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Thursday, July 26, 2018

whether the petitioner had preferential right to match the lowest bid without pre-qualifying or participating in the bidding process.

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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3288 OF 2018
NATIONAL HIGHWAYS AUTHORITY OF INDIA …..Appellant(s)
:Versus:
GWALIOR JHANSI EXPRESSWAY LIMITED ....Respondent(s)
J U D G M E N T
A.M. Khanwilkar, J.
1. This appeal emanates from the decision of the High Court
of Delhi at New Delhi dated 21st August, 2017 in Appeal ARB.A
(Comm.) No.20 of 2017 whereby the appeal filed by the
appellant under Section 37(2)(b) of the Arbitration and
Conciliation Act, 1996 (for short, “the Act”) seeking to quash
the order dated 24th May, 2017 passed by the Arbitral Tribunal
under Section 17 of the Act came to be dismissed. The Arbitral
Tribunal vide order dated 24th May, 2017 allowed the
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application preferred by the respondent (claimant) under
Section 17 of the Act seeking a direction to the appellant to
allow the respondent to exercise an option to match the lowest
bid in terms of the order dated 23rd July, 2016 passed by the
Arbitral Tribunal and including to exercise Right of First
Refusal (“ROFR”) and for other consequential reliefs.
2. Shorn of unnecessary details, some of the relevant facts
are that the appellant (a body corporate, constituted under
the National Highways Authority of India Act, 1988) entered
into a Concession Agreement dated 17th December, 2006 with
the respondent (a consortium comprising of Apollo Enterprises
Limited and D.S. Construction Limited) for works of widening
the existing two-lane portion of Km 16.000 to Km 96.127 on
National Highway No.75 to four lanes in the States of Uttar
Pradesh and Madhya Pradesh on the terms and conditions
specified therein. The appellant asserts that the respondent
failed to undertake the project work at the requisite pace, inter
alia, due to inadequate deployment of machinery, plant,
material and manpower. The respondent had merely achieved
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62% progress and eventually abandoned the project site in
March, 2012. The appellant, therefore, had to issue a Cure
Period Notice dated 19th October, 2013 requiring the
respondent to cure the breaches within 30 days from receipt of
the notice, failing which the appellant may be forced to initiate
further action to terminate the contract in terms of the
Concession Agreement. The respondent denied the correctness
of the stated notice by a written reply. The appellant then
issued letters dated 27th February, 2014 and 7th March, 2014
expressing its intention to issue termination notice of the
Concession Agreement. The respondent immediately rushed to
the court by filing a petition under Section 9 of the Act seeking
stay of the Cure Period Notice dated 19th October, 2013 as well
as the notice expressing the intention to issue termination
notice. The High Court of Delhi passed an interim stay on 12th
March, 2014 restraining the appellant from taking any
coercive action. The petition under Section 9 of the Act was
finally disposed of on 22nd April, 2015 with a direction to the
Arbitral Tribunal, which was already constituted in the
meantime, that the interim order dated 12th March, 2014
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would continue during the pendency of the arbitral
proceedings with liberty to the parties to seek its modification
or revocation before the Arbitral Tribunal.
3. The appellant accordingly moved an application dated 8th
April, 2016 under Section 17 of the Act before the Arbitral
Tribunal seeking permission to complete the balance works of
the project as it was causing huge distress due to traffic
congestion, unsafe highway, increase in expenditures, higher
wear and tear of the vehicles and, in particular, national loss
to the public at large. The respondent also filed an application
under Section 17 of the Act on 17th May, 2016 seeking interim
directions against the appellant to pay Rs.400 crores to the
respondent at the risk and costs of the respondent for
completing the balance works of the project. The reliefs
claimed in the application filed by the respondent read thus:
“a) Allow the present application and as an interim
measure direct the Respondent to pay a sum of Rs.400
Crores to the Claimant at the risk and cost of the Claimant
so as to complete balance/remnant works of the project;
b) In the alternative and strictly without prejudice to
the prayer (a), as an interim measure permit the
Respondent to invite tender/bid for executing the
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balance work under the Concession Agreement on
Engineering Procurement and Construction basis subject
to Claimant being granted the right of First Refusal for
matching the lowest bid and in the event the Claimant
matches the said lowest bid permit the Claimant to
complete the said balance/remnant works on the terms
and conditions of the tender/bid invited on Engineering
Procurement and Construction basis except for the
provision, if any, for furnishing Bank Guarantees;
c) In alternative and strictly without prejudice to the
prayer (a) & (b), direct the Respondent to act in terms of their
letter dated 19.01.2016 and the Circular dated 09.06.2015
in the event prior to the award of contract of the balance
work on Engineering Procurement and Construction basis
the Project Lenders of the Claimant agree to provide first
charge to the Respondent;
d) Pass such further order and other relief(s) as this
Hon‟ble Tribunal may be deem fit, just, necessary and
appropriate in the facts and circumstances of the case.”
