IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs._8545-8546_______ of 2010 (Arising out of S.L.P. (C) Nos. 14538-14539 of 2010)

M/s. Indian Railway Catering & Tourism  Corporation Limited & Anr.              …… Appellants

Versus

M/s. Doshion Veolia Water Solutions (P) Limited & Ors.                       …… Respondents

WITH

CIVIL APPEAL NOs.8547-8548___ of 2010 (Arising out of S.L.P. (C) Nos. 14996-14997 of 2010)

M/s. Ion Exchange India Limited            …… Appellant Versus

M/s. Doshion Veolia Water Solutions (P) Limited & Ors.                       …… Respondents

AND  

CIVIL APPEAL NO._8549_______of 2010 (Arising out of S.L.P. (C) No. 17471 of 2010)

M/s. Doshion Veolia Water Solutions (P) Limited               …… Appellant

Versus M/s. Indian Railway Catering & Tourism  Corporation Limited & Ors.                      …… Respondents

J U D G M E N T

A. K. PATNAIK, J.

Leave granted.  

2. These Appeals are against the judgment and order dated  

29.04.2010 passed by the Division Bench of the Madras High  

Court in Writ Appeal Nos. 726 and 727 of 2010.

3. The  relevant  facts  very  briefly  are  that  M/s  Indian  

Railway Catering and Tourism Corporation Limited (for short  

‘IRCTC’) planned to set up a packaged drinking water bottling  

plant  at  Palure,  near  Chennai,  to  produce  drinking  water  

under the brand name “Rail Neer” for railway passengers.  In  

November 2008, the civil  work for construction of the plant  

building was started.  In February 2009, IRCTC published a  

tender  notice  for  turnkey  project  for  design,  engineering,  

supply,  installation,  commissioning,  operation  and  

maintenance  of  the  packaged drinking  water  bottling  plant.  

Pursuant to the tender notice, three tenderers, namely, M/s  

Thermax, M/s Ion Exchange (I) Ltd. and M/s. Doshion Veolia  

Water Solutions (P) Limited submitted their offers, but as the  

2

offers were conditional, it was not possible to evaluate them  

and to decide the inter-se position of the three tenderers in an  

objective manner and therefore the Tender Committee of the  

IRCTC recommended for discharge of the tender and to invite  

fresh tenders after incorporating all the relevant revisions in  

the tender document to avoid anomalies.  On 04.08.2009, a  

fresh tender notice was advertised by IRCTC and in response  

to this fresh tender notice M/s Ion Exchange (I) Limited (for  

short  ‘Ion  Exchange’)  and  M/s.  Doshion  Veolia  Water  

Solutions  (P)  Limited  (for  short  ‘Doshion’)  submitted  their  

technical  and financial  bids in separate sealed covers.   The  

technical  bids  were  opened  on  24.08.2009  and  both  Ion  

Exchange  and  Doshion  were  informed  on  26.08.2009  that  

their financial bids would be opened on 27.08.2009.  When on  

27.08.2009 the financial  bids of Ion Exchange and Doshion  

were opened, it  was found that Doshion had quoted a total  

price of Rs. 18.65 Crores, whereas Ion Exchange had quoted a  

total price of Rs. 18.66 Crores and had also quoted a discount  

of 1% on the quoted price.  The result was that the net price  

quoted by Ion Exchange after deducting the discount of 1%  

3

worked  out  to  Rs.18,47,34,000/-  as  against  the  price  of  

Rs.18,66,00,000/- quoted by Doshion.  

