Bank Guarantee; Central Coalfields Vs. SLL – SML (Joint Venture Consortium) [Supreme Court of India, 17-08-2016]

Bid – Bidding Process – Bank Guarantee – 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 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.

Bank Guarantee


IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

(Madan B. Lokur) and (R.K. Agrawal) JJ.

August 17, 2016

CIVIL APPEAL NO. 8004 OF 2016

Central Coalfields Limited & Anr. .…Appellants Versus SLL – SML (Joint Venture Consortium) & Ors. ….Respondents

WITH

CIVIL APPEAL NO. 8005 OF 2016 PLR-RPL – SMASL (JV) .…Appellant Versus SLL – SML (Joint Venture Consortium) & Ors. ….Respondents

J U D G M E N T

Madan B. Lokur, J.

1. The first appeal is that of the Central 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 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 26th 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.

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 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 5th August, 2015 the Central Coalfields Limited (for short CCL) issued a Notification Inviting Tenders (for short NIT). The name of the work was:

“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, Piparwar Area for a period of 8 years.”

6. The notice mentioned that for details of the NIT and online submissions, an interested person could visit https://eps.buyjunction.in.

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 of India. This is being mentioned because anybody having a Digital Signature Certificate cannot be computer illiterate.

8. Clause 3 of the e-tender carried the heading “Deposit of EMD” and the relevant portion of this reads as follows:

“Earnest Money can be deposited in the form of Demand Draft (DD)/Banker’s Cheque (BC)/Banker’s payorder (BPO) from any scheduled Bank drawn in favour of “Central Coalfields Limited” payable at “Ranchi”. EMD can also be deposited in the form of irrevocable Bank Guarantee (BG) from any scheduled Bank in the format given in 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 (EMD) exceeds Rs. 5.00 Lakhs.”

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”.

10. Clause 4 of the e-tender mentioned that for a clarification of the bid, a bidder may seek clarification on-line from the Service Provider M/s 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 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 appropriate form 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 JVC). One of the bids was apparently rejected. Nine of the bidders submitted a bank guarantee strictly in accordance with the pro forma provided in the GTC. A bank guarantee was provided by JVC – not in the prescribed pro forma 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 Limited”.

14. Under the circumstances, an email was sent on behalf of CCL on 11th 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.

15. In response, JVC sent an email on 15th 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 guarantee submitted was not in the format given in the NIT read with the GTC.