(emphasis supplied)
4. During the pendency of the aforementioned proceedings
before the Arbitral Tribunal, a meeting was held on 19th April,
2016 in the Chamber of Member (P) at NHAI – HQ to discuss
and conclude the issues of Gwalior-Jhansi project pursuant to
Ministers‟ meeting dated 15th March, 2016 in order to get the
work restarted without further delay. Another meeting was
convened on 27th April, 2016 before the said Authority, as a
result of which the hearing of the matter was deferred till 18th
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May, 2016. On the adjourned date, the advocate appearing
for the appellant placed reliance on the minutes of the
meetings held on 19th April, 2016 and 27th April, 2016. The
hearing of the applications was then deferred till 29th May,
2016, as the respondent submitted a construction-linked
financial plan for completing the balance work within a
maximum period of 24 months from the date of receipt of
advance payment from the appellant. The appellant filed its
response on 28th May, 2016 to the proposal submitted by the
respondent. The appellant asserted that the financial plan
submitted by the respondent was not in accord with the NHAI
Circular dated 19th June, 2015. In the meantime, on 25th
May, 2016, the respondent filed its reply to the application
filed by the appellant under Section 17 of the Act. The
appellant had stated that it was agreeable to infuse funds for
completion of the project as per the policy with condition of
first charge of NHAI, considering the larger public interest.
The respondent accepted the offer given by the appellant
including the conditions specified by the appellant.
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The conditions suggested by the appellant have been noted by
the Arbitral Tribunal as under:
“(i) As the Respondent is a public body, in the event of the
lowest bidder being denied the work, it will require to be
compensated. For this purpose Claimant/Concessionaire
shall pay to the authority a sum of Rs.2% of the bid amount,
out of which 75% shall be paid to the lowest bidder. This is
on the lines agreed by the parties and provided in the
Concession Agreement based on Model Concession
Agreement (MCA).
(ii) The Respondent shall not pay any „Mobilization
Advance‟ without Bank Guarantee being furnished for the
equivalent amount. The advance shall be at the interest at
the rate of 2% more than the prevailing bank interest.
(iii) The work shall be completed by the Claimant in a
period of 24 months from the date of LOA for the
Construction Contract.
(iv) The terms and conditions of the Construction
Agreement shall be in addition to and not in substitution of
any terms and condition of the Concession Agreement. In the
event of any disparity the terms of the Concession Contract
shall prevail.
(v) The specifications and quality of construction shall not
be lower than stipulated in the Concession Agreement.
(vi) The Respondent shall be free to bring forward
consequential additional claims for the expenses incurred
and damages suffered.”
The respondent, through counsel, informed the Arbitral
Tribunal that the respondent would accept the
aforementioned conditions except condition No.(ii).
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5. The arguments were heard by the Arbitral Tribunal
on 28th May, 2016. Before the application filed by the
parties under Section 17 of the Act could proceed further,
the appellant filed an application under Section 23 of the
Act for amendment of its reply dated 25th May, 2016 so
as to withdraw its acceptance of prayer (b) for
modification of procedure order No.9 dated 28th May,
2016, for the reasons mentioned therein. Finally, the
Arbitral Tribunal disposed of the applications by a
common order dated 23rd July, 2016. It accepted the
relief claimed by the respondent in terms of prayer clause
(b) of its application, reproduced in paragraph 3 above.
6. The Arbitral Tribunal rejected the plea of the
appellant to withdraw from its earlier offer noted in the
reply affidavit. The Arbitral Tribunal inter alia observed
thus:
“ . . . . .
NHAI had taken a specific stand before us that it would not
agree to prayer (a) made by the Claimant. Tribunal therefore
granted time to NHAI to examine and come out with concrete
proposals in respect of prayer (b) and on the unilateral
conditions suggested by NHAI itself, an order to that effect
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was passed by the Tribunal on May 18, 2016. Conditions
stipulated by NHAI, it is seen, are more stringent than what
were suggested by CCEA in its meeting held on May 13,
2015, particularly in the CCEA decision made on October
14, 2015, where in CCEA stated that after the constructions,
loans can be recovered bi-annually through execution of a
tripartite agreement between NHAI, lender and
concessionaire. Policy endorsed by CCEA takes note of the
comfort level of not only that of NHAI, citizens and travellers,
but also of the concessionaire. We have to take it, that it was
after taking into consideration all those aspects including
the policy decisions taken by CCEA and the Claimant‟s
eligibility for one time fund infusion in terms of the Circular
dated June 9, 2015, the NHAI suggested various conditions
and all those conditions were accepted by the Claimant
including the furnishing, of Bank Guarantee for the
mobilization advance to be made by NHAI. We are of the view
that by furnishing the unconditional Bank Guarantee, the
interest of NHAI is also protected.
We find that NHAI has no case that the Claimant has been
blacklisted or that it is incapable of completing the balance
work. In our view, it would not be in public interest if the
remaining work is allotted to a third party and in the facts
and circumstances, one cannot rule out the possibility of
passing the same order, even if NHAI is allowed to withdraw
the unilateral conditions suggested by it.
The Tribunal in its order dated May 25, 2016, also made it
clear that only if the Claimant would agree to all the
conditions stipulated by NHAI, the Claimant would be
granted permission to complete the balance work. The
Claimant has now filed an affidavit before the Tribunal that
all the conditions stipulated by NHAI are acceptable to it,
that being the factual position, we find no reason to
entertain the application preferred by NHAI under Section 23
of the Act seeking amendment in its reply dated May 25,
2016, to the Claimant‟s Sec 17 application, so as to
withdraw the conditions unilaterally suggested by it.
We are also of the view that the reasons stated for
modification of Procedural Order No.9 dated May 28, 2016,
cannot be sustained in the facts and circumstances of the
case and we find it difficult to accept the contention that the
specific conditions stipulated by NHAI to the alternative
prayer (b) made by the Claimant in Sec 17 Application have
been made without application of mind or that the so called
„higher management‟ was unaware of the pendency of this
arbitration proceedings as well as the pendency of the Sec 17
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applications filed by the parties and the various meetings
held in respect of this matter at HQ of NHAI and the
participation of Lead Bank, the Claimant and the officials of
NHAI and the meaning and content of the policy laid down
by CCEA. Sec 17 Application preferred by NHAI would
therefore stand dismissed and prayer (b) made by the
Claimant in its Sec 17 Application stands allowed subject to
the conditions stipulated by NHAI.
