIGHT TO VERIFY THE FINANCIAL AND TECHNICAL STRENGTHS OF BIDDERS BEFORE AWARDING THE TENDER

A two Judge Bench of the High Court of Delhi, comprising of Justice Tushar Rao Gedela and Justice Satish Chandra Sharma passed a Judgment dated 07.11.2023, in a recent case of M/S Greentech Environ Management Pvt Ltd and Anr. v. Municipal Corporation Of Delhi & Ors. W.P. (C) 14535/2023 & CM APPLN. 57606-07/2023, and held that before awarding a contract for public works that require significant public funds, the Authorities have a right to confirm that the bidder is not only financially and technically capable of completing the work, but is also in compliance with strict terms of any previous or current contracts.

Facts

i) In the present case, one, Greentech Environ Management Company Pvt. Ltd., in partnership with M/s HP Ispat Pvt. Ltd., Petitioners herein filed a Writ Petition under Article 226 of the Constitution (Power of High Courts to issue certain writs) against the Municipal Corporation of Delhi, the Respondent herein. The Petition seeking the setting aside of a Letter dated 01.11.2023 from the Executive Engineer, (SLF) Ghazipur, further alleged that the Petitioner was unfairly denied the opportunity to open a financial bid because of the Addendum brought by way of the contested Corrigendum dated 03.07.2023 by unilaterally modifying Clause 5.1 of the Bid Document.

ii) A Notice Inviting Tender (NIT) was issued by the Executive Engineer (EE), Okhla bearing NIT No. EE (SOF)OKHLA/MCD/2022-23/08 dated 03.08.2022 for disposal of 30 lakhs MT of legacy waste by bio-remediation and bio-mining at Okhla Dumpsite, Delhi. The Petitioner in Joint Venture with M/s HP Ispat Pvt. Ltd. was declared as a successful bidder and consequently an Agreement dated 07.11.2022 was entered into between the Petitioner and the Respondent.

iii) According to the terms of the Contract, the Petitioner was expected to eliminate at least 30 lakh tons of legacy garbage from the total amount of waste disposed of at the dumpsite at Okhla, where the processed material is disposed of. It was anticipated that the Petitioner would dig up the legacy waste and separate it into as many different types and categories as they could, such as RDF, soil enricher, C & D fraction, recyclables, inert materials, etc.

iv) The separated materials were employed by different Government and non-Government departments following the aforementioned waste segregation. The issue in the present case relates to the inert materials which were used by National Highway Authority of India (NHAI).

v) The Respondent sent a Letter with Ref. No. EE/SLF/OKHLA/MCD/2022–23/D–507 to the Project Director of NHAI on 09.12.2022, requesting verification of the inert materials that was disposed of at the NHAI 30-acre land adjacent to NTPC Badarpur Eco-Park. Thereafter, the Authority Engineer of NHAI had assigned a Quantity Surveyor to verify the inert materials that was disposed of at the specified area between 11.11.2022 and 30.11.2022.

vi) The Respondent sent another Letter with Ref. No. EE/SLF/OKHLA/MCD/2022-23/566 to the Project Director of NHAI on 06.01.2023, requesting verification of the inert materials that was disposed of at the NHAI 30-acre land adjacent to NTPC Badarpur Eco-Park during 01.12.2022 to 31.12.2022.

vii) Thereafter, on 10.10.2022, the Petitioner sent a Letter to the NHAI Project Director requesting verification of the inert materials disposed of at the NHAI 30-acre area near NTPC Badarpur EcoPark. The Letter attaching the list detailed the specifics of the inert materials disposed of each day. Thereby the Authority Engineer (Quantity Surveyor) checked the list using weighment slips on 20.01.2023 and certified that it was in order.

viii) Thereafter, the Respondent sent a Letter dated 23.01.2023, bearing number EE(SLF)/OKHLA/MCD/2022-23/592, imposing a penalty of INR 8,50,09,505 (i.e., 50% of the value of certified bills for three months prior to the month of incidences noticed) for failing to comply with contractual provisions and SWM Rules.