4. On  28.08.2009,  Doshion  submitted  a  letter  to  IRCTC  

saying that the offer of discount on the quoted price made by  

Ion  Exchange  was  in  violation  of  Clause  1.10  of  the  

Instructions  to  Bidders.   Again  on  03.09.2009,  Doshion  

submitted  a  letter  reiterating  its  objection  to  the  offer  of  

discount  made  by  Ion  Exchange  and  also  saying  that  the  

excise duty amount had not been indicated in rupees by Ion  

Exchange  in  its  financial  bid  contrary  to  the  terms  and  

conditions  of  the  tender.   On  18.10.2009,  the  Tender  

Committee of IRCTC met and made its first recommendation  

to the Accepting Authority of IRCTC.  In the recommendation,  

the two members of the Tender Committee gave their opinion  

that the discount of 1% offered by Ion Exchange was not valid  

and that  the  non-mentioning  of  the  excise  duty  amount  in  

Rupees  by  Ion  Exchange  was  a  major  deviation.  The  third  

member gave his dissent in the recommendation saying that  

the excise duty could be easily ascertainable by applying the  

normal  methodology  of  calculation  and  so  calculated  the  

4

excise duty amount in the bid of Doshion was Rs.69,26,080/-  

and  that  of  Ion  Exchange  was  Rs.55,12,050/-.   The  third  

member  also  gave  his  opinion  that  the  bid  amount  of  Ion  

Exchange was Rs.17 Lacs lesser and if the set off received in  

service tax for operation and maintenance part of the contract  

is taken into account, then the additional benefit of MODVAT  

would get neutralized and therefore even if excise duty amount  

was not quoted by Ion Exchange in its financial bid, this was  

not  a  material  deviation.   On  13.10.2009,  the  Accepting  

Authority of IRCTC directed the Tender Committee to look into  

the  financial  implications  of  excise  duty  on  plant  and  

equipment/ MODVAT credit.  Regarding the discount of 1%,  

the Accepting Authority directed the Tender Committee to look  

into  the  prevalent  practice  being  followed  by  Government  

Departments  and  Public  Sector  Undertakings  regarding  

discount  and  thereafter  make  their  recommendations.  On  

02.11.2009,  the  Tender  Committee  made  its  second  

recommendation.  In  this  recommendation,  all  the  three  

members  of  the  Tender  Committee  were  of  the  unanimous  

view that  excise  duty should not be taken into account for  

5

tender  evaluation  because  if  the  offer  of  Ion  Exchange  in  

totality  was  considered,  there  was  no  adverse  financial  

implication  to  IRCTC.   Regarding  discount,  the  Tender  

Committee  could  not  find  any  instruction  relating  to  the  

prevalent practice followed by Government Departments and  

Public  Sector  Undertakings.   On 13.11.2009,  the  Accepting  

Authority  considered  the  second  recommendation  of  the  

Tender  Committee  and  asked  the  Tender  Committee  for  

further clarification on excise duty and to make a review of the  

cases  of  Central  Vigilance  Commission,  Chief  Technical  

Examiner’s Organization and Stores Directorate Compendium,  

Railway Board on the discount aspect.  On 20.11.2009, the  

Tender  Committee  made  its  third  recommendation.   In  the  

third recommendation, the members of the Tender Committee  

were of the unanimous view that taxes and duties (excise duty  

in particular) had no adverse financial implication to IRCTC.  

Two  of  the  three  members  of  the  Tender  Committee  after  

taking  into  consideration  the  guidelines/observations in  the  

Railway  Stores  Directorate  Compendium,  Central  Vigilance  

Commission, Chief Technical Examiner’s Organization, the bid  

6

documents of other Public Sector Undertakings in respect of  

discounts  and  after  verification  from Railways  and  Railway  

Public Sector Undertakings, took the view that unconditional  

discount available alongwith the offer should be considered.  

The third member of the Tender Committee, however, did not  

agree  with  this  view  and  maintained  his  earlier  view  that  

unconditional discount offers should not be considered when  

price  bid  does  not  speak  of  discount  as  part  of  the  bid  

conditions.   The Accepting Authority of the IRCTC accepted  

the unanimous recommendation of the Tender Committee that  

taxes and duties (including the excise duty) had no financial  

implication on IRCTC.  The Accepting Authority also accepted  

the majority  recommendation of  the  Tender  Committee  that  

the 1% discount offered in the bid of  Ion Exchange can be  

considered.  Accordingly, the Accepting Authority decided to  

accept the offer of Ion Exchange and on 17.12.2009 letter of  

acceptance was issued to Ion Exchange.  