NHAI is directed to take up follow up action on the basis of
this order, within two weeks from today and submit a report
to that effect within a month. Claimant is directed to
scrupulously follow the conditions imposed by NHAI for
accepting prayer (b). Claimant is further directed to submit
quarterly reports before the Tribunal of the progress of the
balance work undertaken by it on the basis of the order of
this Tribunal. The Claimant is directed to furnish Bank
Guarantee from a nationalised bank on the mobilization
advance to be made by NHAI within the time stipulated. Both
sec 17 Applications and the Application made by NHAI under
Sec 23 of the Act are disposed of as above, reserving all the
contentions raised by the parties in the main matter.
This order as well as the observations and findings recorded
will have no bearing on the ultimate disposal of the main
matter.”
7. The appellant acquiesced to the aforementioned interim
order passed by the Arbitral Tribunal and allowed it to attain
finality. For, the subject project was on Build Operate and
Transfer (“BOT”) basis, any amount incurred by the Authority
with regard to the project or in relation to the completion of
the balance work was liable to be reimbursed by the
Concessionaire (respondent).
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8. The appellant accordingly issued a tender for the balance
work vide Notice dated 28th November, 2016 which fact was
brought to the notice of the Arbitral Tribunal during the
hearing on 10th December, 2016. The tender notice was placed
in the public domain, as is done in the case of other tender
process. Some of the pertinent clauses of the tender
documents may be appositely reproduced for considering the
matter in issue before us. In the bidding document, Volume I,
regarding Invitation for Bids (“IFB”), it was noted that sealed
bids were invited (technical and financial) from eligible bidders
for the construction and completion of the balance work
detailed in the table given in the said document. Clause (1)
postulated that eligibility of bidders would be assessed on post
qualification basis, amongst others. The financial bid in the
second part would be opened of only those bidders whose
technical bids were responsive to eligibility and qualification
requirements as per the Request for Proposal (“RFP”). Further,
clause (7) of the IFB reads thus:
“7. The Bidders may take notice of the following:
Notwithstanding anything to the contrary contained in this
RFP, as per the direction of Hon‟ble Arbitral Tribunal, if the
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BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to
payment of 2% (two per cent) of the bid amount to the
Authority and thereupon becomes the selected Bidder.
……………...”
 (emphasis supplied)
In Section I of the bid document providing for procedure
for tender document of the Instructions to Bidders, the
eligibility of bidders has been specified in clause (3)
thereof which reads thus:
“3. Eligible Bidders
3.1 Eligibility of bidders is based on bidder meeting the
pass/fail criteria regarding their general and particular
experience, financial position, personnel and equipment
capabilities and other relevant information as demonstrated
by the applicant‟s responses on the forms attached.
3.2. This invitation for bids is open to bidders meeting the
following requirements:-
a) xxx xxx xxx
b) xxx xxx xxx
c) xxx xxx xxx
d) xxx xxx xxx
“(e) Notwithstanding anything to the contrary contained in
this REP, as per the direction of Hon‟ble Arbitral Tribunal, if
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to
payment of 2% (two per cent) of the bid amount to the
Authority and thereupon becomes the selected Bidder. Out
of the amount so received by the Authority (ILLEGIBLE) 5%
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of the amount shall be paid by the Authority to the lowest
bidder. For the avoidance of doubt, it is clarified that no
claim for compensation, damages, loss of profits etc. by the
lowest bidder for unbecoming selected bidder, shall be
admissible from the Authority.
(f) Notwithstanding anything to the contrary contained in
this RFP, for the purposes of eligibility and qualification of
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.), if it has participated in the bidding
process, it shall be deemed to fulfill all the requirements
of Clauses 3 to 6 of the RFP, being the existing
concessionaire of the Four lane project (Gwalior-Jhansi
section of NH-75.”
 (emphasis supplied)
Again in clause 26, it is stated thus:
“26. Examination of Technical Bids and Determination of
Responsiveness of Technical Bids
x x x x x x x x x x x x
26.8 Notwithstanding anything to the contrary contained in
this RFP, as per the direction of Hon‟ble Arbitral Tribunal, if
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four Lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to
payment of 2% (two per cent) of the bid amount to the
Authority and thereupon becomes the selected bidder, Out of
the amount so received by the Authority, 75% of the amount
shall be paid by the Authority to the lowest bidder. For the
avoidance of doubt, it is clarified that no claim for
compensation, damages, loss of profits etc. by the lowest
bidder for unbecoming selected bidder, shall be admissible
from the Authority.
26.9 Notwithstanding anything to the contrary contained in
this RFP, for the purposes of eligibility and qualification of
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.), if it has participated in the bidding
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process, it shall be deemed to fulfill all the requirements
of Clauses 3 to 6 of the RFP, being the existing
concessionaire of the Four lane project (Gwalior -Jhansi
section of NH-75).
27. Opening of Financial Bids.
xxx xxx xxx xxx
27.5 Notwithstanding anything to the contrary contained in
this RFP, as per the direction of Hon‟ble Arbitral Tribunal, if
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior-Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the
lowest bid in terms of the selection criteria, subject to
payment of 2% (two per cent) of the bid amount to the
Authority and thereupon becomes the selected Bidder. Out
of the amount so received by the Authority, 75% of the
amount shall be paid by the Authority to the lowest bidder.