ix) Thereafter, the Petitioner replied to the Respondent on 06.02.2023 stating that all necessary precautions have been taken to ensure that inert material is properly filled into vehicles for transportation to NHAI sites and that there is very little chance of unprocessed material being transported from the Okhla dumpsite. It further stated that the penalty for the specified cause is INR 40,000/- (INR 20,000 x 2), as stated in Clause 7.4 of the Contract Agreement, and that the penalty is unjustified.

x) Thereafter, the Respondent issued a notification inviting bids for disposal of 30 Lakh MT of legacy waste by bioremediation and bio-mining at Ghazipur Dumpsite, Delhi.  Further an Addendum/Corrigendum was issued on 03.07.2023 mentioning the eligibility criteria as follows:   “The bidders need to fulfill the minimum eligibility criteria as defined in relevant clauses of this RFP to be eligible for opening of financial proposal (‘Technically qualifies Bidders”). However, in case of the existing agencies, working at the three dumpsites of MCD i.e. Okhla, Bhalaswa & Ghazipur in individual capacity or in JV, participate in the bidding process, then their performance of existing contracts such as no penalty should have been levied upon the bidder (or any of its members in case of JV/ consortium) on the basis of tampering or manipulation of records/ malafide practices/quality of biominded fraction/disposal of unprocessed waste/ fine or compensation by the Hon’ble NGT on environment damage, continuous failure to achieve target/ project etc. during the biomining works shall be considered by technical evaluation committee..”

xi) Aggrieved by the decision of imposing penalties, the Petitioner filed an Appeal on 06.07.2023 before the Commissioner, of the Respondent-Department. The same was rejected by the Executive Engineer of the Respondent on 31.07.2023 by way of a Non-speaking Order.

xii) Aggrieved by the Non-Speaking Order dated 07.2023, the Petitioner filed a Writ Petition bearing No. WP(C) No. 10308 of 2023 before the High Court of Delhi (High Court). The High Court vide an Order dated 04.08.2023, dismissed the Writ Petition.

xiii) Aggrieved by the Order of the High Court, the Petitioner filed an Appeal before the Division Bench of the High Court (Division Bench) in LPA No. 606 of 2023 seeking setting aside of the Single Judge Order of the High Court dated 04.08.2023.

xiv)The Hon’ble Division Bench passed an Order dated 01.09.2023 by upholding the Single Judge Order dated 04.08.2023 and thereby, dismissed the LPA.

Analysis and Findings of the High Court

1) That the Petitioner has acknowledged that the Respondent has penalized them to the tune of around Rs. 8.5 Crores in accordance with Clause 7.4.7 of the Contract Agreement. The punishment is applicable in cases of record tampering, submission of falsified records, or any other malpractice that has an impact on the volume and caliber of work completed. If it is discovered that the bidder engaged in the aforementioned malpractices, 50% of the certified invoices’ total value for the three months prior to the month the occurrence was noticed will be collected as a penalty.

2) That the Ld. Single Judge of the High Court drew precedent from judgment of the Hon’ble Supreme Court in Joshi Technologies International Inc. Vs. Union of India (2015) 7 SCC 728, and Division Bench also upheld the Judgment of the Single Judge.

3) That before awarding a contract for public works that require significant public funds, the Authorities have the right to confirm that the bidder is not only financially and technically capable of completing the work, but is also in compliance with all the strict terms of any previous or current contracts.

4) In the present case, the High Court found that undisputedly, the Petitioner has been penalized with Rs. 8.5 Crores in respect of the existing contract regarding similar/identical works.

5) That the unilateral Amendment of the Tender qualifying requirements has been added or modified solely for the purpose of clarification. As a result, the Petitioner is not subject to any new limitations or deprivations.

Conclusion

Thus, based on the aforesaid observations, the High Court held that, before awarding a contract for public works that require significant public funds, the Authorities have the right to confirm that the bidder is not only financially and technically capable of completing the work, but is also in compliance with all the strict terms of any previous or current contracts. As a result, the Writ Petition filed by the Petitioner under Article 226 was dismissed.

 

Suneel Kumar Jaiswal

Associate

The Indian Lawyer