5. On 21.12.2009, Doshion filed Writ Petition No. 27074 of  

2009  in  the  Madras  High  Court  praying  for  a  writ  of  

mandamus  restraining  IRCTC  from  taking  any  step  in  

7

furtherance  of  the  tender.   On  23.12.2009,  learned  Single  

Judge of the Madras High Court issued an interim injunction  

till  15.01.2010  and  posted  the  matter  for  05.01.2010.   On  

05.01.2010, IRCTC filed its detailed counter affidavit in reply  

to  the  writ  petition.   On  17.01.2010,  Doshion  filed  Writ  

Petition No. 1059 of 2010 praying for quashing the letter of  

acceptance  dated  17.12.2009  issued  in  favour  of  Ion  

Exchange.   IRCTC  and  Ion  Exchange  filed  their  respective  

counter  affidavits  in reply to the Writ  Petition and Doshion  

also  filed  its  rejoinder  affidavit.   After  hearing,  the  learned  

Single Judge of the Madras High Court dismissed the two Writ  

Petitions on 16.02.2010.  On 08.04.2010, Doshion filed Writ  

Appeal Nos. 726-727 of 2010 before the Division Bench of the  

Madras  High  Court  and  on  12.04.2010  the  Division  Bench  

passed the order of status quo while admitting the appeals.  

After  hearing  the  appeals,  the  Division  Bench  passed  the  

impugned judgment and order dated 29.04.2010 setting aside  

the order dated 16.02.2010 of the learned Single Judge in Writ  

Petition Nos. 27074 of 2009 and 1059 of 2010 and allowed the  

Writ Petitions of the appellant and quashed the acceptance of  

8

the  offer  of  Ion  Exchange.   The  Division  Bench,  however,  

refused to grant the prayer in the Writ Petition to award the  

contract  to  Doshion and instead  observed in  the  impugned  

judgment and order that it is for IRCTC to take a decision in  

the light of the findings in the impugned judgment.  Aggrieved,  

the  IRCTC  and  Ion  Exchange  have  filed  appeals  against  

quashing of  acceptance of  the offer  of  Ion Exchange by the  

Division Bench of the High Court and Doshion has filed the  

appeal against the refusal of the Division Bench of the High  

Court  to grant  the  prayer in the  writ  petition to award the  

contract to Doshion.

6. Mr. Goolam E. Vahanvati,  learned Attorney General for  

India appearing for IRCTC, submitted that the Division Bench  

of the High Court quashed the acceptance of the offer of Ion  

Exchange by IRCTC on the ground that the offer of discount of  

1% over  the quoted price  and the non-mentioning of  excise  

duty  amount  in  rupees  in  the  offer  of  Ion  Exchange  were  

contrary to the provisions of the tender notification and the  

tender format and, therefore, the acceptance of the offer of Ion  

9

Exchange was unfair and arbitrary and violative of Article 14  

of the Constitution.

7. He argued that the terms and conditions of the tender  

documents did not contain any express provision prohibiting a  

tenderer from quoting a discount on the price offered by him  

and in the absence of an express provision in this regard, an  

implied provision cannot be read into the terms and conditions  

of the tender documents prohibiting a tenderer from quoting a  

discount on the quoted price.  He urged that in the facts of the  

present  case,  the  majority  of  the  members  of  the  Tender  

Committee,  after  taking  into  consideration  the  guidelines/  

observations in the Railway Stores Directorate Compendium,  

Central  Vigilance  Commission,  Chief  Technical  Examiner’s  

Organization  and the  bid  documents  of  other  Public  Sector  

Undertakings  in  respect  of  discounts  and  after  verification  

from Railways and Railway Public Sector Undertakings, had  

given  the  opinion  in  their  third  recommendation  on  

20.11.2009 that unconditional discount along with the offer  

should  be  considered  and  the  Accepting  Authority  had  

accordingly considered the 1% discount offered on the quoted  

10

price of Ion Exchange and accepted the offer of Ion Exchange.  

He cited the decision of this Court in Kanhaiya Lal Agrawal v.  

Union of India and Others [(2002) 6 SCC 315] in which rebates  

offered by a tenderer as an additional inducement to accept  

his offer was not treated as breach of the terms and conditions  

of the invitation to tender.

8. Regarding the non-mentioning of excise duty in rupees in  

the offer of Ion Exchange, Mr. Vahanvati contended that the  

members  of  the  Tender  Committee  in  their  third  

recommendation  made  on  20.11.2009  were  unanimous  in  

their view that taxes and duties including excise duty had no  

adverse  financial  implication  on  IRCTC  and  this  

recommendation of the Tender Committee was accepted by the  

Accepting Authority.  He submitted that the Division Bench of  

the  High  Court  has  acted  as  an  appellate  court  over  the  

Tender Committee and the Accepting Authority by holding that  

the non-mentioning of excise duty in rupees in the offer of Ion  

Exchange  amounted  to  breach  of  the  essential  terms  and  

conditions  of  the  tender  notification and tender  format  and  

has exceeded the power of judicial review in matters relating to  

11

tenders and award of contracts.  He cited the decision of this  

Court in Tata Cellular v. Union of India [(1994) 6 SCC 651] in  

which it has been held that it is not the function of the Judge  

to act as Super Board over the decisions of the administrator  

in matters relating to tenders.