For the avoidance of doubt, it is clarified that no claim for
compensation, damages, loss of profits etc. by the lowest
bidder for unbecoming selected bidder admissible from the
Authority.
27.6 Notwithstanding anything to the contrary contained in
this RFP, for the purposes of eligibility and qualification of
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.), if it has participated in the bidding
process, it shall be deemed to fulfill all the requirements of
Clauses 3 to 6 of the RFP, being the existing concessionaire
of the Four lane project (Gwalior-Jhansi section of NH-75).”
 (emphasis supplied)
In clause 30, it is observed thus:
“30. Examination of Financial Bids and Determination of
Responsiveness of Financial Bids
xxx xxx xxx xxx
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30.4 Notwithstanding anything to the contrary contained in
this RFP, as per the direction of Hon‟ble Arbitral Tribunal, if
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.) of Four lane project (Gwalior Jhansi
section of NH-75, is also a responsive bidder, the
Concessionaire shall have the option of matching the lowest
bid in terms of the selection criteria, subject to payment of
2% (two per cent) of the bid amount to the Authority and
thereupon becomes the selected Bidder. Out of the amount
so received by the Authority, 75% of the amount shall be
paid by the Authority to the lowest bidder. For the avoidance
of doubt, it is clarified that no claim for compensation,
damages, loss of profits etc. by the lowest bidder for
unbecoming selected bidder, shall be admissible from the
Authority.
30.5 Notwithstanding anything to the contrary contained in
this RFP, for the purposes of eligibility and qualification of
the BOT-Annuity concessionaire (M/s Gwalior Jhansi
Expressway Ltd.), if it has participated in the bidding
process, it shall be deemed to fulfill all the requirements
of Clauses 3 to 6 of the RFP, being the existing
concessionaire of the Four lane project (Gwalior-Jhansi
section of NH-75).”
 (emphasis supplied)
9. In consonance with the tender documents as uploaded
on E-Tender Portal 2016, technical bids were opened on 5th
January, 2017 and financial bids were opened on 29th March,
2017. It is only thereafter on 25th April, 2017, the respondent
moved an application before the Arbitral Tribunal under
Section 17 of the Act, seeking, inter alia, permission of the
Arbitral Tribunal to complete the balance work at its risk and
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cost. In the said application, it was asserted that the
respondent verily believed that it would get an opportunity to
exercise the option of ROFR and match the lowest bid, in
terms of the order dated 23rd July, 2016. However, to its utter
shock, surprise and dismay, it was reliably learnt on the
previous day (to the filing of the application) that the
appellant was proceeding to conclude the tender process by
issuing LOI/LOA in favour of the L-1 bid behind the back of
the respondent and in a highly surreptitious and opaque
manner. On the basis of the said assertions, the respondent
in its application filed under Section 17 of the Act prayed thus:
“a) Allow the present application and direct the
respondent to grant first right of refusal to the claimant for
matching the lowest bid, in terms of the order dated
23.07.2016 passed by this Hon‟ble Tribunal;
b) Pending hearing and disposal of the present
Application, pass an ex-parte ad-interim Order, directing the
Respondent to not issue LoI/LoA or award the works or take
any further steps, in any manner, directly or indirectly, in
favour of any party, pursuant to the Notice Inviting Tender
published by the Respondent on 28.11.2016;
c) Confirm prayer (b) upon issuance of notice;
d) Pass such further order and other relief(s) as this
Hon‟ble Tribunal may be deemed fit, just, necessary and
appropriate in the facts and circumstances of the case.”
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10. This application was resisted by the appellant by filing a
reply affidavit. The appellant asserted that the respondent
chose to remain silent during the entire period and only at the
belated stage when the tender process was nearing
completion, it has chosen to file the application with the
intention of stalling the entire process. This approach cannot
be countenanced. The appellant also asserted that it was
unfathomable that the respondent would get the right to
match the lowest bid without participating in the bidding
process. Further, an application such as this would delay the
progress of the main arbitration proceedings which was
required to be completed within one year. It was thus asserted
by the appellant that the ROFR could be invoked by the
respondent only if it had participated in the bidding process.
The appellant adverted to the terms and conditions of the
tender documents which unambiguously mandated the
respondent to participate in the tender process, coupled with
the fact that there was no express direction given by the
Arbitral Tribunal so as to give any right or cause of action to
the respondent to contend to the contrary. The appellant
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beseeched the Arbitral Tribunal to allow it to take the tender
process to its logical end.
11. Admittedly, no rejoinder was filed by the respondent to
the specific plea taken by the appellant in the reply affidavit
that despite having knowledge of the condition in the tender
documents requiring the respondent to participate in the
tender process, it failed to do so for reasons best known to the
respondent.
12. The Arbitral Tribunal vide order dated 24th May, 2017
allowed the application preferred by the respondent by inter
alia observing as follows:
“The Tribunal while examining both the 17 Applications
preferred by the parties specifically noticed that the
Claimant had completed more than 65% of the work though,
NHAI took the stand that the physical progress was only
62.13%. Claimant took the stand that it had completed more
than 73% work. Considering the fact that so much of money
and labour had been invested by the Claimant, and at the
same time safeguarding the interest of NHAI, the Tribunal
passed the order dated 23.7.2016 directing the Respondent
to grant the Claimant the right of first refusal for matching
the lowest bid. The Tribunal also felt that involvement of
third parties would also create more problems. The Tribunal,
therefore, ordered in the event Claimant matches the lowest
bid, Claimant be permitted to complete the balance work
that too by periodically submitting reports before the
Tribunal so that the Tribunal can examine whether the
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Claimant is successfully completing the balance work to the
satisfaction of NHAI. In our view, the stand taken by the
Respondent that the first right of refusal can be granted to
the Claimant only if it had participated in the bidding
process cannot be sustained. Accordingly, reliefs sought for
by the Claimant in the Application dated 25.4.2017 are
granted”.
13. Against this decision, the appellant filed an appeal under
Section 37(2)(b) of the Act before the High Court of Delhi at
New Delhi. The same was dismissed on 21st August, 2017. The
High Court upheld the view taken by the Arbitral Tribunal by
inter alia observing thus:
“12. It is quite clear from a perusal of the earlier order
dated 23.07.2016 that the respondent was granted right of
first refusal by matching the lowest bid, and if it matched the
bid the respondent was to be permitted to complete the
balance work as stated. There was no directions that the
respondent was obliged to participate in the bid. They had
been given the right to match the lowest bidder, subject to
terms and conditions and in that eventuality of their
matching the lowest bid, they were to be given the right to
carry out the balance work. The insistence of the appellant
that the respondent ought to have participated in the bid
floated pursuant to the order of the learned Arbitral Tribunal
dated 23.07.2017 is misplaced.
13. Learned counsel for the appellant was, several times
asked as to what prejudice is caused by the respondent by
not participating in the bid. The only reply made by the
learned counsel for the appellant was that in the absence of
participation in the bid by the respondent, the appellant is
unable to ascertain whether the respondent was eligible to
be a bidder or not. In my opinion in the light of the orders of
the Learned Arbitral Tribunal dated 23.07.2016 the
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appellant was not to participate in the bid. The apprehension
of the appellant are entirely misplaced.
14. No prejudice is caused to the appellant. It is manifest
that other than insistence on compliance by the respondent
of a procedural requirement, there is no prejudice caused to
the appellant by non participation of the respondent in the
bidding process. Further the impugned directions are passed
in accordance with the earlier orders of the Learned Arbitral
Tribunal dated 23.07.2016 which has not been challenged
and attained finality. There is no merit in the present appeal
and the same is dismissed.”
14. The appellant has assailed the decision of the Arbitral
Tribunal dated 24th May, 2017 and of the High Court dated
21st August, 2017 on the argument that the respondent
cannot be permitted to exercise ROFR sans participating in
the bidding process and in the teeth of the terms and
conditions of the tender documents. According to the
appellant, the Court cannot interfere with the tender process
and in particular with the modalities adopted for re-tendering
of the balance work of the project. The process of evaluation
of tender and awarding the contract are essentially commercial
functions for which reason the Courts should refrain from
exercising judicial review, especially when the decision taken
by the statutory authority is bona fide and taken in public
interest. Further, the order of the Arbitral Tribunal dated 23rd
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July, 2016 in no way, much less expressly, exempts the
respondent from participating in the bidding process nor has
any stipulation been placed on the appellant to refrain from
incorporating a condition requiring the respondent to
participate in the tender process along with others. In that
case, all concerned including the respondent, were bound by
the terms and conditions specified in the tender documents.
The fact that the respondent was deemed to possess technical
qualifications would not and does not do away with the
essentiality of participating in the subject bidding process, the
purpose whereof is to ensure a fair competition amongst the
participants and, more particularly, to get a fair offer and the
best value for money in a scientific and transparent manner,
encouraging competition between the participants and also to
give them equal opportunity. It is contended that the order of
the Arbitral Tribunal, be it dated 23rd July, 2016 or dated 24th
May, 2017, is in excess of jurisdiction as it transcends beyond
the purport of Section 17 of the Act. For, it was not open to
the Arbitral Tribunal to pass an interim order concerning a
separate contract albeit facilitating completion of the
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unfinished and incomplete works of the project. It is
contended that it is well settled position that the prerogative to
formulate the terms and conditions of the tender document is
that of the employer and the Court cannot sit in appeal over
such conditions. Nor can the same be re-written or modified
much less when it has not been challenged by the respondent.
It is contended that the fact that the respondent qualified the
technical bids in 2006, will not by itself qualify it for retendering
bid process in 2016. Having failed to participate in
the bid process in 2016, it was not possible to examine the
eligibility and qualification of the respondent in the context of
tender documents of 2016. Further, a person or entity who
stands out of the tender process or fails to comply with the
terms and conditions of the tender documents cannot acquire
any right or interest much less actionable claim in respect of
such tender process. According to the appellant, the
respondent must take the consequences of non-participation
in the subject tender process and cannot be allowed to
interdict the same in absence of an express exemption granted
by the competent forum/Authority to the respondent not to
23
participate in the tender process and yet exercise ROFR. To
buttress the aforesaid submission, reliance has been placed
on the decision of the Delhi High Court in VHCPL-ADCC
Pingalai Infrastructure Pvt. Ltd. & Anr. Vs. Union of India
& Ors.1 and on the decision of the Appellate Tribunal for
Electricity in M/s. Raj West Power Limited & Anr. Vs.