9. Dr.  Abhishek  Manu  Singhvi,  learned  senior  counsel  

appearing for Ion Exchange, submitted that in the impugned  

judgment and order, the Division Bench of the High Court has  

referred to Clause 1.10 of the Instructions to Bidders which  

provides that rates are to be quoted in the prescribed price  

schedule format only and has also referred to Clause 1.12 of  

the Instructions to Bidders which states that failure to comply  

with either of the conditions will render the tender void.  He  

submitted that the Division Bench of the High Court appears  

to have taken the view that Clause 1.12 is attracted in case of  

failure  of  the  tenderer  to  comply  with  Clause  1.10,  but  a  

careful reading of Clause 1.12 would show that it will apply  

when  the  tenderer  fails  to  comply  with  either  of  the  two  

conditions in Clause 1.11 of the Instructions to Bidders and  

will not apply when the tenderer does not comply with Clause  

12

1.10 of the Instructions to Bidders.  He contended that excise  

duty rate is 8.24% on the value of the plants and equipments  

and therefore the excise duty amount in rupees can always be  

calculated by IRCTC and it  made no difference whether the  

excise duty was quoted in rate or in rupees.  He submitted  

that for these reasons, mentioning of excise duty in rupees for  

the plants and equipments cannot constitute an essential term  

of  the  tender  notification  or  tender  format  as  held  by  the  

Division Bench of the High Court.

10. Dr. Singhvi argued that the fact remains that the price  

offered by Ion Exchange with 1% discount is less than that of  

Doshion and for this reason was accepted by IRCTC and hence  

the Division Bench of the High Court should not have quashed  

the acceptance of the offer of Ion Exchange.  He cited Jagdish  

Mandal v.  State of Orissa and Others [(2007) 14 SCC 517] in  

which this Court has held that so long as a decision relating to  

award of contract is bona fide and is in the public interest,  

courts will not interfere by exercising power of judicial review  

even  if  a  procedural  aberration  or  error  in  assessment  or  

prejudice to a tenderer is made out.

13

11. Mr. Jaideep Gupta, learned senior counsel appearing for  

Doshion,  on  the  other  hand,  supported  the  impugned  

judgment and order of the Division Bench of the High Court  

quashing the acceptance of offer of Ion Exchange by IRCTC.  

He  submitted  that  when  IRCTC  published  the  first  notice  

inviting tenders in February, 2009, the bid of Doshion was the  

lowest  and  yet  IRCTC cancelled  the  tender  process  on  the  

ground  that  the  offer  made  by  the  three  tenderers  were  

conditional  and  it  was  not  possible  to  evaluate  them.   He  

submitted that when the fresh tender notice was advertised on  

04.08.2009 for the very same work, IRCTC revised the tender  

conditions and the tender format and in Clause 1.10 of the  

Instructions to Bidders clearly stipulated that rates are to be  

quoted in the Prescribed Price Schedule only.  He submitted  

that  the  IRCTC  further  stipulated  in  Clause  1.12  of  the  

Instructions to Bidders that failure to comply with either of the  

conditions  in  Clauses  1.10  or  1.11  of  the  Instructions  to  

Bidders will render the tender void.  He contended that on a  

reading of  these two tender conditions,  it  will  be  clear  that  

rates were to be quoted in the Prescribed Price Schedule only  

14

and no tenderer could quote any discount on the quoted price,  

and further any offer of discount on the quoted price would be  

in breach of Clause 1.10 of the Instructions to Bidders and the  

tender  would  be  rendered  void  under  Clause  1.12  of  the  

Instructions to Bidders.  He submitted that it would be also  

clear from Clause 2.1 of the Special Terms and Conditions of  

the tender documents that the vendor was required to quote a  

lump  sum price  along  with  detailed  break-up  as  per  price  

schedule enclosed with the bid documents and Clause 9.0 of  

the  Special  Terms  and  Conditions  stated  that  the  vendor  

should  clearly  spell  out  in  his  offer  his  acceptance  of  the  

Special  Terms and Conditions and in case of  deviation,  his  

offer may be rejected.  He also referred to the Prescribed Price  

Schedule to show that there was no scope for a bidder to quote  

any discount.  Mr. Gupta next submitted that Note (ii) at the  

bottom of the price schedule provides that the vendor should  

indicate  total  excise  duty  amount  included  in  the  price  for  

plants and equipments, and yet Ion Exchange did not mention  

the total excise duty amount in its offer.  He argued that since  

Ion  Exchange  quoted  a  discount  on  the  price  and  did  not  

15

indicate  the  excise  duty  amount  in  its  offer,  the  Division  

Bench  of  the  High  Court  rightly  held  that  the  offer  of  Ion  

Exchange  did  not  comply  with  the  essential  terms  and  

conditions  of  the  tender  notification and tender  format  and  

was ought to have been rejected by IRCTC.  

12. Mr. Gupta relied upon the observations of this Court in  

W.B. State Electricity Board v.  Patel Engineering Co. Ltd. and  

Others [(2001)  2 SCC 451] that the very purpose of  issuing  

Rules/Instructions to bidders is to ensure their enforcement  

lest  the  rule  of  law should be a  casualty  and relaxation or  

waiver  of  a  rule  or  condition,  unless  provided  in  the  

Instructions to Bidders, by the State or its agencies in favour  

of one bidder would create justifiable doubts in the minds of  

the other bidders and would impair the rule of transparency  

and fairness and provide room for  manipulation to suit  the  

whims of the State agencies in picking and choosing a bidder  

for  awarding  contracts.   He  also  relied  upon  Kanhaiya  Lal   

Agrawal v.  Union  of  India  and  Others (supra)  for  the  

proposition  that  if  the  consequence  of  non-compliance  of  a  

condition  in  the  notice  inviting  tenders  is  rejection  of  the  

16

tender,  then  the  condition  is  an  essential  condition  of  the  

invitation to tender.  Mr. Gupta submitted that the Division  

Bench of the High Court therefore was right in quashing the  

offer of Ion Exchange on the ground that it was in breach of  

the essential terms and conditions of the tender notification  

and the tender format.   He submitted that as the tender of  

Doshion  was  the  only  other  valid  tender,  the  High  Court  

should have directed IRCTC to award the contract to Doshion.  

He urged that we should allow the appeal of Doshion on this  

point and direct IRCTC to award the contract to Doshion.

13. The first question that we have to decide in this case is  

whether the offer of 1% discount on the quoted price made by  

Ion Exchange was in breach of any essential term of the tender  

notification or the tender format as held by the High Court.  

Mr.  Gupta,  learned  counsel  for  Doshion,  has  relied  upon  

Clauses 1.10, 1.11 and 1.12 of the Instructions to Bidders and  

Clauses 2.1 and 9.0 of the Special Terms and Conditions of  

the  tender  documents  to  support  this  finding  of  the  High  

Court, which are quoted hereinbelow:

17

“Instructions to Bidders:

1.10 Rates are  to be quoted in the  prescribed  price schedule format only and it shall be  inclusive of all taxes, levies and duties.

1.11  Every page of the tender document shall be  signed on the left hand side bottom corner  and  stamped  properly  by  the  authorized  person or persons submitting the tender in  token  of  his/their  having  acquainted  himself/themselves  with  the  general  conditions  of  contract,  technical  specifications  etc.  as  laid  down.   Any  tender is liable  to be treated as defective  and is  liable  to  be rejected if  any of  the  documents is  not signed.   The initials  of  the tenderer must attest all erasures and  alterations  made  while  filling  the  tender.  Over-writing of figures is not permitted.  

1.12  Failure  to  comply  with  either  of  these  conditions will render the tender void.   No  advice of any change in rate after opening  of the tender will be entertained.

Special Terms & Conditions:

2.1  Vendor  shall  quote  for  lump  sum  price  along  with  detailed  break-up  as  per  price  schedule enclosed with this bid document.  The  cost  of  plants  and  equipments  as  quoted in the price schedule will constitute  contract price/contract value.

9.0 Deviation to Terms and Conditions:

The vendor should clearly  spell  out in his  offer  his  acceptance  of  the  terms  &  

18

conditions  indicated  above.   In  case  of  deviation, his offer may be rejected.

Deviations  proposed,  if  any,  should  be  raised  in  pre-bid  meeting  and  decision  taken there and conveyed to all parties will  be final and binding.”