Rajasthan Electricity Regulatory Commission & Ors.2
15. The respondent on the other hand, would contend that
no interference in this appeal is warranted in view of the
concurrent view taken by the Arbitral Tribunal as well as the
High Court that it was not necessary for the respondent to
participate in the tender process to exercise ROFR. For, the
order dated 23rd July, 2016 does not prescribe such a precondition
nor does it prohibit the respondent from exercising
the ROFR without participation in the bidding process. It is
contended that the order dated 23rd July, 2016 is based on
consent of the parties and has never been challenged by the
appellant and as such, the appellant was obliged to comply

1
 2010 SCC Online Del 2687
2
 2013 SCC Online APTEL 46
24
with the same in its letter and spirit. According to the
respondent, having completed 78% work of the Project (which
according to the appellant, is only around 62%) and having
invested Rs.715 crores on the Project, by no stretch of
imagination can the respondent be termed as a non-serious
contender. According to the respondent, the appellant cannot
be heard to challenge the order dated 23rd July, 2016, which
confers ROFR, as it was based on consent of the parties and
also attained finality. Further, the purpose of participating in
the bidding process was only to ascertain as to whether the
offer given by the bidder was a responsive offer. The
respondent having already completed substantial work of the
Project, by no stretch of imagination, can be said to be
incapable of completing the balance work. This aspect had
commended to the Arbitral Tribunal, as can be discerned from
the order dated 23rd July, 2016. The Arbitral Tribunal in that
order also unambiguously recorded that it was not the case of
the appellant herein that the respondent had been black listed
or was incapable of completing the balance work. Not only
that, the Arbitral Tribunal went on to observe that it would not
25
be in the public interest to allow a third party to take over the
balance work of the project. On that basis, direction was given
to the appellant to allow the respondent to exercise ROFR,
subject to certain conditions. The order passed by the Arbitral
Tribunal, in essence, was on the basis of consent of the
respondent with unilateral conditions imposed by the
appellant, which the appellant should not be allowed to resile.
According to the respondent, it was impermissible for the
appellant to incorporate conditions such as clauses 3, 26, 27
and 30 in the tender documents, as the same are in the teeth
of order dated 23rd July, 2016 passed by the Arbitral Tribunal
and, more so, without seeking liberty from the Arbitral
Tribunal in that behalf. It is contended that the purpose of the
tender process is only to evoke responsive offers. There would
be no logic or rationale for participation of the respondent in
the backdrop of clause 3.2(f) which is a deeming provision
virtually declaring the respondent as eligible and qualified for
the work. The capability of the respondent to complete the
balance work was never in doubt as has been recorded by the
Arbitral Tribunal. In any case, in the absence of liberty given
26
by the Arbitral Tribunal, it was not open to the appellant to
incorporate such a pre-condition in the tender document. It is
contended that such pre-condition would require the
respondent to furnish bid security amount in which case it
would be a fait accompli situation for the respondent if it were
to refuse or fail to match the lowest bid. For, it would result in
forfeiture of its bid security and also entail in black listing. The
order dated 23rd July, 2016, is one of ROFR and not for right
to participate in the bidding process as such. Further, the
submission of financial bid by the respondent was not to find
out whether it is L-1. In that, all the bidders participating in
the subject tender process pursuant to tender notice, were
made fully aware in the bid document itself that the
respondent had ROFR and L-1 would be compensated by the
respondent as provided in the order dated 23rd July, 2016.
Therefore, the respondent was not expected to bid with itself
by submitting a financial bid and then matching the same.
The respondent would contend that the appellant has wrongly
asserted that the respondent was aware of the conditions
prescribed in the tender documents and yet did not choose to
27
participate in the bidding process. For, the bid documents
were neither furnished to the respondent nor placed on record
before the Arbitral Tribunal. Thus, the conditions on which
reliance has now been placed by the appellant were never
pointed out to the respondent or to the Arbitral Tribunal at
any point of time. In any case, the appellant had completely
failed to show as to what prejudice would be caused by
allowing the respondent to exercise ROFR without
participating in the tender process. The learned Single Judge
of the High Court repeatedly made queries in that behalf
which was not explained by the appellant, as is noted in the
impugned judgment. Resultantly, the High Court rejected the
plea of the appellant and held that it was not necessary for the
respondent to participate in the bidding process in terms of
order dated 23rd July, 2016, to exercise ROFR. The respondent
has distinguished the two decisions relied upon by the
appellant and would contend that the same do not lay down
any legal principle that participation in the bidding process is
a condition precedent for exercise of ROFR. It is contended, in
the present case, the ROFR, without condition of participation
28
in the bid, was granted by the Arbitral Tribunal on the basis of
consent of the parties. It is contended that in view of the
concurrent view taken by the Arbitral Tribunal as also the
High Court, this Court should be slow in entertaining this
appeal.
16. We have heard Mr. K.K. Venugopal, learned Attorney
General for India and Mr. Mukul Rohatgi, learned senior
counsel appearing for the respondent.
17. The issue involved in the present appeal ostensibly
concerns the justness of the order passed by the Arbitral
Tribunal and affirmed by the High Court on an application
moved by the respondent (claimant) under Section 17 of the
Act in the pending arbitral proceedings. However, in essence,
the subject matter of the application under consideration
relates to the rights and liabilities of the parties in respect of a
tender process for awarding of a contract in relation to the
unfinished and balance work of the Highway Project.
29
18. While considering the relief claimed by the respondent
(claimant), the same should have been tested on the
touchstone of the principle governing the tender process,
especially when the validity of the tender document has not
been put in issue or challenged before any competent forum.