14. Clause 1.10 of the Instructions to Bidders quoted above  

states  that  rates  are  to  be  quoted  in  the  Prescribed  Price  

Schedule  format  only  and it  shall  be  inclusive  of  all  taxes,  

levies and duties.  This clause does not say that the tenderer  

will not quote any discount on the price.  Clause 1.11 of the  

Instructions to Bidders states that every page of  the tender  

document  shall  be  signed  and  properly  stamped  by  the  

authorized person or persons submitting the tender and no  

over-writing will be permitted.  Clause 1.12 of the Instructions  

to Bidders states that failure to comply with either of these  

conditions  will  render  the  tender  void.   Since  there  is  no  

condition  either  in  Clause  1.10  or  Clause  1.11  that  the  

tenderer  will  not  quote  discount  on  the  price,  in  case  a  

tenderer offers a discount on his quoted price his tender will  

not be rendered void under Clause 1.12 of the Instructions to  

19

Bidders.   Clause  2.1  of  the  Special  Terms  and  Conditions  

quoted above states that the vendor shall quote for lump sum  

price  along  with  detailed  break-up  as  per  price  schedule  

enclosed with the bid document and the cost of plants and  

equipments  as  quoted  in  the  price  schedule  will  constitute  

contract price/contract value.  This clause also does not say  

that the vendor will  not quote a discount on the lump sum  

price.  Clause 9.0 of the Special Terms and Conditions states  

that  the  vendor  should  clearly  spell  out  in  his  offer  his  

acceptance of  the  terms and conditions  as  indicated in  the  

Special  Terms and Conditions and in case of  deviation,  his  

offer may be rejected.  There is nothing in this clause also to  

show that the vendor cannot quote a discount on the price.  In  

the  Prescribed  Price  Schedule  also  there  is  no  mention  

anywhere that the tenderer will not offer any discount on his  

quoted price.  In the absence of any express stipulation in the  

Instructions to Bidders or the Special Terms and Conditions or  

in the Prescribed Price Schedule prohibiting the tenderer from  

quoting a discount on the price offered by him, the High Court  

could  not  have  come  to  the  conclusion  that  by  offering  a  

20

discount  of  1%  on  the  quoted  price  Ion  Exchange  has  

committed  a  breach  of  the  essential  terms  of  the  tender  

notification or the tender format.   

15. For  this  conclusion,  we  are  supported  by  a  direct  

authority of this Court in Kanhaiya Lal Agrawal v. Union  

of India and Others     (supra) cited by Mr. Vahanvati.  In  

this  case,  the  conditions  in  the  tender  notice  required  

that the rates at which the supply was to be made had to  

be stated in words as well as in figures against each item  

of work as per Schedule attached thereto and that the  

tenders submitted with any omissions or alteration of the  

tender  document  were  liable  to  be  rejected,  but  

permissible  corrections  could  be  attached  with  due  

signature  of  the  tenderers.   Kanhaiya  Lal  Agrawal  

submitted along with his tender a covering letter that if  

his  offer  was  accepted  within  the  stipulated  time  the  

following rebates would be offered by him:  

 (a) 5% reduction in rates if the contract is given to  him within 45 days,  

(b) 3% reduction in rates if  the contract is given  within 60 days, and  

21

(c)  2% reduction in rates if the contract is given  within 75 days.”

The Union of India accepted the tender offered by Kanhaiya  

Lal  Agrawal  on  the  rates  subject  to  the  rebate.   Another  

tenderer,  whose  rates  would  have  been  the  lowest  if  the  

rebates offered by Kanhaiya Lal Agrawal would not have been  

considered, filed a writ petition in the Madhya Pradesh High  

Court contending that the offer of Kanhaiya Lal Agrawal was  

conditional  and  not  valid  and  succeeded  both  before  the  

learned  Single  Judge  and before  the  Division  Bench of  the  

High Court.  Kanhaiya Lal Agrawal carried an appeal to this  

Court and this Court held that the offer of rebates made by  

Kanhaiya Lal Agrawal “did not militate against the terms and  

conditions of inviting tender”.  From the decision of this Court  

in Kanhaiya Lal Agrawal v. Union of India (supra), therefore, it  

is clear that unless the offer of rebate or discount is in breach  

of the clear stipulations in the notice inviting tenders it cannot  

be held that such offer is in breach of the essential terms and  

conditions of the notice inviting tenders.

22

16. The observations of this Court in  W.B. State  Electricity   

Board v.  Patel  Engineering  Co.  Ltd.  and  Others (supra),  on  

which Mr. Gupta relied upon, is of no assistance to Doshion.  

In that case the West Bengal State Electricity Board invited  

bids  for  the  Purulia  Pumped  Storage  Project  and  the  bids,  

which were submitted, were opened on 08.09.1999 and while  

the details of the bids were under scrutiny, respondents 1 to 4  

in the appeal before this Court informed the State Electricity  

Board  that  there  was  a  repetitive  systematic  computer  

typographical transmission failure on account of which there  

were  errors  in  their  bid  and  requested  that  the  errors  be  

corrected.   On  17.12.1999,  they  sent  another  letter  stating  

that they had reason to believe that the State Electricity Board  

was evaluating their price bid by an incorrect application of  

the Instructions to Bidders and that their bid was the lowest.  

The  State  Electricity  Board  evaluated  their  bid  and  on  

18.12.1999 sent a letter to them saying that during checking  

of their bid documents a good number of arithmetical errors  

were discovered.  Respondents 1 to 4 challenged the validity of  

the letter dated 18.12.1999 of the State Electricity Board in a  

23

writ  petition  filed  in  the  High  Court  at  Calcutta.   Learned  

Single Judge of the High Court directed the State Electricity  

Board to consider the representation of Respondents 1 to 4  

and to communicate a reasoned order to them.  Against the  

order of the learned Single Judge, the State Electricity Board  

filed appeals.  Cross-objections were also filed by Respondents  

1 to 4.  The Division Bench of the High Court dismissed the  

appeals and the cross-objections upholding the order of the  

learned Single Judge and directed the State Electricity Board  

to permit Respondents 1 to 4 to correct the errors in the bid  

documents and then consider their bid along with the other  

bids and take a decision objectively and rationally.  On these  

facts, this Court held that Respondents 1 to 4 in that appeal  

were bound by the Instructions to Bidders which should be  

complied with scrupulously and adherence to the instructions  

cannot be given a go-by by branding it as a pedantic approach,  

otherwise  it  will  encourage  and  provide  scope  for  

discrimination, arbitrariness and favouritism which are totally  

opposed to the  rule  of  law and constitutional  values.   This  

Court  further  observed  that  the  very  purpose  of  issuing  

24

rules/instructions is to ensure their enforcement lest the rule  

of law should be a casualty and relaxation or waiver of a rule  

or  condition,  unless  so  provided  under  the  Instructions  to  

Bidders, by the State or its agencies in favour of one bidder  

would create justifiable doubts in the minds of other bidders,  

would  impair  the  rule  of  transparency  and  fairness  and  

provide room for manipulation to suit the whims of the State  

agencies  in  picking  and  choosing  a  bidder  for  awarding  

contracts.  

17.  These observations made by this Court  in  W.B. State   

Electricity  Board v.  Patel  Engineering  Co.  Ltd.  and  Others  

(supra) rather come to the aid of Ion Exchange in this case.  

Since IRCTC did not  clearly  stipulate  in the  Instructions to  

Bidders  or  in  the  Special  Terms  and  Conditions  or  in  the  

Prescribed Price Schedule or in any other part of the tender  

documents that a tenderer will not offer any discount on the  

prices quoted by him and if any such discount is offered the  

tender will be rejected, the offer of discount on the price made  

by  Ion  Exchange  cannot  be  treated  to  be  in  breach  of  the  

essential term or condition of the tender documents.  To hold  

25

that the State or its agencies can reject a tender for breach of  

a  term  or  condition  in  the  tender  document,  which  is  not  

explicit in the tender documents, is to give room to the State  

or its agencies to arbitrarily reject tenders even where the clear  

terms  or  conditions  of  the  tender  documents  are  complied  

with.  In  Dutta Associates  Pvt. Ltd. v.  Indo Merchantiles Pvt.   

Ltd. [(1997) 1 SCC 53), this Court found that the offer of the  

lowest tenderer for wholesale supply of rectified spirit (Grade  

1) to the Excise Department of the Government of Assam was  

not accepted on the ground that the price offered did not come  

within the “viability range” and this Court held that the tender  

process was vitiated for the reason that the tender notice did  

not specify the “viability range” nor did it say that only the  

tenders coming within the “viability range” will be considered.  