Going by the terms and conditions in the tender documents,
as already alluded to in paragraph 8 above, there is no tittle of
doubt that the right of the claimant (respondent) to match the
bid of L-1 or to exercise ROFR would come into play only if the
respondent was to participate in the tender process pursuant
to the notice inviting tenders from the interested parties. The
objective of tender process is not only to adhere to a
transparent mechanism but to encourage competition and give
equal opportunity to all tenderers with the end result of
getting a fair offer or value for money. The plain wording of the
eligibility clause in the tender documents and the incidental
stipulations make it explicit that the respondent was required
to participate in the tender process by submitting its sealed
bid (technical and financial). The fact that a deeming clause
has been provided in the tender document that if the
30
respondent was to participate in the bidding process, it shall
be deemed to fulfill all the requirements of the tender clauses
3 to 6 of the RFP, being the existing concessionaire of the
Project, does not exempt the respondent from participating in
the tender process; rather the tenor of the terms of the
documents made it obligatory for the respondent to participate
in the tender process to be considered as a responsive bidder,
along with others. Having failed to participate in the tender
process and, more so, despite the express terms in the tender
documents, validity whereof has not been challenged, the
respondent cannot be heard to contend that it had acquired
any right whatsoever. Only the entities who participate in the
tender process pursuant to a tender notice can be allowed to
make grievances about the non-fulfillment or breach of any of
the terms and conditions of the concerned tender documents.
The respondent who chose to stay away from the tender
process, cannot be heard to whittle down, in any manner, the
rights of the eligible bidders who had participated in the
tender process on the basis of the written and express terms
and conditions. At the culmination of the tender process, if
31
the respondent had not participated, in law, the offer
submitted by the eligible bidders is required to be considered
on the basis of the stated terms and conditions. Thus, if the
claim of the respondent was to be strictly adjudged on the
basis of the terms and conditions specified in the subject
tender document, the respondent has no case whatsoever.
19. The gravamen of the plea taken by the respondent is on
the assumption that the interim order passed by the Arbitral
Tribunal on 23rd July, 2016 bestows unconditional right on
the respondent to exercise ROFR, in the event tender process
in respect of the balance work is resorted to. For that, we may
straightway advert to the order dated 23rd July, 2016. That is
an order granting prayer clause (b) in the application preferred
by the respondent under Section 17 of the Act. The same has
been reproduced in paragraph 3 above. Notably, there is
nothing in the entire application (filed by the respondent
under Section 17 of the Act) to even remotely suggest that the
respondent had prayed in clause (b) that it be exempted from
participating in the proposed tender process as such, and
32
could yet exercise ROFR before the letter of intent was to be
issued to the lowest bidder. The exemption in this regard
cannot be inferred. It has to be an express exemption sought
and so granted and disclosed in the tender documents. The
respondent may be right in contending that the interim order
passed by the Arbitral Tribunal dated 23rd July, 2016 neither
prescribes that the respondent must participate in the bidding
process as a condition precedent for exercise of ROFR nor does
it prohibit the respondent from exercising ROFR without
participation in the bidding process. The order is, indeed,
silent in that behalf. But, that will be of no avail to the
respondent. For, such exemption ought to have been prayed
and expressly granted by the Court. In absence of such
express exemption, the respondent was obliged to comply with
the terms and conditions of the tender documents publicly
notified by the appellant as per its understanding of the order
of the High Court. Having failed to participate in the bidding
process in consonance with such notified terms and
conditions, the respondent lost the opportunity granted under
the order dated 23rd July, 2016 to match the lowest bid or to
33
exercise ROFR. Any other view would fall foul of the
fundamental policy of the Indian law and cannot be
countenanced.
20. It is not the case of the respondent that an express
exemption has been granted to the respondent, from
participating in the bidding process. In the matter of tender
process, there can be no tacit or implied exemption from
participating. In the first place, whether such direction can be
issued by the Arbitral Tribunal under Section 17 of the Act
itself is debatable. However, since the order dated 23rd July,
2016 has remained unchallenged, we do not wish to dilate on
that aspect. Indeed, the appellant accepted the order with a
sanguine hope that a proper tender process can be resorted to,
wherein the respondent would also participate, for awarding
the contract of unfinished and balance works of the subject
Project. For effectuating that order, tender documents were
issued by the appellant on 28th November, 2016 which, as
aforesaid, explicitly stipulated that the respondent was
expected to submit its bid within the specified time.
34
Admittedly, the fact that tender notice was issued, came to be
disclosed before the Arbitral Tribunal on 10th December, 2016.
Surprisingly, the respondent neither took any clue nor
bothered to follow up the tender documents which were placed
in public domain (as is done in respect of any other tender
process). Further, the respondent waited till the opening of
technical bids on 5th January, 2017 and financial bids on 29th
March, 2017 and rushed to the Arbitral Tribunal by way of an
application under Section 17 of the Act, only on 25th April,
2017 stating that on the previous day, it had come to its
notice that the appellant was likely to issue letter of intent to
the lowest bidder, without giving opportunity to the
respondent to match the lowest bid or exercise ROFR. To
oppose the said application, the appellant in the reply affidavit
had asserted that the respondent was fully aware about the
terms and conditions of the tender documents and yet chose
not to participate in the bidding process. The respondent did
not think it necessary to counter the said assertion by filing
any rejoinder thereto. Notwithstanding that, the Arbitral
Tribunal was impressed by the plea taken by the respondent
35
and allowed the application of the respondent vide order dated
24th May, 2017. The relevant extract of the said order has been
reproduced in paragraph 12 above. The Arbitral Tribunal was
more impressed by the fact that the respondent had completed
substantial works of the Project and it would be just and
proper to allow the respondent to complete the balance work.