The  Court  further  observed  that  whatever  procedure  the  

Government proposes to follow in accepting the tender must  

be clearly stated in the tender notice and the consideration of  

tenders  received  and  the  procedure  to  be  followed  in  the  

matter of acceptance of a tender should be transparent, fair  

and open.

26

18.The  next  question,  which  falls  for  consideration  in  this  

case, is whether the High Court was right in coming to the  

conclusion that by not indicating the excise duty amount  

in rupees in its offer, Ion Exchange committed breach of an  

essential term or condition of the tender notification or the  

tender format.  Clauses (i)  and (ii) of the Note appended to  

the Prescribed Price Schedule, which relate to duties and  

taxes, are quoted hereinbelow:

“Note:

(i) The prices quoted are lump sum inclusive of all  duties and taxes etc.

(ii) Vendor  should  indicate  total  Excise  Duty  amount included in above prices (for Plants &  Equipments)”

The language of Clauses (i) and (ii) of the Note quoted above is  

clear that the prices quoted are to be lump sum inclusive of all  

duties  and  taxes  etc.  and  the  vendor  should  indicate  total  

excise  duty  amount  included  in  the  prices  for  plants  and  

equipments.   The  Note  does  not  indicate  the  consequences  

that will follow if the vendor does not indicate the total excise  

27

duty amount included in the prices for plants and equipments.  

The Note does not say that if the vendor does not indicate the  

total excise duty amount included in the prices for plants and  

equipments, the offer of the vendor “shall” be rejected.  In the  

absence of any mention of the consequence of rejection of the  

offer for not indicating the total excise duty amount in rupees  

included in the price of plants and equipments in the tender  

documents,  the  High  Court  could  not  have  held  that  Ion  

Exchange  had  committed  breach  of  an  essential  term  or  

condition of the tender notification or the tender format.  For  

this  conclusion,  we  are  again  supported  by  the  decision  in  

Kanhaiya Lal Agrawal v.  Union of India and Others  (supra) in  

which  this  Court  relying  on  G.J.  Fernandez v.  State  of   

Karnataka [(1990) 2 SCC 488] held:  

“Whether  a  condition  is  essential  or  collateral  could  be  ascertained  by  reference  to  the  consequence  of  non-compliance  thereto.   If  non- fulfillment of the requirement results in rejection  of the tender, then it would be an essential part of  the tender otherwise it is only a collateral term.”

Hence, if on the recommendation of the Tender Committee, the  

Accepting Authority did not find the deviation from Clause (ii)  

28

of the Note by Ion Exchange very material and has accepted  

the  offer  of  Ion  Exchange,  the  Division  Bench  of  the  High  

Court  could  not  have  held  that  Ion Exchange  committed  a  

breach of an essential term by not mentioning the excise duty  

amount in rupees in its offer.      

19. As the offer of 1% discount on the quoted price and the  

non-mentioning of excise duty amount in rupees in the bid of  

Ion Exchange were not in breach of the essential terms of the  

tender documents, it was for IRCTC to evaluate the valid offers  

of Ion Exchange and Doshion on the merits of the two offers.  

We find that on the basis of recommendations of the Tender  

Committee, the Accepting Authority of IRCTC found the offer  

of  Ion  Exchange  at  a  net  price  of  Rs.18,47,34,000/-  to  be  

better  than  the  offer  of  Doshion  at  the  price  of  

Rs.18,66,00,000/-  and that  tax and duties  including excise  

duty  had  no  adverse  financial  implications  to  IRCTC  and  

accordingly accepted the offer of Ion Exchange.  By reversing  

this  decision  of  the  Accepting  Authority  of  the  IRCTC,  the  

Division Bench of the High Court, in our considered opinion,  

acted as an Appellate Court and exceeded its power of judicial  

29

review in a matter relating to award of contract contrary to the  

law laid down by this Court in the leading case of Tata Cellular  

(supra).

20. In the result, we set aside the impugned judgment and  

order of the Division Bench of the High Court and allow the  

appeals of IRCTC and Ion Exchange and dismiss the appeal of  

Doshion.  There shall be no order as to costs.

……………………..J.                                                                   (Altamas Kabir)

……………………..J.                                                                   (A. K. Patnaik) New Delhi, October 04, 2010.      

30