The Arbitral Tribunal made no effort to ascertain as to whether
the order dated 23rd July, 2016 was a blanket and
unconditional order entitling the respondent to straightaway
exercise ROFR without participating in the bidding process.
The Arbitral Tribunal merely adverted to the objection of the
appellant and rejected the same on the finding that
involvement of a third party in the Project would create serious
problems. It took the view that giving option to the respondent
to match the lowest bid and to complete the balance work,
with a condition to periodically submit the progress report to
the Arbitral Tribunal for monitoring whether the balance work
was successfully completed to the satisfaction of the NHAI,
would be a proper and equitable arrangement. This approach
36
is not in conformity with the fundamental policy of Indian
law.
21. The approach of the High Court in the appeal preferred
by the appellant was no different. The relevant extract of the
High Court decision has been reproduced in paragraph 13
above. The High Court did not find any error, much less
manifest error, in the view taken by the Arbitral Tribunal.
Further, it can be gleaned from the observations of the High
Court in the impugned judgment that the High Court was
more eager to know as to what prejudice would be caused to
the appellant if the respondent had not participated in the
bidding process. This query of the High Court is begging the
question. For, that cannot be the primary basis to answer the
relief claimed by the respondent in the application under
Section 17 of the Act. An entity who stays away from the
bidding process and fails to comply with the express terms
and conditions of the tender documents cannot claim any
right to match the lowest bid or exercise ROFR. Only a
responsive bidder could do so. The High Court has overlooked
37
the fact that the appellant is a body corporate under the 1988
Act. It has to act in a just and fair manner in the matter of
allocation of contract albeit the balance and unfinished work
of the Project. No express exemption has been granted to the
respondent vide order of the Arbitral Tribunal dated 23rd July,
2016 – to exercise ROFR or match the lowest bid without
participating in the bidding process. The respondent had the
option to participate in the bidding process which was not
availed of for reasons best known to the respondent. The High
Court also overlooked the fact that the tender process was not
an empty formality and with the initiation of the same, third
parties, who participated in the bidding process, were likely to
be prejudiced by allowing the respondent to match the lowest
bid or exercise ROFR, without participating in the bidding
process despite the express stipulation in that behalf in the
tender documents. Suffice it to observe that the High Court
committed the same error as committed by the Arbitral
Tribunal in not examining the core issues for grant or
non-grant of the relief to the respondent, in conformity with
the fundamental policy of Indian law.
38
22. The argument of the respondent that the order dated 23rd
July, 2016 passed by the Arbitral Tribunal was based on
consent of the parties and was never challenged by the
appellant, does not take the matter any further. The
respondent on the one hand, contends that the said order was
based on consent of the parties and also in the same breath
contends that the respondent consented to the unilateral
conditions stipulated by the appellant, which the appellant
should not be allowed to resile as prayed by it. Be that as it
may, on a fair reading of the order dated 23rd July, 2016, it is
noticed that the same is the outcome of a contest and not
founded on any concession. In any case, the order makes no
express mention about granting of exemption to the
respondent from participating in the proposed bidding
process. The fact that the respondent has already invested a
substantial amount in the subject Project and has also
completed substantial work can be no basis to overlook the
fundamental policy of Indian law regarding the subject of
tender process and the rights and obligations of the parties
39
involved. We are also not impressed by the argument of the
respondent that the respondent was not expected to refuse to
match its own bid or that if it had participated in the bidding
process and exercised ROFR, then it would have resulted in
consequence of black listing and forfeiture of bid security
amount. The fact that the respondent would exercise ROFR
would mean that the bid given by the respondent was not L-1.
If it was not L-1, exercising ROFR would obviously neither
entail in forfeiture of the bid security nor would visit the
consequence of black listing. This plea is obviously an
argument of desperation and belated one to justify the failure
to participate in the bidding process.
23. The appellant invited our attention to the dictum in
VHCPL-ADCC Pingalai Infrastructure Pvt. Ltd., (supra). In
that case, the Court considered the question whether the
petitioner had preferential right to match the lowest bid
without pre-qualifying or participating in the bidding process.
In that case, Article 14.1(c) of the concession agreement
stipulated that the respondent No.1 could invite proposals
40
from eligible persons for capacity augmentation of the project
which required the petitioner to give an option to submit its
proposal. The Court after noticing the precedents on the
relevant aspects, went on to observe that if the concessionaire
chose not to submit its proposal, it did not have the right to
match the preferred offer as would be the case of the
respondent herein, in view of the express stipulation in the
tender documents requiring the respondent to participate in
the bidding process. The appellant has also placed reliance on
the decision in M/s. Raj West Power Limited, (supra). We
agree with the respondent that this decision does not lay down
any principle which may have any bearing on the case in
hand.
24. In view of the above, we have no hesitation in concluding
that the decision of the Arbitral Tribunal as confirmed by the
High Court, falls foul of the fundamental policy of Indian law
and cannot be countenanced.
25. Accordingly, the order passed by the Arbitral Tribunal
dated 24th May, 2017 as also the order dated 21st August,
41
2017 passed by the learned Single Judge of the High Court,
deserve to be quashed and set aside and resultantly, the
application preferred by the respondent under Section 17 of
the Act dated 24th April, 2017 ought to be dismissed. We
order accordingly.
26. The appeal is allowed in the above terms with no order
as to costs.
.………………………….CJI.
(Dipak Misra)
…………………………..….J.
 (A.M. Khanwilkar)
…………………………..….J.
 (Dr. D.Y. Chandrachud)
New Delhi;
July 13, 2018.

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